Industry Networks and the Geography of Firm Behavior

Management Science, Forthcoming

101 Pages Posted: 5 May 2020 Last revised: 18 May 2021

See all articles by William Grieser

William Grieser

Texas Christian University ; Texas Christian University - M.J. Neeley School of Business

James P. LeSage

Texas State University - McCoy College of Business Administration

Morad Zekhnini

Michigan State University - The Eli Broad College of Business and The Eli Broad Graduate School of Management

Date Written: February 1, 2021

Abstract

Using a network approach that circumvents well-known challenges in estimating peer effects, we show that interactions with a firm’s geographic neighbors play a significant causal role in corporate investment behavior, and a modest role in financial policies and firm performance. Moreover, these geography network effects are almost entirely driven by propagation effects through product market and supply chain networks. We corroborate our findings in a quasi-experimental framework that allows for spillovers in treatment effects. Our findings help rationalize industrial clusters (e.g., Silicon Valley), as they illustrate that agglomeration economies are substantial and operate predominantly within industry boundaries.

Keywords: Networks, Peer Effects, Agglomeration Economies, Corporate Investment, Capital Structure, Firm Performance, Geography, Spatial Econometrics

JEL Classification: G31, G32, L20, L23, L25, R11, R12, R15

Suggested Citation

Grieser, William and LeSage, James P. and Zekhnini, Morad, Industry Networks and the Geography of Firm Behavior (February 1, 2021). Management Science, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3555390 or http://dx.doi.org/10.2139/ssrn.3555390

William Grieser (Contact Author)

Texas Christian University ( email )

Fort Worth, TX 76129
United States

Texas Christian University - M.J. Neeley School of Business ( email )

Fort Worth, TX 76129
United States

James P. LeSage

Texas State University - McCoy College of Business Administration ( email )

Finanace and Economics Department
601 University Drive
San Marcos, TX 78666
United States
512-245-0256 (Phone)
512-245-3089 (Fax)

HOME PAGE: http://www.spatial-econometrics.com

Morad Zekhnini

Michigan State University - The Eli Broad College of Business and The Eli Broad Graduate School of Management ( email )

East Lansing, MI 48824-1121
United States

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