The 'Thick Market' Effect and Agglomeration in High-Growth Industries

21 Pages Posted: 23 Jun 2005

See all articles by Mikhail M. Klimenko

Mikhail M. Klimenko

Georgia Institute of Technology - School of Economics

Abstract

This paper considers a simple model of geographical concentration of new high-technology industries that lack stable design standards. In the model, agglomerative effects result from positive feedback between competitive forces in the upstream and downstream segments of a high-technology industry, rather than as a result of traditional scale economies in the manufacturing of standardized products. The model assumes that firms in the upstream service supply industry have ex ante uncertain costs and compete in Bertrand fashion for the independent demands of downstream firms. This framework explains the mechanism of spatial clustering in industries with a high rate of innovation.

Suggested Citation

Klimenko, Mikhail M., The 'Thick Market' Effect and Agglomeration in High-Growth Industries. Pacific Economic Review, Vol. 10, No. 2, pp. 167-187, June 2005, Available at SSRN: https://ssrn.com/abstract=735824

Mikhail M. Klimenko (Contact Author)

Georgia Institute of Technology - School of Economics ( email )

781 Marietta Street, NW
Atlanta, GA 30332
United States

HOME PAGE: http://www.econ.gatech.edu/docs/klimenko_vita0904.pdf

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