Agglomeration Economies and Firm Performance: The Case of Industry Clusters

Abstract

Do firms located within an industry cluster outperform those that are not? Scholars of agglomeration economies have suggested that clustered firms stand to benefit from the positive externalities that stem from geographic proximity of industry. In this article, the relationship between agglomeration economies and financial performance is investigated. Thirty-one years of performance data for 194 firms from the semiconductor and pharmaceutical industries revealed no significant differences between clustered and nonclustered firms in the early stages of the industry life cycle. However, isolated (nonclustered) laggards outperformed clustered laggards in the late stages of the industry life cycle. Similarly, no significant differences in financial performance were found between the groups during periods of economic contraction at an early stage of the industry life cycle, but isolated firms outperformed clustered firms in the late stages of the industry life cycle. The reported results of this study, in combination with concerns raised by a few agglomeration scholars, suggest that the enthusiasm for cluster theory shown by scholars, practitioners, and policy makers may need to be tempered.

African farmers’ market organizations and global value chains: competitiveness versus inclusiveness

“…Clustering of farmers may improve the labor market, the exchange of knowledge, and the further development of local markets (Kukalis 2010). Cooperative organizations are not a prerequisite to realize cluster effects, but the existence of a cooperative may facilitate the development of these economies.…”

Does Cluster Membership Enhance Financial Performance?

“…That study finds that clustered firms have higher survival rates than nonclustered firms. Kukalis (2010) [31], in a study which perhaps corresponds most closely to the present investigation, examined the financial performance of 194 firms in the pharmaceutical and computer chip industries. Since firms in both industries depend heavily upon innovation, that study determines cluster membership on the basis of the location of each firm's primary R&D facility.…”

“…The empirical evidence, however, is industry-specific, consists of relatively small samples of firms, and reports mixed results. Story and Westhead (2009) [32] and Kukalis (2010) [31] find that profitability does not seem to differ as a function of cluster membership. The Story and Westhead firms, however, are not in the same industries and the Kukalis study classifies firms in two industries by R&D rather than headquarters location.…”

Práticas gerenciais: análise dos custos e formação de preço no arranjo produtivo local de confecções - PE

“…Conforme Kukalis (2010), ao longo das duas últimas décadas, geógrafos e economistas, redescobriram ou reinventaram Marshall com o conceito de cluster. Como exemplos, citam-se os trabalhos de Krugman (1991) ;Rosenfeld, (1997) e Porter (1998.…”