Beyond clusters: How regional geographic signature affects firm value and risk

Abstract

Existing studies examining how geography affects firm outcomes primarily consider how clusters affect performance. We examine how regional geographic signature-industry clusters, regional economic diversity, region size, and regional innovativeness-affects firm value and systematic and unsystematic risk using a sample of publicly traded American bank holding companies. After controlling for endogeneity of clusters, we find that locating in large and innovative regions enhances firm value, while locating in clusters and diversifying into many regions reduces value. Clusters reduce systematic risk and increase unsystematic risk, while economic diversity and innovativeness increase systematic risk. Thus, geographic locales exert multifaceted influences on value and risk, and we need to consider more than industry clusters and geographic diversification when considering geographic influence. Copyright © 2013 ASAC. Published by John Wiley & Sons, Ltd. JEL Classifications: M10, R12Keywords: geographic signature, cluster, performance, risk, banking Résumé Les travaux courants sur l'influence que la géographie a sur la performance de l'entreprise examinent surtout l'impact des concentrations sur la performance. Cette étude s'appuie sur un échantillon de sociétés de portefeuille bancaire américaines cotées en bourse pour se pencher sur la manière dont la signature géographique régionale-concentrations de l'industrie, diversité de l'économie régionale, taille de la région et capacité de la région à innover-influe sur la valeur de la firme et sur le risque systématique et non systématique. Après avoir neutralisé le caractère endogène des concentrations, l'étude révèle que les firmes installées dans de grandes régions innovantes gagnent en valeur tandis que les firmes installées dans les concentrations et diversifiées par régions en perdent. Les concentrations réduisent le risque systématique et augmentent le risque systématique, tandis que la diversité de l'économie et l'innovativité augmente le risque non systématique. Il s'ensuit que les milieux géographiques exercent des influences multiples sur la valeur et le risque. Par conséquent, dans l'étude de l'influence géographique, il faut aller au-delà des concentrations de l'industrie et de la diversification géographique.

Unpacking the effect of exploration during environmental uncertainty: Evidence from the information technology sector

“…For instance, managers who have greater confidence in their organization's strategic planning processes may not perceive response uncertainty as acutely as their counterparts from other poorly‐prepared organizations (Ashill & Jobber, ). Secondly, clusters differ in terms of their geographical signatures (i.e., size, economic diversity, and innovativeness) (e.g., Bell & Deng, ). Scholars should consider teasing apart the characteristics of clusters and study how variations between and within clusters moderate the relationship between the types of uncertainty and firm performance.…”

Modeling the Size of the Mutual Fund Industry in Countries of Central and Eastern Europe

“…Additionally characteristics relating to quality of fund management, structure of management team and corporate culture are also relevant (Prather et al, 2004;Morey, 2006, 2012;Karagiannidis, 2010Karagiannidis, , 2012. Knowledge spillovers experienced by funds headquartered in large cities might be another relevant factor (Bell and Deng, 2013;Christoffersen and Sarkissian, 2009). Along with determinants of fund performance modern studies deal with problematic market timing.…”

Corporate innovation and innovation efficiency: does religion matter?

“…Finally, our study is also complementary to the research in the industrial geography which focuses on what regional characteristics of firm’s geographic location affects firm behavior and then firm value. On the basis of the information advantage, agglomeration economy and network-based effect associated with geographic location, prior studies have primarily considered the impact of economic regional characteristics, including industry clusters, regional economic diversity, region size and geographic proximity (Glaeser et al , 1992; Bell, 2005; Loughran and Schultz, 2005; John et al , 2011; Bell and Deng, 2013; El Ghoul et al , 2013; etc.). However, we are aware of little research delving into the non-economic regional factors.…”