Industrial agglomeration and firm size: Evidence from China

Abstract

This paper, by using annual surveys of manufacturing …rms from 1998 to 2005 in China, …rst documents a positive correlation between industrial agglomeration and …rm size, which is previously found in developed economies. Next, by using the instrumental variable estimations, we identify that industrial agglomeration has a positive and statistically signi…cant causal impact on …rm size. Finally, we …nd that …rms are more likely to become larger by locating with a number of larger …rms than with a larger number of …rms.

Agglomeration and productivity in China: Firm level evidence

“…Previous studies on why an agglomeration occurs and how it benefits economic agents have been mainly based on the two perspectives (Rosenthal & Strange, 2004): the localization economies, which are the Marshallian externalities arising from a concentration of firms in a same industry; and the urbanization economies, which arise from an increase in city size that enables cross-fertilization of idea among diverse economic activities (Jacobs, 1969). While both industry concentration and city size were found to be associated with higher productivity, when assessed together, empirical evidences tended to support the localization economies more than the urbanization economies (for example, Henderson, 2003;Li et al, 2012). While this paper is primarily oriented toward the localization perspective, it goes beyond the concept by incorporating explicitly the agglomeration of upstream industries.…”

“…For instance, Greenstone, Hornbeck, and Moretti (2010) found that the United States firms in counties which saw new openings of "Million Dollar plants" realized 12% higher productivity growth after 5 years vis-à-vis the firms in other counties. More recently, Li et al (2012) observed that Chinese firms are more likely to become larger by locating with a number of large firms than with larger number of firms. Therefore, agglomerations that include many large firms may reward larger favorable effects on a firm's productivity.…”

“…On the other hand, the average size of firms in an agglomeration not only captures the size of input demand and labor pooling for a given number of firms, but also the co-location of productive enterprises. Firm size has often been seen as a proxy of productivity and several studies have indeed reported significant externalities arising from the co-location of large firms (Greenstone, Hornbeck & Moretti,2010;Li, Lu, & Wu, 2012).…”

Impact of market access and comparative advantage on regional distribution of manufacturing sector

“…As reported by the previous researchers Li et al (2012) and Kang et al (2012), the industrial distribution and regional numbers of firms are direct functions of the market size and possible regional market access: Eq.4 explains the same concept by indicating the importance of comparative advantage, while dealing with the distribution of the manufacturing sector in a two-region model. Statement 1: if one region improves its market access, ultimately improves its home market endogenously and exogenously by reconsidering trade costs, the region will become more attractive for firms to locate, which further helps the region to extract its market power and size.…”

The Spatial Distribution and Clustering of Convention Facilities in Beijing, China

“…The agglomeration of industrial activities has significant impacts on firm behavior and firm performance such as productivity (Ciccone & Hall, 1996;Drucker & Feser, 2012;Henderson, 2003), organization of production processes (Holmes, 1999;Li & Lu, 2009), innovation (Carlino, Chatterjee, & Hunt, 2007;Feldman & Audretsch, 1999), firm size (Li, Lu, & Wu, 2012), firm survival (Silva & McComb, 2012), destination economic performance (Fan & Scott, 2003), destination attractiveness (Jin et al, 2012), and destination industry dynamics (Frenken, Cefis, & Stam, 2011).…”