On the Marshall-Jacobs controversy: it takes two to tango

Abstract

The literature is inconclusive as to whether Marshallian specialization or Jacobian diversification externalities favour regional innovativeness. The specialization argument poses that regional specialization towards a particular industry improves innovativeness in that industry. Regional specialization allows for knowledge to spill over among similar firms. By contrast, the diversification thesis asserts that knowledge spills over between firms in different industries, causing diversified production structures to be more innovative. Building on an original database, we address this controversy for the Netherlands. We thereby advance on the literature by providing a two-level approach, at the region's and the firm's level. At the regional level, we compare specialized with diversified regions on numbers of accommodated innovators. At the firm level, we establish causalities between externalities and degree of innovativeness. The results unambiguously suggest Marshallian externalities: specialized regions accommodate increased numbers of innovating firms and, consistently, incumbent firms' innovativeness increase with regional specialization.Once the product has been launched, innovators in diversified Jacobian regions appear to be more successful in commercial terms than innovators in specialized Marshallian regions.

Geography, knowledge spillovers and small firms’ exports: an empirical examination for The Netherlands

“…Feldman (1994) also argues that proximity to specialized business services reduces the risks of commercial failure. Van der Panne and van Beers (2006) suggest that innovating firms in The Netherlands in Marshallian districts performed better in terms of production of innovative output or technological success. However, innovating firms in diversified regions seem to perform better in terms of commercial success.…”

Who's right, Marshall or Jacobs? The localization versus urbanization debate

“…Two cases are generally considered, the Marshallian model where specialization externalities are positive and competition has a negative effect (i.e. market power is better for growth), and the Jacobian model where both diversity and local competition have a positive effect (van der Panne, 2004;and van der Panne and van Beers, 2006). The results of Porter or competition externalities are found in Table 3.…”

Innovation through new blood

“…Supplier-dominated industries never experience agglomeration advantages or disadvantages, apparently; competition has the largest number of significant effects, though as many are positive as negative. Concentration and diversity are always positive in our estimation, but for different sectors, underlining why the Marshall versus Jacobs debate is so difficult to bring to an end (Beaudry and Schiffauerova 2009;de Groot et al 2015;van der Panne and van Beers 2006). Note that there are four differences and only one match between the results on productivity from regression (4), where the agglomeration variables were interacted with the Pavitt sectors, but the other variables were not, and those from regression (6), where the coefficients of all variables were allowed to vary by sector.…”

“…If we frame the employee flows in the context of the specialization-versus-diversity debate (Beaudry and Schiffauerova 2009;van der Panne and van Beers 2006), this implies within-sector 'specialisation' effects are not important, compared to cross-sector 'diversity' effects. New input from different companies is valued, no matter whether these companies are in the same line of business.…”