The effect of agglomeration economies on firm deaths: A comparison of firm and regional based approaches

Abstract

This paper compares the merits of regional and firm based approaches for analysing the effect of agglomeration economies on firm deaths in Ireland. We aggregate a comprehensive data set on Irish firm deaths to Electoral Division (ED) level, the lowest geographical scale available. Estimates of the effect of agglomeration on firm deaths from a regional analysis at ED level using a cross-sectional spatial-autoregressive spatial error model are compared with firm-level estimates from a contemporary log-log model with spatially weighted agglomeration regressors. While estimates of the effects of agglomeration using these alternative methods is much discussed in existing literature rarely are the approaches or results compared. We show that contrasting results are found using the same data set dependent upon the unit of analysis used. Diversity lowers regional and firm deaths while specialisation raises regional deaths but lowers firm deaths. Greater urbanisation does not have a significant effect on firm hazard rates or equivalent regional estimates. While regional estimates provide evidence on the existence and nature of spatial dependence (negative in this case), firm estimates do not provide evidence that agglomeration in neighbouring regions is the source of this spatial dependence. No empirical analysis to our knowledge directly compares regional and firm based approaches for analysing the effect of spatial agglomeration economies on firm deaths.

Does Location Matter for Micro Shops Resilience? Evidence from Uganda

“…Kitsos and Bishop (2018) stress how firm location in Great Britain may have a strong influence on resilience, emphasizing a sort of “geographically diverse” resilience. Similar conclusions emerged also in a study on Ireland (Power, Doran, and Ryan 2019), where spatial dependence implies that bordering economic activities experience different patterns of longevity and that location of firms strongly impacts their duration. This recalls Audretsch and Dohse (2007), for which firm-specific characteristics are not the only highly influential factors to business resilience but also the “business environment” of the place where an enterprise operates matters.…”

Linking industrial agglomeration and manufacturers inventory performance: the moderating role of firm size and enterprise status in the supply chain

“…For the sake of identifying industrial agglomeration, measurements to describe the spatial distribution have been explored by a series of regional economics research. Concretely, metrics emerge from the common concentration ratios like the Location Quotient to the summary measures on geographical concentration such as the Gini Coefficient (Krugman, 1991), the Herfindahl-Hirschman Index (Power et al, 2019), the Ellison-Glaeser Index (Ellison et al, 2010) and the DO's Indices (Duranton and Overman, 2005). Despite that, the Location Quotient probably remains the most common measurement to detect specialization in regional economic impacts and economic base analysis (Billings and Johnson, 2012;Zhang, 2017).…”

“…In consequence, inventory management should fully consider the context of industrial agglomeration. To date, the effects of industrial clusters on inventory performance are often neglected in practice, and both the regional economics and operations management research yields little insight into the location-based factors, which may affect such inventory outcomes (Lanier et al, 2010;Power et al, 2019).…”

“…Concretely, agglomeration studies emphasize the benefits of geographical proximity, such as labor markets, backward and forward supply chain linkages, and knowledge spillovers (Glaeser et al, 1992;Beaudry and Schiffauerova, 2009). In spite of the congestion and increased factor costs, the mainstream view still holds that positive agglomeration externalities mostly prevail over the negative externalities (Baldwin, 1999;Power et al, 2019). In this case, industrial agglomeration can reinforce the localized production linkage along the supply chain, and promote the knowledge sharing and entrepreneurial opportunities (Massimino et al, 2017;Audretsch et al, 2019).…”

“…First, to our knowledge, we examine the relationship between industrial agglomeration and inventory performance within and across clusters for the first time. Previous studies mainly treat them as separate issues and primarily explore the determinants and implications (Ning et al, 2016;Power et al, 2019). Concretely, the relevant research overwhelmingly centers around the impact of industrial agglomeration on productivity growth in regional economics (e.g., Greenaway and Kneller, 2008;Beaudry and Schiffauerova, 2009;Howell et al, 2016), or inventory leanness on firm performance, especially financial performance in operations management (e.g., Mishra et al, 2013;Eroglu and Hofer, 2014;Elking et al, 2017).…”