Research note from David A. Price and Zhu Wang:
The geographic clustering of companies within an industry is often attributed to several agglomeration economies: intra-industry spillovers (benefits from proximity to firms in the same industry), inter-industry spillovers (benefits from proximity to firms in related industries), and spinoffs (firms established by former employees of a company in the same industry). Analysis of data on the U.S. auto industry in its fi rst 75 years sheds light on the relative importance of those forces to the clustering of car makers.
So what does US auto cluster analysis show:
In the setting of the U.S. auto industry, the researchers’ analysis suggests certain refinements of traditional views of agglomeration. It highlights the importance of inter-industry spillovers; the significant, but lesser, importance of spinoffs; and no measurable overall contribution by intra-industry spillovers.
Future directions for research on comparative agglomeration eff ects could include pursuing other measures of fi rm performance and family quality, such as net income, output, employment, or product variety. Further research could extend the analysis to other, more recent industries. It also could assess whether spinoff eff ects have become more important with the emergence of new forms of financing for entrepreneurship, such as the large and active venture capital industry.