Location strategies for agglomeration economies |
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Authors: | Juan Alcácer Wilbur Chung |
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Institution: | 1. Harvard Business School, Harvard University, , Boston, Massachusetts, U.S.A.;2. R.H. Smith School of Business, University of Maryland, , Maryland, U.S.A. |
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Abstract: | Because agglomeration economies may create competitive advantage and each location has a unique array of agglomeration economies, where should firms locate? We combine fundamental economic and strategy concepts to: (1) determine when firms must locate proximately to access factor pools; (2) show that factor pools controlled by fewer firms are less useful to new entrants; and (3) demonstrate that certain firms risk aiding competitors when contributing to efficient factor pools. We find support for our predictions with a test on new U.S. manufacturing entrants from 1985 to 1994, using an empirical specification that separates agglomeration levels from agglomeration economies. Copyright © 2013 John Wiley & Sons, Ltd. |
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Keywords: | agglomeration economies location choice firm heterogeneity agglomeration factor pools |
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