Industrial Location behaviour To Cluster or Not to Cluster That is the Question

1
Industrial Location behaviourTo Cluster or Not
to Cluster? That is the Question

• Dr. Philip McCann
• The University of Reading
• 5 February 2004

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Types of Clusters

• Cities
• City Centres services
• City Fringes mixed uses
• Industrial Centres - petrochemical
• Business Parks commercial and light industrial
• Regional Systems of Industries Silicon Valley,
• Emilia-Romagna

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Cities and Agglomeration Externalities

• Marshall (1890)
• Three sources of agglomeration economies in
  industrial districts
• Local Information Spillovers
• Local Non-Traded Inputs
• Local Pool of Skilled Labour

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Cities and Agglomeration Externalities

• Classification of Agglomeration Ohlin (1933),
  Hoover (1937, 1948)
• Internal Returns to Scale
• Economies of Localization
• Economies of Urbanization

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Industrial Centres

• Petrochemical Industries
• Manufacturing Industries
• Input-Output Models
• Location-Production Models

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Regional Systems of Industries

• New Industrial Spaces (Scott 1988)
• Innovative Milieux (GREMI)
• Saxenian (1994)
• Castells and Hall (1995)
• Small firms, flexibility, information,
• collaboration, innovation

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The Business School Model of Clusters

• Porter (1990)
• Notion of competitiveness
• Mutual Transparency from Proximity
• Competitiveness of the Firm and the Region
• Product Cycle Model (Vernon 1960, 1966)

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How Important is Clustering?

• Doubts as to the Critical Geographical Dimensions
• over which Local Externalities Operate
• Suarez-Villa and Walrod (1997)
• Arita and McCann (2000)
• Audrestch and Feldman (1996)
• Cantwell and Iammarino (2000)
• Simmie (1998)

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Changes in Geographical Transactions Costs
Transport Costs

• Glaeser (1997) transport costs are falling
• as a proportion of GDP
• Hummels (1999, 2000) international
• transport costs may be increasing in some
• Sectors role of Just-In-Time (JIT)
• Evidence Inventory Turns (Schonberger 1996)
• Local Multipliers (McCann and Fingleton 1996)

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Changes in Geographical Transactions Costs
Information Costs

• Role of Information technology as a Complement to
  face-to-Face Communication
• Evidence from Telephone Usage (Gaspar
• and Glaeser 1970)
• Urbanization Rates (UNDP 2000)

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Role of Innovation

• Nature of Innovation
• Newness, Improvement, Overcoming of Risk
• Product Innovations and Process
• Innovations
• Bias towards Product rather than Process
• Innovations (Patent Literature)

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Issues for Firm Level Analysis

• Nature and Stability of Transactions
• Nature of Informal Information Trading -
• Syndicates
• Nature of the Organization of the Firm
• Opportunity Costs of Face-To-Face Contact

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Issues for Thematic Consideration

• How Important are Clusters?
• What is the Significance of New Industrial
• Spaces (based on small firms)
• What about Regional Policy?