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    Spatial Agglomeration and Superstar Firms: Firm-level Patterns from Europe and US
    20 Aug 2019Working Paper Summaries

    Spatial Agglomeration and Superstar Firms: Firm-level Patterns from Europe and US

    by Laura Alfaro, Maggie X. Chen, and Harald Fadinger
    Large, productive, or internationalized firms tend to co-locate geographically. This study of the United States and Eurozone shows greater agglomeration around high performance plants, particularly multinationals. For policymakers, then, policies aimed at improving industry performance should pay attention to firm productivity distribution and not only focus on average performance.
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    Author Abstract

    We characterize the agglomeration patterns of industries and plants in Europe, distinguishing Eurozone countries and the United States. Using a micro-level index, we quantify the degree of geographic concentration in industrial activities and explore how firm heterogeneity, industry attributes, and location fundamentals jointly explain the observed patterns. Our analysis shows that there is a clear hub-and-spoke structure in the geographic distribution. Larger and more productive plants, especially the superstars of each industry, are more centered than their smaller, less productive counterparts. The greater agglomeration surrounding superstars is particularly pronounced in the Eurozone but not present in the rest of Europe. Location fundamentals also play an important role and can sometimes mitigate the importance of agglomeration economies around large firms. Regions with different levels of economic development, including in education and technology, exhibit distinct agglomeration patterns. The findings suggest heterogeneity in the ability of regional policies to build superstar-centered industry clusters.

    Paper Information

    • Full Working Paper Text
    • Working Paper Publication Date: August 2019
    • HBS Working Paper Number: HBS Working Paper #20-015
    • Faculty Unit(s): General Management
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    Laura Alfaro
    Laura Alfaro
    Warren Alpert Professor of Business Administration
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