Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Working Knowledge
Business Research for Business Leaders
  • Browse All Articles
  • Popular Articles
  • Cold Call Podcast
  • Managing the Future of Work Podcast
  • About Us
  • Book
  • Leadership
  • Marketing
  • Finance
  • Management
  • Entrepreneurship
  • All Topics...
  • Topics
    • COVID-19
    • Entrepreneurship
    • Finance
    • Gender
    • Globalization
    • Leadership
    • Management
    • Negotiation
    • Social Enterprise
    • Strategy
  • Sections
    • Book
    • Podcasts
    • HBS Case
    • In Practice
    • Lessons from the Classroom
    • Op-Ed
    • Research & Ideas
    • Research Event
    • Sharpening Your Skills
    • What Do You Think?
  • Browse All
    Spatial Organization of Firms: Internal and External Agglomeration Economies and Location Choices Through the Value Chain
    11 Sep 2012Working Paper Summaries

    Spatial Organization of Firms: Internal and External Agglomeration Economies and Location Choices Through the Value Chain

    by Juan Alcácer and Mercedes Delgado
    How do firms decide location strategy for distinct activities in the value chain, such as manufacturing, research and development, or sales? Does strategy depend on geographically bounded spillovers between firms, or within firms? This paper uses data for organic expansions in the US by firms in pharmaceuticals in 1993-2005 to consider two types of expansions. The first is internal: an increase in employment in existing establishments. The second is external: opening new establishments. Alcacer (HBS) and Delgado (Fox School of Business) argue that decisions about geographical location are a tradeoff between external drivers pulling firms to geographically disperse activities and internal drivers pushing within-firm collocation, either across activities (such as manufacturing and R&D) or within activities (such as multiple R&D labs). Key concepts include:
    • In biopharmaceutical activity, both internal and external agglomeration economies have separate, positive impacts on location, with relevant differences by activity.
    • Internal economies of agglomeration arise within an activity (such as among plants) and across activities (such as between manufacturing and sales).
    • The effects of across-activity and within-activity internal economies vary by activity and type of organic expansion.
    • Across-activity internal economies are asymmetric: For example, organic expansions of bio-sales activity seem to collocate with existing manufacturing establishments, but organic manufacturing expansions do not collocate with sales.
    LinkedIn
    Email

    Author Abstract

    We explore the impact of geographically bounded intra-firm spillovers (internal agglomeration economies) and geographically bounded inter-firm spillovers (external agglomeration economies) on firms' location strategies. Using data from the Census Bureau's Longitudinal Business Database and the U.S. Cluster Mapping Project, we analyze organic expansions of biopharmaceutical firms (by both new establishments and employment increase in existing establishments) in the U.S. in 1993-2005. We consider all activities in the value chain and allow location choices to vary by R&D, manufacturing, and sales. Our findings suggest that (1) internal and external agglomeration economies have separate, positive impacts on location, with relevant differences by activity; (2) internal economies of agglomeration arise within an activity (e.g., among plants) and across activities (e.g., between manufacturing and sales); (3) the effects of internal economies across and within activities vary by activity and type of organic expansion; and (4) across-activity internal economies are asymmetric.

    Paper Information

    • Full Working Paper Text
    • Working Paper Publication Date: August 2012
    • HBS Working Paper Number: 13-025
    • Faculty Unit(s): Strategy
      Trending
        • 31 May 2023
        • HBS Case

        From Prison Cell to Nike’s C-Suite: The Journey of Larry Miller

        • 23 May 2023
        • Research & Ideas

        Face Value: Do Certain Physical Features Help People Get Ahead?

        • 31 May 2023
        • HBS Case

        Why Business Leaders Need to Hear Larry Miller's Story

        • 30 May 2023
        • Research & Ideas

        Can AI Predict Whether Shoppers Would Pick Crest or Colgate?

        • 25 Feb 2019
        • Research & Ideas

        How Gender Stereotypes Kill a Woman’s Self-Confidence

    Juan Alcacer
    Juan Alcacer
    James J. Hill Professor of Business Administration
    Contact
    Send an email
    → More Articles
    Find Related Articles
    • Organizational Design
    • North & Central America
    • United States

    Sign up for our weekly newsletter

    Interested in improving your business? Learn about fresh research and ideas from Harvard Business School faculty.
    This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
    ǁ
    Campus Map
    Harvard Business School Working Knowledge
    Baker Library | Bloomberg Center
    Soldiers Field
    Boston, MA 02163
    Email: Editor-in-Chief
    →Map & Directions
    →More Contact Information
    • Make a Gift
    • Site Map
    • Jobs
    • Harvard University
    • Trademarks
    • Policies
    • Accessibility
    • Digital Accessibility
    Copyright © President & Fellows of Harvard College