Geography Reference
In-Depth Information
to as demonstration or observational effects. The most important inter-
actions among clustered firms are based on rivalry, and it is rivalry that
generates differentiated products, expands domestic demand and makes it
more sophisticated.
The agglomeration arguments of Marshall, allied with the additional
insights of Ohlin, Hoover, Vernon and Porter, provide us with a rich
variety of reasons why industrial clustering is advantageous in many situ-
ations. By these various externalities, spillovers and demonstration and
interaction effects, the co-location or clustering of firms often overcomes
the negative outcome of rising local land and labour prices, and more than
compensates for any adverse congestion effects.
5.2.3
Agglomeration Economies, Related Variety and Regional Growth
Much of the literature on agglomeration economies has dealt with the
question of whether a specific regional industrial structure enhances
knowledge diffusion, innovation and local economic growth. The core
question is whether firms learn more from local firms in the same industry
- that is, cluster or regional specialization - or from local firms in other
industries - that is, cluster or regional diversity. In other words, are the
most innovative and fast-growing regions and clusters sectorally special-
ized or diversified? A conclusive answer to such a question has not (de
Vor et al. 2008), and indeed
cannot
, be found. In fact, an evolutionary
interpretation of these issues indicates that there is no unequivocal causal
relationship between spatial industrial structure and economic growth,
and that the links between diversity and innovation at the spatial level
are far more complex than what is assumed by a mechanistic 'structure-
conduct-performance' type of view.
Contrary to the Marshallian tradition seen above, according to which
agglomeration externalities stem mainly from specialization, and thereby
accrue to spatially proximate firms that operate in the same industry,
Jane Jacobs (1961, 1969) puts the emphasis on the role of the urbaniza-
tion economies in the Ohlin-Hoover schema, and therefore the role of
sectoral diversity in promoting local economic growth. She argues that
urban diversity in terms of productions, facilities, skills, tastes, needs
and cultures, generates the cross-fertilization of ideas, and that ideas
developed in one sector can be fruitfully applied to many other economic
activities co-located in the same urban area. Whilst inter-firm knowledge
spillovers are essentially intra-industry in the Marshallian tradition, they
are inter-industry in Jacobs's view, according to which it is the exchange
of complementary knowledge and experience across different sectors that
yields greater economic returns (Iammarino 2011).
