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A Life Cycle for Clusters?The nature of the beast — On the notion of agglomeration externalities

A Life Cycle for Clusters?: The nature of the beast — On the notion of agglomeration externalities 2.5 Summary and critique 37 3 The nature of the beast – On the notion of agglomeration externalities The theories reviewed in the previous chapter attributed the endurance of clusters to the existence of positive and negative agglomeration externalities, i.e. benefits and downsides to firm co-location. Both were generated by the activities of local firms. As an example, greater numbers of firms in an area increased the availabil- ity of labour (through training and in-migration). Agglomeration externalities thus affected locational characteristics (e.g. wages) as well as incumbent and new firm behaviour. Their existence implies that some firm activities impact on the (out- come) of other firms’ activities. As a result, agglomeration externalities generate interdependencies between the activities of local agents insofar as the latter’s out- come does not only depend on the nature of individual activities but also on the (results of) activities performed by other actors in the area. In the models re- viewed so far, this interdependence was limited to cost effects, which will change with the upcoming concepts. Cluster emergence and exhaustion were then attrib- uted to change events in their environment. Events challenging an existing cluster would thus come at a point in its development http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png

A Life Cycle for Clusters?The nature of the beast — On the notion of agglomeration externalities

Part of the Contributions to Economics Book Series
A Life Cycle for Clusters? — Jan 1, 2006
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Publisher
Physica-Verlag HD
Copyright
© Physica-Verlag Heidelberg 2006
ISBN
978-3-7908-1710-2
Pages
37 –56
DOI
10.1007/3-7908-1763-5_3
Publisher site
See Chapter on Publisher Site

Abstract

2.5 Summary and critique 37 3 The nature of the beast – On the notion of agglomeration externalities The theories reviewed in the previous chapter attributed the endurance of clusters to the existence of positive and negative agglomeration externalities, i.e. benefits and downsides to firm co-location. Both were generated by the activities of local firms. As an example, greater numbers of firms in an area increased the availabil- ity of labour (through training and in-migration). Agglomeration externalities thus affected locational characteristics (e.g. wages) as well as incumbent and new firm behaviour. Their existence implies that some firm activities impact on the (out- come) of other firms’ activities. As a result, agglomeration externalities generate interdependencies between the activities of local agents insofar as the latter’s out- come does not only depend on the nature of individual activities but also on the (results of) activities performed by other actors in the area. In the models re- viewed so far, this interdependence was limited to cost effects, which will change with the upcoming concepts. Cluster emergence and exhaustion were then attrib- uted to change events in their environment. Events challenging an existing cluster would thus come at a point in its development

Published: Jan 1, 2006

Keywords: Local Culture; Local Firm; Informal Institution; Industrial District; Agglomeration Economy

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