GENERAL EQUILIBRIUM OF SPATIAL PRODUCT AND LABOR MARKETS*

ABSTRACT A simple general equilibrium model relates spatial product markets and spatial labor markets. The firm is treated as being a spatial monopolist or as a Löschian competitor in the output market and as a spatial monopsonist in the labor market. Derived free spatial demand and free regional labor supply are defined, and their properties examined. The model provides the framework for analyzing the impact of a technological improvement in labor productivity on the structure of the spatial markets. The impact of entry on spatial labor supply is an important determinant of whether or not entry lowers wages and raises output prices. Unlike the spaceless competitive paradigm, zero-profit long-run equilibrium can occur in a space economy under conditions of increasing returns to scale.     

Regional Competition for Mobile Oligopolistic Firms: Does Public Provision of Local Inputs Lead to Agglomeration?

We develop a model in which two regional governments compete for two mobile oligopolistic firms. Regional governments provide local infrastructure to attract mobile firms in order to increase regional employment and income. Firms face the trade-off between better regional infrastructure and fiercer competition for local workers. Strategic interaction prevails at the regional level as well as at the firm level. We show that an equilibrium with spatial concentration of firms as well as an equilibrium with spatial diversification of firms exists. In almost all cases regional competition leads to a suboptimal provision of local infrastructure.     

上海大都市区物联网产业集聚与空间演化

新兴技术产业的空间集聚与扩散对大都市区的空间结构有直接的影响,厘清新兴技术产业的空间分布和区位选择规律对新兴产业集群培育和大都市区空间结构调整都具有重要的政策意义。本文分析了上海市物联网企业的空间分布和集聚特征,结果发现初创期物联网企业在郊区集聚,随后向郊区其他区域扩散,并呈现出从单极向多极集聚转变的空间演化进程。通过构建负二项回归探究上海物联网企业的区位选择因素,结果表明制度因素和企业集聚效应对企业区位选择有重要影响。在产业发展初创期,企业区位选择受政府管制和市场机制双重影响,其中制度因素发挥了关键作用;而在随后的兴起期,产业集聚效应对新企业的入驻具有强大的吸引力。     

The Development of Geographical Specialization of Venture Capital

Many regions have realized that access to capital is an important prerequisite for establishment and growth of businesses, and have therefore focused policies to ensure an adequate supply of risk capital. The growth of the venture capital industry in the 1990s put pressure on venture capital firms (VCFs) to act more strategically. Many VCFs have thus specialized along one or more dimensions: certain industries, stages of development of the firm, or geographical areas. A theoretical dichotomy is developed in this paper to explain regionally focused venture capital. A competence-based theoretical view sees increased competition in the industry as promoting the growth of geographical specialization, while, according to financial theory, it would lead to diversification in order to spread risk. The empirical analysis illustrates the development in the average distance between VCFs and their Danish portfolio firms. All venture capital investments are included. Findings suggest that the process of geographical specialization follows an inverted V-shaped curve. This is interpreted in light of the developments in competition and in the competencies in the market. VCFs search broadly for investment opportunities in the first phase of the emergence of the venture capital industry, but when competition increases they tend to confine themselves to investments within a closer geographical distance. The implications of these findings are important both for funds-of-funds, regional governments, and VCFs.     

Transport Costs and Rural Development

Innovations that reduce costs of transport from rural locations may also reduce transport costs to rural areas. As transport costs fall, producers can afford to concentrate and achieve economies of scale. This paper explains an initially negative, but ultimately positive, relationship between reductions in transport costs and rural development. A two-region general equilibrium model with firm and worker spatial mobility highlights the firm and household location implications of costly transport-service use by both industry and agriculture in the context of scale economies and product differentiation. The computable general equilibrium model is initialized and verified with a bi-regional social accounting matrix and then used for simulations. Changes in relative transport costs are shown to affect relative regional wage rates, thus also determining the location of "production-cost-oriented" firms.     

Picking 'winners' in space: Impact of spatial targeting on firm performance in China

This paper examines the spatial patterns of China's industrial encouragement policy and its distributional impact on firm productivity. To this end, I develop separate proxies to measure three popular policy instruments (subsidies, tax holidays, and preferential access to loans). I first show that China's industrial support policies tend to exhibit a prominent spatial feature of targeting firms located in lagging cities with lower density. Taking into account potential endogeneity of industrial policy, unobserved heterogeneity and firm dynamics, quantile regression techniques show that more intense industrial support leads to: (a) a reduction in the productivity of lower-performing firms, especially in denser cities; and (b) a small productivity gain for better performing firms but only in denser cities. Counterfactual analysis further reveals that pursuing an alternative, space-neutral industrial encouragement policy would increase average productivity by 14–16%, in aggregate, but also contribute to significantly higher regional inequality.     

Digital gravity? Firm birth and relocation patterns of young digital firms in Germany

This paper analyses the spatial patterns of young (<10 years) digital firms in Germany between 2008 and 2017 on county level. Determinants of firm birth locations as well as relocations are considered jointly to understand differences in location choices within firms' life cycles. I match commercial register data of 107,321 firms with county-level administrative data to capture local characteristics. Using an OLS model with fixed effects, I find that the local knowledge base—that is, universities, research institutes, and colocated incumbents—are significant key determinants of digital firm birth when controlling for a host of local characteristics. My results indicate that for five firms per 1000 inhabitants, there is around one firm birth. Second, using a fixed effects gravity model for the analysis of relocations, I find that the most dominant explanatory factor for firm relocation across specifications is distance, that is, relocation costs. Relocation flows are more than twice as high to neighboring counties relative to other locations which shows that digital firms are not as footloose as their business model may suggest. Jointly, my results reflect economic activity's regional persistence, particularly for new firms. My paper provides evidence for policies targeting homogenous digital clusters based on strong colocation and that digital economic activity is not shifted over long distances, but the regional entrepreneurship capital is crucial for local growth.     

OPENNESS TO TRADE AND INDUSTRY COST DISPERSION: EVIDENCE FROM A PANEL OF ITALIAN FIRMS*

ABSTRACT We use Italian firm‐level data to investigate the impact of trade openness on the distribution of firms across marginal cost levels. In so doing, we implement a procedure that allows us to control not only for the standard transmission bias identified in firm‐level TFP regressions but also for the omitted price bias due to imperfect competition. We find that more open industries are characterized by a smaller dispersion of costs across active firms. Moreover, in those industries the average cost is also smaller.     

DOES AGGLOMERATION MATTER EVERYWHERE?: NEW FIRM LOCATION DECISIONS IN RURAL AND URBAN MARKETS*

We test whether commonly used measures of agglomeration economies encourage new firm entry in both urban and rural markets. Using new firm location decisions in Iowa and North Carolina, we find that measured agglomeration economies increase the probability of new firm entry in both urban and rural areas. Firms are more likely to locate in markets with an existing cluster of firms in the same industry, with greater concentrations of upstream suppliers or downstream customers, and with a larger proportion of college‐educated workers in the local labor supply. Firms are less likely to enter markets with no incumbent firms in the sector or where production is concentrated in relatively few sectors. The same factors encourage both stand‐alone start‐ups and establishments built by multiplant firms. Commuting decisions exhibit the same pattern as new firm entry with workers commuting from low to high agglomeration markets. Because agglomeration economies are important for rural firm entry also, policies encouraging new firm entry should focus on relatively few job centers rather than encouraging new firm entry in every small town.     

LOCATION AND ENTREPRENEURSHIP: INSIGHTS FROM A SPATIALLY‐EXPLICIT OCCUPATIONAL CHOICE MODEL WITH AN APPLICATION TO CHILE

Occupational choice and heterogeneous managerial ability enter a spatial Dixit‐Stiglitz setting, linking location, wages and regional entrepreneurship rates. Market potential has a positive partial effect and wages a negative partial effect on the regional supply of entrepreneurs, both balancing in equilibrium with endogenous wages. Market potential increases profits, but also the opportunity cost of entrepreneurship. In the long‐run equilibrium with perfect mobility, the cut‐off level of ability determining selection into entrepreneurship will be the same across regions; moreover, regional differences in entrepreneurship rates depend only in differences in average fixed costs of firms. An empirical application is provided for Chile.     

Innovations, Competitiveness and Local Embeddedness: A Study of Machinery Producers in Sweden

This paper is about technological relations and firm performance in the Swedish machinery industry. Taking its point of departure in the proliferating literature on the localized nature of learning and innovation processes, the paper sets out to answer three empirical questions: To what extent are firms integrated in localized production systems based on buyer-supplier relations? At what geographical level–local/regional, national or international–are the most important technological relations found? Is there a correlation between localized technological relations and the technological performance of firms? The results indicate that few firms display localized buyer-supplier relations. Rather, the industry is highly internationalized, with the most important customers and competitors located outside Sweden. In terms of technologically important relations, the domestic arena seems to be more important. The majority of the most important technological relations link the machinery producers to other actors in Sweden. Three out of four firms may be classified as predominantly local/regional or national in their technological relations, or technology profile. This survey therefore supports the notion that there exists both local/regional and national innovation systems. Finally, however, despite the fact that most firms are fairly locally embedded in their technology relations, there is no evidence that such embeddedness shows up as superior firm performance, in terms of technology level or innovative capacity.     

ON THE IMPACT OF LABOR MARKET MATCHING ON REGIONAL DISPARITIES*

ABSTRACT We propose a model where imperfect matching between firms and workers on local labor markets leads to incentives for spatial agglomeration. We show that the occurrence of spatial agglomeration depends on initial size differences in terms of both number of workers and firms. Allowing for dynamics of workers' and firms' location choices, we show that the spatial outcome depends crucially on different dimensions of agents' mobility. The effect of a higher level of human capital on regional disparities depends on whether it makes workers more mobile or more specialized on the labor market.     

R&D Cooperation in Innovation Systems—Some Lessons from the European Regional Innovation Survey (ERIS)

Our paper summarizes some of the main results of the European Regional Innovation Survey (ERIS) as far as they are discussed in this special issue of European Planning Studies . The overall target of the ERIS project is a quantitative and qualitative assessment of determinants crucial for the innovation potential of any region, i.e. innovative and non-innovative manufacturing firms, business services and research institutions, as well as the innovative linkages and networks between these actors. Empirical research is based upon almost 8600 questionnaires collected in 11 European regions. Results confirm some of the common hypotheses on the relationship between space and innovation networks but others are contrary to existing scientific knowledge. Obviously the impact of national innovation systems on the innovation activities of manufacturing firms in a given European region is-at least-as strong as the impact of the respective regional innovation system. The spatial range of innovative linkages significantly depends on the size, the type of the cooperation partner, the R&D intensity and the industry of the analysed manufacturing firm. For example, the higher the technology intensity of the industry, the greater is the need of each firm to use intraregional knowledge via innovation linkages. It is therefore an important task in regional innovation policy to promote network-building among firms and other actors of a regional innovation system and to interlink these intraregional networks with national and international knowledge sources.     

EXTENDING A SMOOTH PARAMETER MODEL TO FIRM LOCATION ANALYSES: THE CASE OF NATURAL GAS ESTABLISHMENTS IN THE UNITED STATES

This paper extends recent developments in regional growth modeling that use spatial regime switching functions to a count regression model of firm location events. The smooth parameter count model (SPCM) allows for a parsimonious parameterization of locally varying coefficients while simultaneously attending to excess‐zero count events. An empirical application examines natural gas establishment growth between 2005 and 2010. The smooth parameter model appears to outperform a standard zero‐inflated count model. The SPCM may be extended to the location analysis of other industries with the identification of transition variables related to the supply or demand oriented cost structure of the sector.     

A River is a River-Cross-Border Networking Between Baden and Alsace

Using the concepts of national and regional innovation systems as an analytical framework for analysing the cross-border networking activities between Baden and Alsace, the empirical analysis presented in this paper reveals that despite the political promotion of cross-border relations the reality in innovation networking looks different. In the industry sample used for empirical analysis, no firm in Baden had research contacts with an Alsatian research institute, while at least 7% of the Alsatian firms cooperated with research and transfer institutes in Baden. Although spatial distance does not matter, cultural and institutional distance does. The neighbouring region is not looked at as a significant knowledge source for firms in both regions. Despite technological and economic internationalization, for many firms innovation-relevant learning still takes place mainly within their own national and regional system of innovation. For the two regions under review, the Rhine is still a cultural and institutional barrier which needs more networking bridges to be crossed.     

Developing cross-industry innovation capability: regional drivers and indicators within firms

ABSTRACT

The role of firms in the process of regional renewal and path development is a somewhat neglected area in the existing literature. With few exceptions, the literature is mainly concerned with aggregated development paths. To cover this gap, the current study turns its attention to cross-industry innovation capability (CIIC) building in firms and discusses how conditions for innovation and learning in a region drive this process. We introduce a new concept of CIIC – that is, the firm’s ability to transform knowledge and ideas from different industries into new products, processes and systems and/or its ability to adapt existing products, processes and systems to new industries – and identify its drivers and indicators. The discussion is supported by empirical studies of firms in three Norwegian case regions that undergo the restructuring process due to the recent severe decrease in oil prices. Our empirical data demonstrate that organizationally thick and diversified regions are more favourable for firms’ abilities to develop CIIC and cross-industry innovation activity. As a result, we emphasize that future regional policies should have a stronger focus on the linkages between internal firm characteristics and regional innovation systems to contribute to the firms’ absorptive capacity for developing cross-industry innovation.     

Delocalization Patterns in University–Industry Interaction: Evidence from the Sixth R&D Framework Programme

Increasing university–industry interaction (UII) and university contribution to the local economy are compatible—conventional wisdom would say. However, similar to other university activities, interaction with industry may be limited due to a lack of absorptive capacity in local firms. The data of those participating in the European Union's (EU's) Sixth R&D Framework Programme (FP6) were used to obtain values for the number and, notably, the budgets of UII projects at the regional level for the EU27. Two types of interactions were considered: inside and outside the region. Our analysis indicates that universities from regions whose firms have low absorptive capacity participate more often in FP6 projects with firms outside the region. Our results highlight the value of policies that facilitate firm R&D to enhance collaboration with regional universities.     

A SPATIAL COMPETITION APPROACH TO CENTRAL PLACE THEORY: SOME BASIC PRINCIPLES*

ABSTRACT. This paper investigates the potential offered by the model of spatial competition for the study of central place theory. We consider n firms selling m substitutable or complementary goods to a continuum of consumers evenly distributed along a linear segment. Consumers have the same income and the same utility function which is quadratic in the goods supplied by the firms and linear in the numeraire. The main results are as follows. (1) In any location equilibrium in which all goods are consumed everywhere, each good supplied by a single firm is sold at the market center. In Christaller's terminology, this means that when the exhaustive principle holds in equilibrium, highest-order goods are made available at the center. (2) When all goods (excluding the numéraire) are complements to each other and each good is sold by a single firm, there always exists an equilibrium in which all the firms locate coincidentally. (3) If the stores selling a given good are under the control of a single owner then, in any equilibrium for which the exhaustive principle holds, the stores are located in a way such that the total transport cost (borne by consumers) is minimized.     

SPATIAL COMPETITION AND THE JOINT CONSUMPTION OF SERVICES*

In Hotelling location models, an implicit assumption has been made that a customer uses the service provided by the firm, independent of other customers. However, for firms that supply meeting rooms, wedding halls, tennis courts, and golf links it is essential to incorporate the fact that the customer only uses the service in conjunction with other customers. The objective of this paper is to formulate the Hotelling location model n consideration of the interdependence among customers in one-dimensional space, and to characterize the state of equilibrium. In our model, each group of members within a given distance enjoys a fixed amount of service of the firms, under the assumption that the travel cost incurred by each group is defined as the travel cost of the farthest customer in the group.     

UNIFORM SPATIAL PRICING

ABSTRACT Uniform spatial pricing means that a firm delivers its product to any customer at a fixed price, independent of location. Economic theory explains the use of uniform pricing by the added profit generated by absorbing freight charges of distant customers. I extend this insight by demonstrating that when demand elasticity and transportation cost are positively enough correlated, uniform pricing generates higher profits than mill pricing. I show that this result can better explain observed patterns of price policy choice by mail order and web firms. A second result is application of this idea to firms with many shipping facilities.