Economic Agglomeration & Localization: Clusters, Growth Poles and Industrial Districts



. Internal Economies/Diseconomies External Economies/Diseconomies
General References to Untraded Interdependencies, Spillovers & Complementarities Externalities

Coupling Constraints (Hagerstrand, 1970)

Scale Effects Economies of Scale
Scale & Diversity and/or "Place" Effects Economies of Scope (including the complementarity expressed in concave transformation curves)

Economies of Massed Reserves/Resources (Robinson)

Diversity, Complementaries and other Interdependencies in "Agglomeration Economies"

"Place" and "Locality" Effects

"Business Climate" & "Milieu" Effects

Supporting Pages: Definitions:

Internet Sites:


Amin, Ash. "Industrial Districts," in: Sheppard, Eric and Trevor J. Barnes, eds., A companion to economic geography. Oxford, UK ; Malden, Mass. : Blackwell Publishers, 2000 [Chapter 10, pp.149ff.] [Suzzallo/Allen Stacks HF1025 .C66 2000]

Appold, S.J. Labor-market imperfections and the agglomeration of firms: evidence from the emergent period of the US semiconductor industry. Environment & Planning A, vol.30(3), 1998.

Arthur, B. 1990. 'Silicon valley' locational clusters: When do increasing returns imply monopoly. J. Mathematical Social Sciences. 19: 235-251.

Asheim, Bjorn T., Industrial Districts: The Contributions of Marshall and Beyond, in: The Oxford Handbook of Economic Geography, Edited by GORDON L. CLARK, MARYANN P. FELDMAN, and MERIC S. GERTLER, Oxford (U.K.): Oxford University Press, 2000, Ch.21, pp.413ff. [HF1025.O94.2000 (Suzzallo)]

Baily, M., Hulten, C. & Campbell, D. 1992. Productivity dynamics in manufacturing plants. In Brookings Papers: Microeconomics 1992.

Bergman, Edward M. and Edward J. Feser Industrial and Regional Clusters: Concepts and Comparative Applications {Regional Science Institute Web Book]

Berstein, J. & Nadiri, M. 1988. Interindustry R&D spillovers, rates of return, and production in high- tech industries. AER. 78: 429-434.

Bernstein, J. & Nadiri, M. 1989. Research & development and intra-industry spillovers: An empirical application of dynamic duality. Rev. Economic Studies. 56: 249-269.

Best, Michael H., "Cluster Dynamics," Ch.3 in: The New Competitive Advantage: The Renewal of American Industry. Oxford University Press, 2001. [HD41 B382 2001]

Carlton, D. 1983. The location and employment choices of new firms: An econometric model with discrete and continuous endogenous variables. Rev. Econ. & Stat. 65(3): 440-449.

Castania, R. & Helfat, C. 1991. Managerial resources and rents. J. of Management. 17: 155-171.

Catin, Maurice. Productivity, Agglomeration Economies and Metropolitan Concentration. Revue d'Economie Regionale et Urbaine, 1995, 4, pp. 663ff.

"Productivity gains seem to play an important role in the metropolisation process. Metropolitan concentration is underscored by labor migrations, by variations of the number of jobs and by productivity differentials. Then metropolitan specialisations and their spatial logics are analysed. Finally metropolitan growth is explained by the use of two notions: "induced productivity effects" and "autonomous productivity effects." Nevertheless, productivity gains are not the only ones to account for metropolitan concentration..."

Clark, G. 1989. U.S. regional transformation in the context of international economic competition. In Rodwin, L. & Sazanami, H. (eds.) Deindustrialization and Regional Economic Transformation: The experience of the United States. Boston, Mass: Unwin. pp. 198- 220.

Ciccone, A. and R.E.Hall, Productivity and the Density of Economic Activity, American Econ. Rev. 86(1), 1996, pp.54ff.

David, P. & Rosenbloom, J. 1990. Marshallian factor market externalities and the dynamics of industrial localization. J. Urban Economics. 28: 349-370.

Davis, S. & Haltiwanger, J. 1992. Gross job creation, gross job destruction, and employment reallocation. QJE. 107(3): 819-863.

DeBresson, C. & Amesse, F. 1990. Networks of innovators: A review and introduction to the issue. Research Policy. 20: 363- 379.

Faini, R., 1984. Increasing returns, non-traded inputs and regional developments. Economic Journal. 94: 308- 323.

Farrell, J. & Saloner, G. 1986. Installed base and compatibility innovation, product preannouncements and predation. Amer.Econ.Rev. 76(5): 940-955.

Digiovanna, Sean. Industrial Districts and Regional Economic Development: A Regulation Approach. Regional Studies, July 1996, 30(4), p. 373.

... examines the regulatory underpinnings of industrial districts. ...the industrial district model has been presented as an attractive p ath to economic development. ... By applying the concepts of regulation theory to the experiences of Emilia-Romagna, Baden-Wurttemberg and Silicon Valley, this paper illustrates that flexibily-specialized districts can result in a variety of social outcomes. ... concludes that the success of industrial districts ... depends on the institutionalized social compromises .. in the region.

Foray, D. 1990. The secrets of industry are in the air: Industrial cooperation and the organizational dynamics of the innovative firm. Research Policy. 20: 393- 405.

DeBresson, C. & Amesse, F. 1991. Networks of innovators: A review and introduction to the issue. Research Policy. 20: 363-379.


Economic development increasingly is a local, bottom-up phenomenon in the context of global restructuring, budget crises, and reduced funding to regions and cities. Neither the public nor private sectors can adequately plan for change alone; thus, government and business have entered into a partnership to achieve local development. To date, however, the effectiveness of many local initiatives is uncertain.

Fujita, M., P.Krugman and Anthony J. Venables, "Industrial Clustering," Ch.16 in: The Spatial Economy. 1999, pp.283ff. [HF1025.F973.1999]

Fujita, M. and J. Thisse, "Economics of Agglomeration," Journal of the Japanese and International Economies, (1996). (A survey of recent literature on agglomeration.)

Glaeser, E., Kallal, H., Scheinkman, J., & Shleifer, A. 1992. Growth in cities. JPE. 100: 1126-1152.

Gray, M., E.Golob & A. Markusen, "Big Firms, Long Arms, Wide Shoulders: 'The Hub-and-Spoke' Industrial District in the Seattle Region," Regional Studies, 30(7), 1996, 651-66.

One variant of industrial districts is the hub-and-spoke form, where an industry and its suppliers cluster around one or several core firms. The hub-and-spoke district is distinct from the flexibly specialized district, its successs a function of dominant firm market power and strategy rather than networking. Hub-and-spoke districts may generate high regional growth rates and good income distributions, but may also be vulnerable to cyclical and secular decline.

Hall, B. 1987. The relationship between firm size and firm growth in the US manufacturing sector. J. Ind. Econ. 35: 583-606.

Hanson, Gordon H., "Firms, Workers, and the Geographic Concentration of Economic Activity, in: The Oxford Handbook of Economic Geography, Edited by GORDON L. CLARK, MARYANN P. FELDMAN, and MERIC S. GERTLER, Oxford (U.K.): Oxford University Press, 2000, Ch.24, pp.477ff.. [HF1025.O94.2000 (Suzzallo)]

Harrison, B. 1994. The myth of small firms as the predominant job generators. Economic Dev. Quar. 8: 3- 18.

Haunschild, P. 1993. Interorganizational imitation: The impact of interlocks on corporate acquisition activity. ASQ. 38: 564-592.

Holmes, Thomas J., How Industries Migrate When Agglomeration Economies Are Important, Journal of Urban Economics, Vol. 45, No. 2, March 1999, pp. 240-63 [Size and Spatial Distributions of Regional Economic Activity; Industrial Migration]

In the model, there are agglomeration benefits from concentrating industry in a particular location because it enables a large variety of local suppliers to emerge. Firms differ by the extent to which they purchase from local suppliers. Low-tier firms purchase little; high-tier firms purchase more. When the industry migrates, the lowest-tier products move first.

Jaffe, A. 1986. Technological opportunity and spillovers of R&D: Evidence from firm's patents, profits, and market value. AER. 76: 984-1001.

Jaffe, A., Trajtenberg, M., & Henderson, R. 1993. Geographic localization of knowledge spillovers as evidenced by patent citations. QJE. __:577-598.

Kaufman, A., Gittell, R. Merenda, M, Naumes, W. & Wood, C. 1994. Porter's model for geographic competive advantage: The case of New Hampshire. Econ. Dev. Quar. 8(1): 43-66.

Keilbach, Max, Marshallian Externalities and the Dynamics of Agglomeration and Regional Growth (Online) Porter's model for geographic competive advantage: The case of New Hampshire. Econ. Dev. Quar. 8(1): 43-66.

Keilbach, Max, Marshallian Externalities and the Dynamics of Agglomeration and Regional Growth (Online) [NECI Research Index]

Kelley, M. & Harrison, B. 1990. The subcontracting behavior of single vs. multiplant enterprises in U.S. manufacturing: Implications for economic development. World Development. 18(9): 1273-94.

Krugman, P., "Increasing Returns and Economic Geography," JPE 99, 483-499, (1991). [ JSTORS/Abstract&PDF]

Krugman, P. 1991b. Geography and Trade. MIT Press: Cambridge, Mass.

Ch.2: "Localization"
pp.55ff. use of Gini coefficient
Appendix D (pp.129ff.) Locational Gini Coefficients

Krugman (1993, p.98) sums up the impact of economies of scale by concluding that "producers have an incentive to concentrate production of each good or service in a limited number of locations". He factors in "the costs of transactions across distance:"

the preferred locations for each individual producer are those where demand is large or supply of inputs is particularly convenient - which in general are the locations chosen by other producers. Thus concentrations of industry, once established, tend to be self-sustaining; this applies both to the localisation of individual industries and to such grand agglomerations as the Boston-Washington corridor.

Lang, Robert (Fannie Mae Foundation). Office Sprawl: The Evolving Geography of Office Space. Brookings Inst. October 2000

Suburbs now contain the majority of office space in many of the country's top metropolitan office markets, according to this survey. Before 1980, central cities dominated the office market...

Lorenzen, Mark, ed., Specialization and Localized Learning: Six Studies on the European Furniture Industry. Copenhagen Business School Press 1998 [Rev. in: JEL Sept.1999, p.120f]

Mansfield, E. 1977. Social & private rates of return from industrial innovations. QJE. 77: 22-240

Mariussen, Oge. Cluster policies - cluster development? : a contribution to the analysis of the new learning economy. Stockholm : Nordregio, 2001. - (Nordregio report, ISSN 14032503 ; 2001:2)

Markusen A., Sticky places in slippery space: A typology of industrial districts ECONOMIC GEOGRAPHY 72: (3) 293-313 JUL 1996 [Reprinted in:

  1. Barnes & Gertler, The New Industrial Geography, 1999, Ch.5, pp.98ff.]
    As advances in transportation and information obliterate distance, cities and regions face a tougher time anchoring income-generating activities. In probing the conditions under which some manage to remain ''sticky'' places in ''slippery'' space, this paper rejects the ''new industrial district,'' in either its Marshallian or more recent Italianate form, as the dominant paradigmatic solution. I identify three additional types of industrial districts, with quite disparate firm configurations..

  2. Bryson, John, Nick Henry, David Keeble, Ron Martin, eds. The Economic Geography Reader: Producing and Consuming Global, Capitalism. Chichester: Wiley, 1999. ISBN: 0-471-98528-7 Paper, pp.191ff. [HF1025 .E192 1999/ Suzz]

Marshall, A. 1920. Industry and Trade. London: MacMillan. (Marshall 1890, 1920, Book 4, Chaper X)

Martin, S., McHugh, R. & Johnson, S. 1993. The influence of location on productivity: Manufacturing technology in rural and urban areas. Growth & Change. 24: 459- 86.

Milgrom, P. & Roberts, J. 1991. Bargaining costs, influence costs, and the organization of economic activity. In Alt, J. & Shepsle, K. (eds.) Positive Perspectives on Political Economy. Cambridge Univ. Press: Cambridge.

Mody, Ashoka. 1993. Learning through alliances. J. Econ. Behav. & Org. 20: 151-170.

Morrison Paul, C.J. and D. S. Siegel, "Scale Economies and Industry Agglomeration Externalities: A Dynamic Cost Function Approach," American Economic Review, 89(1), March 1999, pp.272ff.

Mulligan, James G., The Economies of Massed Reserves, Am Econ Rev 73(4), Sept. 1983, pp.725ff.

Myrdal, Gunnar. Rich Lands and Poor: The Road to World Prosperity. N.Y.: Harper & Row, 1957.

"But within broad limits the power of attraction of a center today has its origin mainly in the historical accident that something was once started there and not a number of other places where it could equally well or better have been started, and that the start met with success..." (p.27)

Nelson, R. 1982. The role of knowledge in R&D efficiency, Quar.J.Econ. 97: 453-70

Norton, R.D., "Agglomeration and Competitiveness: From Marshall to Chinitz," Urban Studies 29(2), 1992, 155-70.

Norton, R.D., CLUSTER THEORIES (1): SPATIAL EXTERNALITIES Update to Online Book, Geography of the New Economy. Revised 2000.

OECD Proceedings. Boosting Innovation: The Cluster Approach. Paris, 1999. [HD69.S8.B66.1999, Suz]

OhUallachain, B. & Satterthwaite, M. 1992. Sectoral growth patterns at the metropolitan level: An evaluation of economic development incentives. J. Urban Economics. 31: 25-58.

Ottaviano, Gianmarco and Jacques-Francois Thisse, Agglomeration and Economic Geography [ -- Discussion Papers, 2003, #16, Universite Catholique de Louvain, Center for Operations Research and Econometrics (CORE)]

Paniccia, Ivana. Industrial Districts: Evolution and Competitiveness in Italian Firms. Cheltenham (UK): Edward Elgar. 2002. [HD1393.5 P345. 2002/ Suzz]

Pennings, J. & Harianto, F., 1992. Technological Networking and Innovation Implementation. SMJ, 13: 29-46.

Phelps, Nicholas A. External Economies, Agglomeration and Flexible Accumulation. Revue d'Economie Regionale et Urbaine, 1995, 4, pp. 645ff.

The concept of external/agglomeration economies has held a central place within geographical accounts of the spatial concentration of economic activity since WEBER's discussion of agglomeration... [This paper] examines the microeconomic logic to agglomeration within accounts of a new regime of accumulation. One influential account of the agglomeration of production is examined in the light of a brief review of the use of the concept of external/agglomeration economies within the geographical literature. The paper identifies several shortcomings of contemporary explanations of agglomeration.

Phillips, Peter W.B., New models of agri-food innovation and development Science, Technology and Innovation Program, Harvard University (Viewpoints) [Author: Department of Agricultural Economics University of Saskatchewan, Saskatoon, Saskatchewan, Canada]

"In short, innovation clusters are attractive economic development tools but they must be nurtured with appreciation for their partial and incomplete nature. Fundamentally, they are part of a global innovation system, and cannot thrive if cut off from the lifeblood of the system." []

Porter, Michael

Predoehl, Andreas

Rauch, J. 1993a. Does history matter only when it matters little? The case of city-industry lcoation. Quarterly J. Economics. 843-867.

Rauch, J. 1993b. Productivity gains from geographical concentration of human capital: Evidence from the cities. J. Urban Econ. 34: 380-400.

Robinson, E.A.G., The Structure of Competitive Industry, Chicago: University of Chicago Press, 1958 (pp.26-7).

Rothenberg, Jerome, The Economics of Congestion and Pollution: An Integrated View The American Economic Review, Vol. 60, No. 2, Papers and Proceedings of the Eighty-second Annual Meeting of the American Economic Association. (May, 1970), pp. 114-121. [A HREF=""> Paper (JSTOR)]

Saxenian, A. 1990. Regional networks and the resurgence of Silicon Valley. Calif. Management. Rev., 33: 89-112.

Sabel, C. 1989. The resurgence of regional economies. In Hirst, P. & Zeitlin, J. Reversing industrial decline. Berg Press: Oxford.

Scott, A. 1988. New Industrial Spaces. Pion Ltd: London.

Scott, A. 1991. The aeropspace-electronics industrial complex of souther California: The formative years, 1940-1960. Research Policy. 20(5): 439-456.

Suzuki, K. 1993. R&D spillovers and technology transfer among and within vertical keiretsu groups: Evidence from the Japanese electrical machinery industry. Intern. J. Industrial Org. 11: 573-591.

Shelburne, R. & Bednarzik, R. 1993. Geographic concentration of trade sensitive employment. Monthly Labor Review. June 1993: 3-13.

Spence, A.M., 1984. Cost reduction, competition and industry performance. Econometrica, 52: 101-21

Storper, M., Globalization, Localization and Trade; in: The Oxford Handbook of Economic Geography, Edited by GORDON L. CLARK, MARYANN P. FELDMAN, and MERIC S. GERTLER, Oxford (U.K.): Oxford University Press, 2000, pp. 146ff.. [HF1025.O94.2000 (Suzzallo)]

Storper, M. 1992. The limits of globalization: Technology districts and international trade. Econ. Geography. 68(1): 60-93.

Storper, M. & Harrison, B. 1991. Flexibility, hierarchy and regional development: The changing structure of industrial production systems and their forms of governance in the 1990's. Research Policy. 20(5): 407-422.

Thurow, L. 1989. Regional transformation and the service activities. In Rodwin, L. & Sazanami, H. (eds.) Deindustrialization and Regional Economic Transformation: The experience of the United States. Boston, Mass: Unwin. pp. 179-198.

Ullman, E.L. "Regional Development and the Geography of Concentration." (1958)

Ullman, E.L. "Geographic Theory and Underdeveloped Areas." (1960)

"... concentration of development within contries is the rule even on a regional basis and may even be increasing, in spite of governmental policies to the contrary. The momentum of an early start is often a compelling circumstance, especially if it results in large-scale market and development. This fact may signal the operation of a general localization principle in man's use of the earth: initial location advantages at a critical stage of change become magnified in the course of development." [Footnote: "For a similar concept note Gunnar Myrdal, Rich Land and Poor (NY: Harper, 1957), pp.26-27), which reads in part..."]

Ullman, E.L. "The Nature of Cities Reconsidered." Papers and Proceedings, Regional Science Association 9 (1962): 7-23. (Reprinted in H. W. Eldredge. Taming Megalopolis, Vol. 1. New York: Anchor, Doubleday, 1967, pp. 71-93; in Library of Urban Affairs. New York: Praeger, 1967; i W. H. Leahy, David L. McKee and Robert J. Dean, eds. Urban Economics. New York, 1970, pp. 3-20; and in part in Ekistics (1964), pp. 413-15.)

"If, in general, each of the largest cities on the average have been growing somewhat more, what is the explanation? No pat answer is possible but the following three factors may be involved:
  1. Mere size attracts size -- a mass, gravity effect; the larger the center the more innovators, the more persons who have relatives and friends who are attracted as inmigrants, etc.,
  2. The external economies of larger centers provide a greater range of interdependent specialities and facilities.
  3. A relative improvement in internal, urban transit has occurred, primarily because of the short haul advantages of the auto and truck; this latter factor has been particularly significant in the expansion of urban area..."


  • Mormons join foes of rural limits Seattle Times, March 02, 2001; By Eric Pryne The size-limit question has consumed county government for weeks. Last year Sims proposed a cap of 10,000 square feet on any individual nonresidential building and 20,000 square feet on all buildings on any site outside the county's urban-growth boundary. He said the limit was needed to protect rural areas from suburbanization.

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