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Do Geographic Concentration and Vertically Related Variety Foster Firm Productivity? Micro‐Evidence from I taly
Author(s) -
Cainelli Giulio,
Ganau Roberto,
Iacobucci Donato
Publication year - 2016
Publication title -
growth and change
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.657
H-Index - 55
eISSN - 1468-2257
pISSN - 0017-4815
DOI - 10.1111/grow.12112
Subject(s) - total factor productivity , economies of agglomeration , diversification (marketing strategy) , variety (cybernetics) , productivity , economic geography , industrial organization , panel data , business , economics , econometrics , marketing , microeconomics , economic growth , artificial intelligence , computer science
Using a large unbalanced panel dataset of more than 12,000 I talian manufacturing firms for the period 1999–2007, this paper investigates the role of geographic concentration and related variety on firms' total factor productivity ( TFP ). The main idea is that diversification—captured by a measure of vertically related variety—promotes firm innovativeness and, consequently, productivity, but when the technology has been consolidated, firms join specialized clusters that enhance efficiency. Our results suggest that the effect on firms' TFP of geographic concentration is stronger than that of related variety. We also confirm previous findings on the relevance of agglomeration forces for small firms compared with medium and large firms, where these agglomerative forces do not seem to influence TFP .