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THE ‘THICK MARKET’ EFFECT AND AGGLOMERATION IN HIGH‐GROWTH INDUSTRIES
Author(s) -
Klimenko Mikhail M.
Publication year - 2005
Publication title -
pacific economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.34
H-Index - 33
eISSN - 1468-0106
pISSN - 1361-374X
DOI - 10.1111/j.1468-0106.2005.00266.x
Subject(s) - economies of agglomeration , upstream (networking) , downstream (manufacturing) , industrial organization , economics , economies of scale , upstream and downstream (dna) , service (business) , manufacturing , microeconomics , supply chain , business , operations management , economy , marketing , computer science , computer network
. This paper considers a simple model of geographical concentration of new high‐technology industries that lack stable design standards. In the model, agglomerative effects result from positive feedback between competitive forces in the upstream and downstream segments of a high‐technology industry, rather than as a result of traditional scale economies in the manufacturing of standardized products. The model assumes that firms in the upstream service supply industry have ex ante uncertain costs and compete in Bertrand fashion for the independent demands of downstream firms. This framework explains the mechanism of spatial clustering in industries with a high rate of innovation.