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Transaction Costs, Agglomeration Economies, and Industrial Location *
Author(s) -
WOOD GAVIN A.,
PARR JOHN B.
Publication year - 2005
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/j.1468-2257.2005.00264.x
Subject(s) - economies of agglomeration , transaction cost , restructuring , database transaction , space (punctuation) , industrial organization , dimension (graph theory) , business , agency (philosophy) , economics , microeconomics , economic geography , computer science , finance , database , sociology , social science , mathematics , pure mathematics , operating system
Following an outline of the different types of agglomeration economy, consideration is given to transaction costs. Transaction costs may have a definite spatial dimension because institutional, commercial, cultural, and language characteristics are differentiated across the geographic space separating market agents. The concept of transaction space is introduced to represent the spatial differentiation of these characteristics, and this concept is used to cast light on how space can contribute to coordination and agency problems that raise transaction costs. Contractual agreements that are rearranged, so as to span a less heterogeneous transaction space, permit the reduction of transaction costs. Agglomeration can then be interpreted as an alternative to hierarchical structures within firms in economizing on transaction costs. The paper concludes with illustrations of how this framework may help to understand the spatial implications of corporate restructuring and new information technologies.