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Information Technology and Local Product Variety: Substitution, Complementarity and Spillovers
Author(s) -
De Vos Duco,
Meijers Evert
Publication year - 2019
Publication title -
tijdschrift voor economische en sociale geografie
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.766
H-Index - 55
eISSN - 1467-9663
pISSN - 0040-747X
DOI - 10.1111/tesg.12365
Subject(s) - complementarity (molecular biology) , economies of agglomeration , variety (cybernetics) , spillover effect , economic geography , product (mathematics) , economies of scope , business , industrial organization , economics , marketing , microeconomics , computer science , genetics , geometry , mathematics , artificial intelligence , economies of scale , biology
This paper addresses the interaction between information technology (IT) and agglomeration. The literature distinguishes two types of interactions, namely a substitution effect and a complementarity effect. We conceptualise a third effect, namely a ‘spillover’ mechanism, by which IT allows places in close proximity of large cities to ‘borrow size’ and sustain greater product variety. We test these mechanisms using detailed data on restaurant cuisine variety in the Netherlands, and the IT dimension is measured through the use and penetration of online restaurant reviews. We find that IT complements cuisine variety in cities, and induces spillovers to smaller places near larger ones, allowing smaller places to sustain ‘rare’ cuisines that were traditionally only present in larger cities. As such, IT leads to the spread of agglomeration benefits such as local product variety over larger territories.