Location Strategy
9 important questions on Location Strategy
Why is innovation often concentrated in local regions? (4)
- Uncertainty and complexity
- local networks
- Reliance upon basic research
- proximity to universities or research institutes
- Importance of learning-by-doing
- close contact with suppliers and customers
- Cumulativeness
- new innovations often build on past innovations
What 2 types of local areas may facilitate innovation?
- Specialized local areas
- Marshall-Arrow-Romer (MAR) externalities
- Diversified local areas (urban areas)
- Jacob externalities
What constitutes a geographic cluster?
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What are advantages of geographic clustering from the supply side? (5)
- Strong local suppliers
- Access to labor
- Shared infrastructure
- Reduced transaction costs
- Information externalities
What are advantages of geographic clustering from the demand side? (2)
- Strong local demand
- Customer feedback
What are disadvantages of geographic clustering from the supply side? (3)
- Competition over inputs and resources
- Congestion (e.g. in transportation)
- 'New ideas need new space'
What is a disadvantage of geographic clustering from the demand side?
How can employment measure as proxy for knowledge exchange?
- Innovation
- number of innovations per firm
- Employment
- Regional employment in firm's own industry
- Regional employment in all other industries
What are the results from the research of Baptista and Swann (1998)? (2)
- Firms located in areas that are strong in their own industry innovate more
- in line with Marshall-Arrow-Romer externalities
- Firms do not innovate more when located in areas in which regional employment in other sectors is high
- Jacobs externalities not supported
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