Agglomeration, knowledge spillovers, and corporate investment

William Grieser, Gonzalo Maturana, Ioannis Spyridopoulos and Santiago Truffa

Journal of Corporate Finance, 2022, vol. 77, issue C

Abstract: Agglomeration is positively correlated with productivity and exhibits substantial heterogeneity across industries. Yet, the connection between agglomeration and corporate investment, an important driver of production, remains relatively underexplored. We study this relation using counterfactuals that account for the empirical distribution of industry size and firm locations, and by employing network methods that exploit firm geographic location and patent citation connections. We find a strong positive relation between industry peers’ proximity, investment externalities, uncertainty, and knowledge capital. Collectively, our evidence supports the notion that knowledge spillovers generate positive investment externalities that drive firm location decisions and explain industry-level agglomeration patterns.

Keywords: Agglomeration; Industrial clustering; Knowledge spillovers; Innovation; R&D; Investment (search for similar items in EconPapers)
JEL-codes: L1 O3 R1 R3 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:77:y:2022:i:c:s0929119922001328

DOI: 10.1016/j.jcorpfin.2022.102289

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