Strategic complementarities, geographical agglomeration, and firm investment

José Jorge

The European Journal of Finance, 2023, vol. 29, issue 2, 135-154

Abstract: We estimate the effect of strategic complementarities (measured by the geographical agglomeration of firms) on firm investment. Individual firm investment responds significantly to industry investment in agglomerated industries, whereas the response is null in dispersed industries. Industry-region sales do not explain the differential effect between these two types of industries. These results have been overlooked in the literature, provide a justification for regional and industry policies, and challenge the stable unit treatment value assumption (SUTVA) required in potential outcome analysis.

Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:taf:eurjfi:v:29:y:2023:i:2:p:135-154

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DOI: 10.1080/1351847X.2022.2030778

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