Industry Networks and the Geography of Firm Behavior

William Grieser (), James LeSage and Morad Zekhnini ()
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William Grieser: Department of Finance, Texas Christian University, Fort Worth, Texas 76109
Morad Zekhnini: Department of Finance, Michigan State University, East Lansing, Michigan 48824

Management Science, 2022, vol. 68, issue 8, 6163-6183

Abstract: Using a network approach that circumvents well-known challenges in estimating peer effects, we show that interactions with a firm’s geographic neighbors play a significant causal role in corporate investment behavior and a modest role in financial policies and firm performance. Moreover, these geography network effects are almost entirely driven by propagation effects through product market and supply chain networks. We corroborate our findings in a quasi-experimental framework that allows for spillovers in treatment effects. Our findings help rationalize industrial clusters (e.g., Silicon Valley), as they illustrate that agglomeration economies are substantial and operate predominantly within industry boundaries.

Keywords: networks; agglomeration economies; geography; product market competition; supply chains; corporate investment; financial policy; spatial econometrics (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:68:y:2022:i:8:p:6163-6183

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