Agglomeration near and far, the case of Southern California: supply chains for goods and ideas

Peter Gordon () and John Cho ()
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Peter Gordon: University of Southern California
John Cho: Southern California Association of Governments

The Annals of Regional Science, 2018, vol. 61, issue 3, No 6, 517-552

Abstract: Abstract Prosperity and economic growth require robust specialization and exchange. This means the formation and maintenance of numerous complex supply chains. These are emergent and include supply chains for things and supply chains for ideas. The former involve transactions; the latter can be via transactions and/or realized positive externalities. All supply chains have a geographic dimension which is also emergent. Firms carefully choose what to make vs what to buy and also where to sell or buy it, near or far. The whole system tends to be a pattern of locations that denote realized transactions (and transactions costs) as well as realized externalities. The city remains a competitive producer if these relationships are encouraged with the attendant costs contained. Cities are “engines of growth.” They offer attractive supply chain formation and management opportunities, including the various spatially situated supply chains for things and ideas. The latter are more complex than textbook discussions of non-rival goods suggest. People are keen to identify and acquire useful knowledge. Consider (1) the advantages of open-source knowledge sharing have been acknowledged; (2) ideas often denote complex tacit knowledge exchange, and (3) access to useful knowledge is priced in land markets and impacts location choice. Favorable networking and location opportunities are significant. Flexible land markets facilitate the availability of such opportunities. Access to pools of human capital is clearly beneficial, but the ability to tailor access to the peculiar requirements of the firm is even better. Detailed firm location data for various sectors for the Los Angeles metropolitan areas are analyzed to support our claims. We estimate Ripley k-functions and note differences by industry as well as firm size. There is agglomeration that is near as well as far. This finding complicates “death of distance” as well as “clustering” discussions.

JEL-codes: R1 R3 (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1007/s00168-018-0881-6

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