Agglomeration externalities of fast-growth firms

Jun Du and Enrico Vanino

Regional Studies, 2021, vol. 55, issue 2, 167-181

Abstract: Small groups of fast-growth firms contribute disproportionately to job creation, yet little is known about their broader impact on the economy. This paper provides the first evidence of the agglomeration externalities of fast-growth firms, examining their economic impact on non-fast-growth firms operating within the same region (NUTS-2) and industry (SIC2), and through backward and forward linkages. Using comprehensive firm-level data on UK firms between 1997 and 2013, the analysis shows robust evidence of positive spillovers of fast-growth firms on the labour productivity of non-fast-growth firms in the same industry and region. However, the externalities in relation to the employment growth of non-fast-growth firms are negative, suggesting labour poaching and local competition effects.

Date: 2021
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DOI: 10.1080/00343404.2020.1760234

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