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Cluster externalities, firm capabilities, and the recessionary shock: How the macro-to-micro-transition shapes firm performance during stable times and times of crisis

Christian Hundt, Linus Holtermann, Jonas Steeger and Johannes Bersch

No 1907, Papers in Evolutionary Economic Geography (PEEG) from Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography

Abstract: In this paper, we examine the macro-to-micro-transition of cluster externalities to firms and how it is affected by the macroeconomic instability caused by the recessionary shock of 2008/2009. Using data from 16,166 manufacturing and business services firms nested in 390 German regions, we employ within-firm regression techniques to estimate the impact of cross-level interactions between firm- and cluster-level determinants on phase-related differences in firm performance between a pre-crisis (2004-2007) and a crisis period (2009-2011). The empirical results validate the existence of a macro-to-micro-transition that evolves best in the case of broad firm-level capabilities and variety-driven externalities. Furthermore, the results indicate that the transition strongly depends on the macroeconomic cycle. While the transition particularly benefits from a stable macroeconomic environment (2004-2007), its mechanisms are interrupted when being exposed to economic turmoil (2009-2011). Yet, the crisis-induced interruption of the transition is mainly restricted to the national recession in 2009. As soon as the macroeconomic pressure diminishes (2010-2011), we observe a reversion of the transmission mechanisms to the pre-crisis level. Our study contributes to the existing literature by corroborating previous findings that the economic performance of firms depends on a working macro-to-micro transition of external re-sources, which presupposes sufficient cluster externalities and adequate firm-level combinative capabilities. In contrast to previous studies on this topic, the transition mechanism is not modeled as time-invariant. Instead, it is coupled to the prevailing macroeconomic regime.

Keywords: Macro-to-micro-transition; combinative capabilities; agglomeration economies; cluster-level externalities; unrelated variety; related variety; macroeconomic regimes; Great Recession; economic resilience (search for similar items in EconPapers)
JEL-codes: C33 R11 R58 (search for similar items in EconPapers)
Date: 2019-02, Revised 2019-02
New Economics Papers: this item is included in nep-cse, nep-eff, nep-ent, nep-eur and nep-geo
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Working Paper: Cluster externalities, firm capabilities, and the recessionary shock: How the macro-to-micro-transition shapes firm performance during stable times and times of crisis (2019) Downloads
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