Agglomeration and clustering over the industry life cycle: Toward a dynamic model of geographic concentration

Authors

  • Liang Wang,

    Corresponding author
    1. School of Management, University of San Francisco, San Francisco, California, U.S.A.
    • Correspondence to: Liang Wang, School of Management, University of San Francisco, 2130 Fulton Street, San Francisco, California, 94117, U.S.A. E-mail: lwang28@usfca.edu

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  • Anoop Madhok,

    1. Schulich School of Business, York University, Toronto, Ontario, Canada
    2. Department of Management and Organization, Vrije University, Amsterdam, Netherlands
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  • Stan Xiao Li

    1. Schulich School of Business, York University, Toronto, Ontario, Canada
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Abstract

Research on agglomeration finds that either a higher survival rate of incumbent firms or a higher founding rate of new entrants, or both, can sustain an industry cluster. The conditioning effects of time on the two distinct mechanisms of survival and founding are, however, rarely examined. We argue that the forces driving geographic concentration vary across the industry life cycle. Data from Ontario's winery industry from 1865 to 1974 demonstrates a dynamic model of geographic concentration: agglomeration attracts more new entry in the growth stage only, whereas it contributes to firm survival in the mature stage only. The results not only establish the importance of understanding the temporal dynamics underlying agglomeration externalities, but also provide a possible explanation for the mixed empirical results found in previous studies. Copyright © 2013 John Wiley & Sons, Ltd.

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