• The research in this paper was undertaken while the author was at Syracuse University. Any opinions and conclusions expressed herein are those of the author and do not necessarily represent the views of the U.S. Census Bureau. The research in this paper does not use any confidential Census Bureau information. I thank the co-editor, Marlon Boarnet, and four anonymous referees for very useful comments and suggestions on an earlier version. I thank Mary E. Lovely and Stuart S. Rosenthal for their valuable insights. This paper has also benefited from discussions with Jeffrey Kubik, Amanda Ross, and seminar participants at the Syracuse University International Trade Workshop and the 2010 Southern Economic Association Meetings. I am grateful to the Maxwell School of Public Policy and Citizenship and Mary E. Lovely for access to the Annual Surveys of Industrial Production. All remaining errors are my own.


The clustering of economic activity is believed to generate both positive own-industry (localization) spillovers and negative competitive pressures. Using data on manufacturing enterprises operating in China during 1998–2006, this paper provides evidence on the net effect of opposing spillovers from nearby economic activity. Central to the analysis is the opportunity to distinguish local manufacturing enterprises by state, private, or foreign ownership. Systematic differences in average productivity of these firms enable inferences about differences in the strength of spillovers from one type of firm to another type. Results indicate that spillovers are larger within the same ownership type than they are across them, consistent with localization economies that operate within segmented channels of influence.