Some commentators maintain that location in an area with ample suppliers results in agglomeration economies that enhance the performance of firms and, therefore, their attractiveness to distant customers, by facilitating interfirm collaboration.  This assertion, however, lacks solid empirical support.  I first review the theoretical arguments concerning the effect of agglomeration on firm performance and then test the theory using distance to principal customer as an indicator of performance.  This indicator is grounded in spatial economics and closely tied to current policy discussions.  Using a national random sample of almost one thousand metalworking plants, I find that collaborative manufacturing enhances establishment performance.  Firms located in agglomerations are not, however, competitively advantaged.
 

Economic Geography 71:27-54 (1995)
 

Return to index
Return to Stephen Appold