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Agglomeration, knowledge spillovers, and corporate investment

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  • Grieser, William
  • Maturana, Gonzalo
  • Spyridopoulos, Ioannis
  • Truffa, Santiago

Abstract

Agglomeration is positively correlated with productivity and exhibits substantial heterogeneity across industries. Yet, the connection between agglomeration and corporate investment, an important driver of production, remains relatively underexplored. We study this relation using counterfactuals that account for the empirical distribution of industry size and firm locations, and by employing network methods that exploit firm geographic location and patent citation connections. We find a strong positive relation between industry peers’ proximity, investment externalities, uncertainty, and knowledge capital. Collectively, our evidence supports the notion that knowledge spillovers generate positive investment externalities that drive firm location decisions and explain industry-level agglomeration patterns.

Suggested Citation

  • Grieser, William & Maturana, Gonzalo & Spyridopoulos, Ioannis & Truffa, Santiago, 2022. "Agglomeration, knowledge spillovers, and corporate investment," Journal of Corporate Finance, Elsevier, vol. 77(C).
    • Handle: RePEc:eee:corfin:v:77:y:2022:i:c:s0929119922001328
    DOI: 10.1016/j.jcorpfin.2022.102289
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    More about this item

    Keywords

    Agglomeration; Industrial clustering; Knowledge spillovers; Innovation; R&D; Investment;
    All these keywords.

    JEL classification:

    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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