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Do Localization Economies Matter in Cluster Formation? Questioning the Conventional Wisdom with Data from Indian Metropolises

Author

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  • Sanjoy Chakravorty

    (Department of Geography and Urban Studies, 310 Gladfelter Hall, Temple University, Philadelphia, PA 19122, USA)

  • Jun Koo

    (Cleveland State University, Maxine Goodman Levin College of Urban Affairs, Cleveland, OH 44115, USA)

  • Somik V Lall

    (Development Research Group, The World Bank, Washington, DC 20433, USA)

Abstract

The large and growing literature on industrial clustering suggests that firms seek locations that provide localization economies (benefits from having common buyers and suppliers, a specialized or skilled labor pool, and informal knowledge transfers). This study of manufacturing industry clusters in three Indian metropolises suggests instead that industry location decisions are guided by market imperfections, specifically rigidities in the land market caused by state action (segregationist or environmental policies, the absence of exit policies, and activist industrial promotion policies). For the investigation the authors use geographically disaggregated industry location and size data from Mumbai, Kolkata, and Chennai, to analyze eight industrial sectors (food and beverages, textiles, leather, printing and publishing, chemicals, metals, machinery, and electrical and electronics). The authors test for evidence of global and local clustering and distinguish between and test for coclustering and colocation of industries. The results are indicative rather than absolute and suggest that for location decisions general urbanization economies are more important than are localization economies.

Suggested Citation

  • Sanjoy Chakravorty & Jun Koo & Somik V Lall, 2005. "Do Localization Economies Matter in Cluster Formation? Questioning the Conventional Wisdom with Data from Indian Metropolises," Environment and Planning A, , vol. 37(2), pages 331-353, February.
    • Handle: RePEc:sae:envira:v:37:y:2005:i:2:p:331-353
    DOI: 10.1068/a373
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    References listed on IDEAS

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    1. Sanjoy Chakravorty, 2000. "How Does Structural Reform Affect Regional Development? Resolving Contradictory Theory with Evidence from India," Economic Geography, Taylor & Francis Journals, vol. 76(4), pages 367-394, October.
    2. Ellison, Glenn & Glaeser, Edward L, 1997. "Geographic Concentration in U.S. Manufacturing Industries: A Dartboard Approach," Journal of Political Economy, University of Chicago Press, vol. 105(5), pages 889-927, October.
    3. Ron Martin & Peter Sunley, 2003. "Deconstructing clusters: chaotic concept or policy panacea?," Journal of Economic Geography, Oxford University Press, vol. 3(1), pages 5-35, January.
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    1. Kumar, Sudesh, 2005. "Development of Industrial Cluster," MPRA Paper 171, University Library of Munich, Germany, revised 30 Sep 2005.
    2. Ugo Fratesi, 2008. "Issues in the Measurement of Localization," Environment and Planning A, , vol. 40(3), pages 733-758, March.
    3. Eva Coll‐Martínez & Ana‐Isabel Moreno‐Monroy & Josep‐Maria Arauzo‐Carod, 2019. "Agglomeration of creative industries: An intra‐metropolitan analysis for Barcelona," Papers in Regional Science, Wiley Blackwell, vol. 98(1), pages 409-431, February.
    4. Josep-Maria Arauzo-Carod & Elisabet Viladecans-Marsal, 2009. "Industrial Location at the Intra-Metropolitan Level: The Role of Agglomeration Economies," Regional Studies, Taylor & Francis Journals, vol. 43(4), pages 545-558.
    5. M.R. Narayana, 2014. "Growth Effects of Industrial Clusters," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 15(1), pages 71-92, March.
    6. José A. Borello & Hernán Morhorlang & Diego Silva Failde, 2011. "Agglomeration Economies in Semi-industrialized Countries: Evidence from Argentina," Institutions and Economies (formerly known as International Journal of Institutions and Economies), Faculty of Economics and Administration, University of Malaya, vol. 3(3), pages 487-518, October.
    7. Sabyasachi TRIPATHI, 2014. "Estimating Urban Agglomeration Economies for India: A New Economic Geography Perspective," Theoretical and Empirical Researches in Urban Management, Research Centre in Public Administration and Public Services, Bucharest, Romania, vol. 9(2), pages 5-34, May.
    8. Sabyasachi TRIPATHI, 2017. "How To Develop An Equitable Distribution Of Urban Gdp By Smart City Development In India," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(2), pages 131-146, December.
    9. Josep-Maria Arauzo-Carod & Elisabet Viladecans-Marsal, 2009. "Industrial Location at the Intra-Metropolitan Level: The Role of Agglomeration Economies," Regional Studies, Taylor & Francis Journals, vol. 43(4), pages 545-558.
    10. Elisabet Viladecans Marsal & Josep Maria Arauzo Carod, "undated". "Industrial Location at the Intra-metropolitan Level: A Negative Binomial Approach," Studies on the Spanish Economy 224, FEDEA.
    11. Richard G Funderburg & Xiaoxue Zhou, 2013. "Trading Industry Clusters amid the Legacy of Industrial Land-Use Planning in Southern California," Environment and Planning A, , vol. 45(11), pages 2752-2770, November.
    12. Ana Moreno-Monroy, 2012. "Critical Commentary. Informality in Space: Understanding Agglomeration Economies during Economic Development," Urban Studies, Urban Studies Journal Limited, vol. 49(10), pages 2019-2030, August.
    13. Tripathi, Sabyasachi, 2015. "Do upcoming “Smart cities” need to provide smart distribution of higher urban economic growth? Evidence from Urban India," MPRA Paper 61527, University Library of Munich, Germany.
    14. Gaurav Bhattacharya, 2019. "Location decisions of industries in the presence of transportation costs and environmental regulations: empirical evidence from India," Journal of Social and Economic Development, Springer;Institute for Social and Economic Change, vol. 21(1), pages 24-53, June.
    15. Tripathi, Sabyasachi & Kumar, Shamika, 2016. "Determinants of firm location choice in metropolitan cities in India: A binary Logit model analysis," MPRA Paper 73995, University Library of Munich, Germany.
    16. Sabyasachi TRIPATHI & Shamika KUMAR, 2017. "Determinants Of Firm Location Choice In Large Cities In India: A Binary Logit Model Analysis," Theoretical and Empirical Researches in Urban Management, Research Centre in Public Administration and Public Services, Bucharest, Romania, vol. 12(3), pages 45-62, April.
    17. Abhinav Alakshendra & Ziming Li, 2020. "Local Governments’ Impact on Market Accessibility of Enterprises: Understanding the Location Choices of Enterprises in Hajipur, India," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 63(1), pages 119-142, March.
    18. Ana Isabel Moreno-Monroy & Gustavo Adolfo García Cruz, 2016. "Intra-Metropolitan Agglomeration of Formal and Informal Manufacturing Activity: Evidence from Cali, Colombia," Tijdschrift voor Economische en Sociale Geografie, Royal Dutch Geographical Society KNAG, vol. 107(4), pages 389-406, September.

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