Macroeconomic impacts on firm performance and place-based cluster policies in the Netherlands

In this chapter we show that firms on knowledge locations have significantly different growth dynamics compared to firms outside such locations. The hypothetical benefits of being located on knowledge locations presume accelerated growth, through among others labour market pooling, specialist shared services and localised learning through spillovers. Our results point to non-stationarity and larger turbulence in growth dynamics - the amplitude of employment change in firms on knowledge locations is larger in times of both growth and decline. During economically vital and stable periods, firms on knowledge locations grow faster than firms located elsewhere, but during the economic downturn period, these firms decline faster than firms in other locations. It is also shown that these dynamics are heterogeneous between locations as well as firm size. Firms in locations with or closer to larger concentrations of business services and modern industry grow more. The presence of larger firms is conditional to growth. We zoom in on the cities of Rotterdam and The Hague and show micro-evidence of these growth dynamics and its agglomeration causes in knowledge locations defined by local municipal policy. Place-based policies are popular around the world, but our empirical analysis on its effectiveness in the Netherlands shows that less policy-prone industrial organization circumstances matter as much.