Spatial agglomeration and business groups: new evidence from Italian industrial districts



Θ.1    Controlling by sector of activity, business groups are expected to be more widespread within

industrial districts than outside industrial districts.

While the rate of growth of district firms is expected to be higher than that of firms
outside the districts, this does not automatically mean that business groups within industrial
districts are larger than groups outside them. Indeed, the external economies that
characterize industrial districts allow smaller firms to compete with larger ones. Moreover,
business groups belonging to industrial districts can rely more than other groups on an
extended network of suppliers.

Information sharing on production technology and market needs, transmission of ideas
and the speed of the imitative process are among the characteristic features of business
clusters. They help firms belonging to a cluster (like an industrial district) to raise efficiency
and to foster product innovation and growth. At the same time, knowledge spill-over in
specialized activities allows firms belonging to the cluster to seize business opportunities
along the production chain or in related sectors (CAINELLI and LEONCINI, 1999). For
this reason we can expect firms belonging to a cluster to have a higher opportunity for
growth in the same sector of specialization of the cluster. This result can also be found in
models of economic geography where specialization have a negative impact on new
product development (DURANTON and PUGA, 2001).

Growth can take the form of product differentiation (horizontal integration) or vertical
integration. Both forms concerns activities along the production chain that characterizes
the cluster. At the same time the thorough familiarity of firms within the same district
should favour acquisitions among them (BRIOSCHI
et al., 2002). Both in the setting up of
new firms and in acquiring established ones it is likely that the firms involved are located
within the cluster.

The previous discussion leads to the following theoretical propositions to be
empirically tested:

Θ.2     Controlling by sector of activity, business groups belonging to industrial districts should show a

higher degree of specialization than groups outside industrial districts.

Θ.3    Controlling by sector of activity, business groups belonging to industrial districts should have a

higher spatial concentration of their activities than groups outside industrial districts.



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