Geographic clusters, regional productivity and resource reallocation across firms: Evidence from China

Guo, Di; Jiang, Kun; Xu, Chenggang; Yang, Xiyi

Abstract

We link industrial clusters, regional productivity and resource reallocation efficiency with geographical and sectoral disaggregated data. Based on a county-industry level panel from 1998 to 2007 in China, we find that industrial clusters significantly increase local industries' productivity by lifting the average firm productivity and reallocating resources from less to more productive firms. Moreover, we find major mechanisms through which resource reallocation is improved within clusters: (i) clusters are associated with a higher firm turnover with increased entry and exit rates simultaneously; and (ii) within clusters' environment, the dispersion of individual firm's markup is significantly reduced, indicating intensified local competition within clusters. Such results suggest that industrial clusters in China help improve regional productivity and resource allocation efficiency with intensified competition and accelerated firm dynamics. The identification issues are carefully addressed by two-stage estimations with instrumental variables and other robustness checks.

Citation

Guo, D., Jiang, K., Xu, C., & Yang, X. (2023). Geographic clusters, regional productivity and resource reallocation across firms: Evidence from China. Research Policy, 52(2), Article 104691. https://doi.org/10.1016/j.respol.2022.104691

• Journal Article Type: Article
• Acceptance Date: Nov 18, 2022
• Online Publication Date: Dec 7, 2022
• Publication Date: 2023-03
• Deposit Date: Jan 20, 2023
• Publicly Available Date: Jan 20, 2023
• Journal: Research Policy
• Print ISSN: 0048-7333
• Publisher: Elsevier BV
• Peer Reviewed: Peer Reviewed
• Volume: 52
• Issue: 2
• Article Number: 104691
• DOI: https://doi.org/10.1016/j.respol.2022.104691
• Keywords: Management of Technology and Innovation; Management Science and Operations Research; Strategy and Management
• Public URL: https://nottingham-repository.worktribe.com/output/16229133
• Publisher URL: https://www.sciencedirect.com/science/article/pii/S0048733322002128
• Additional Information: This article is maintained by: Elsevier; Article Title: Geographic clusters, regional productivity and resource reallocation across firms: Evidence from China; Journal Title: Research Policy; CrossRef DOI link to publisher maintained version: https://doi.org/10.1016/j.respol.2022.104691; Content Type: article; Copyright: © 2022 The Authors. Published by Elsevier B.V.