Internal agglomeration and productivity: Evidence from microdata

Evan Rawley, Robert Seamans

    Research output: Contribution to journalArticlepeer-review

    Abstract

    Research Summary: We study how internal agglomeration—geographic clustering of business establishments owned by the same parent company—influences establishment productivity. Using Census microdata on the population of U.S. hotels from 1987-2007, we find that doubling the intensity of internal agglomeration is associated with a productivity increase of about 2% in pre-existing establishments. We consider several mechanisms that may be driving the productivity effect and find evidence consistent with the idea that an economically meaningful component of the productivity effect is due to knowledge transfer between internally agglomerated establishments. We replicate our main findings with Census microdata on the full population of U.S. restaurants from 1987-2007, suggesting that the internal agglomeration effects we document may generalize broadly to other industries with multi-unit firms. Managerial Summary: Internal agglomeration is the geographic clustering of business establishments owned by the same parent company. This paper uses detailed Census data on hotels and restaurants to show how internal agglomeration influences performance. Interestingly, knowledge sharing between owned establishments in the same metropolitan area appears to be a key driver of the internal agglomeration effect.

    Original languageEnglish (US)
    Pages (from-to)1770-1798
    Number of pages29
    JournalStrategic Management Journal
    Volume41
    Issue number10
    DOIs
    StatePublished - Oct 1 2020

    Keywords

    • agglomeration
    • corporate strategy
    • knowledge spillovers
    • productivity

    ASJC Scopus subject areas

    • Business and International Management
    • Strategy and Management

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