Internal agglomeration and productivity: Evidence from microdata

Evan Rawley, Robert Seamans

Research output: Contribution to journalArticlepeer-review

2 Scopus citations

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

Bibliographical note

Funding Information:
We are grateful to Janet Bercovitz, Kira Fabrizio, Ha Hoang, Jenny Kuan, Michael Leiblein, Susan Lu, Joanne Oxley, Maggie Zhou, Arvids Ziedonis, Rosemarie Ziedonis, seminar participants at BI Norwegian Business School, Copenhagen Business School, ESMT, NYU Stern School of Business, Ohio State University, the University of Connecticut, the University of Michigan, the University of Minnesota, Washington University, for valuable comments and suggestions. The research in this paper was conducted while the authors were Census Bureau research associates at the New York City Census Research Data Center (NYCRDC). Research results and conclusions expressed are our own and do not necessarily indicate concurrence by the Bureau of Census. This paper has been screened to insure that no confidential data are revealed. Financial support for this work was provided to Rawley by the Mack Institute at Wharton and to Seamans by the Ewing Marion Kauffman Foundation. The contents of this publication are solely the responsibility of the authors.

Funding Information:
We are grateful to Janet Bercovitz, Kira Fabrizio, Ha Hoang, Jenny Kuan, Michael Leiblein, Susan Lu, Joanne Oxley, Maggie Zhou, Arvids Ziedonis, Rosemarie Ziedonis, seminar participants at BI Norwegian Business School, Copenhagen Business School, ESMT, NYU Stern School of Business, Ohio State University, the University of Connecticut, the University of Michigan, the University of Minnesota, Washington University, for valuable comments and suggestions. The research in this paper was conducted while the authors were Census Bureau research associates at the New York City Census Research Data Center (NYCRDC). Research results and conclusions expressed are our own and do not necessarily indicate concurrence by the Bureau of Census. This paper has been screened to insure that no confidential data are revealed. Financial support for this work was provided to Rawley by the Mack Institute at Wharton and to Seamans by the Ewing Marion Kauffman Foundation. The contents of this publication are solely the responsibility of the authors.

Publisher Copyright:
© 2020 Strategic Management Society

Keywords

  • agglomeration
  • corporate strategy
  • knowledge spillovers
  • productivity

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