AGGLOMERATION VERSUS DISPERSAL ECONOMIESHYPOTHESISAVERAGE COST CURVE FOR THE FIRM Agglomeration and Dispersal Economies/DiseconomiesDISPERSAL ECONOMIES/DISECONOMIESAGGLOMERATION ECONOMIES/ DISECONOMIESTWO TYPES OF AGGLOMERATION ECONOMIES/DISECONOMIESAGGLOMERATION ECONOMIESAGGLOMERATION ECONOMIESINDUSTRIAL CLUSTERSINDUSTRIAL DISTRICTSINDUSTRIAL DISTRICTS AND FLEXIBLE SPECIALIZATIONGROWTH POLES/CENTERSINTERFIRM NETWORKSTYPES OF NETWORKSINTERFIRM NETWORK CHARACTERISTICSLEARNING REGION DEFINEDLEARNING REGIONS AS DEVELOPMENT COALITIONSFOUR TYPES OF KNOWLEDGEFOUR TYPES OF PROXIMITYLUNDVALL’S FINDINGS ON AUTOMATIONINNOVATION REQUIRES COOPERATIONREGIONAL AND GLOBAL SUPPLY CHAINSCONCLUSIONSMIT OpenCourseWarehttp://ocw.mit.edu 11.481J / 1.284J / ESD.192J Analyzing and Accounting for Regional Economic Growth Spring 2009 For information about citing these materials or our Terms of Use, visit: http://ocw.mit.edu/terms.AGGLOMERATION VERSUS DISPERSAL ECONOMIESKaren R. PolenskeProfessor of Regional Political Economy and PlanningDepartment of Urban Studies and PlanningMassachusetts Institute of TechnologyPresented in 11.481J, 1.284J, ESD.192JHYPOTHESISRegional economic growth can be enhanced/retarded by two types of economies of scale¾ Agglomeration economies/diseconomies¾ Dispersal economies/diseconomiesAVERAGE COST CURVE FOR THE FIRMAgglomeration and Dispersal Economies/DiseconomiesDISPERSAL ECONOMIES/DISECONOMIESA dispersal economy (diseconomy) is external to the firm,thus it moves the entire average cost curve of the firm down (up) at all output levels, although the old and the new cost curves do not have to be parallel at different scales of output.AGGLOMERATION ECONOMIES/DISECONOMIESAn agglomeration economy/diseconomy has the same effect on the average cost curve as a dispersal economy/diseconomy, but different factors affect it.TWO TYPES OF AGGLOMERATION ECONOMIES/DISECONOMIES¾ Urbanization--agglomeration economies accruing to a firm from the many different suppliers and producers locating in a particular region, each of which takes advantage of the presence of banks, universities, labor, etc. that service diverse industries.¾Localization--agglomeration economies accruing when similar firms locate in one region, each of which takes advantage of the various facilities in the region (trade associations, training institutes, etc.).Hoover (1937).AGGLOMERATION ECONOMIESTABLE 1Agglomeration/Dispersal Type of Agglomeration/Dispersal Concept Economies/Diseconomies and Networks __________________________________________________________Old conceptsIndustrial Cluster Internal, Urbanization, ScopeIndustrial Complex Internal, Localization, Social, ScopeIndustrial District Internal, Localization, Social, ScopeIndustrial Growth Pole/Center Internal, Urbanization, ScopeAGGLOMERATION ECONOMIESTABLE 1 (continued)Agglomeration/Dispersal Type of Agglomeration/Dispersal Concept Economies/Diseconomies and Networks _____________________________________________________________New conceptsChain (Consumer-driven) Scope, Horizontal networksChain (Producer-driven) Internal, Vertical networksChain (Supply) Internal, Vertical networks, DispersalInterfirm Network Dispersal, ScopeINDUSTRIAL CLUSTERS“geographic concentrations of interconnected companies and institutions in a particular field. Clusters encompass an array of linked industries and other entities important to competition. They include, for example, suppliers of specialized inputs, such as components, machinery, and services, and providers of specialized infrastructure.”(Porter 1998, p. 78)According to Porter’s definition, all learning regions are clusters.INDUSTRIAL DISTRICTSAn industrial district is a production systemdominated by small firms that are distinguishedby being flexible, specialized, and nonmobile and that occur in a technologically dynamic, regionally rooted system of firms. Storper, 1997, pp. 7-8.INDUSTRIAL DISTRICTS AND FLEXIBLE SPECIALIZATIONSable (1989, 1997) and Best (1990) use the term “flexible specialization” to show policy makers that small and medium-size firms, research and development institutes, and contractual relations are important elements of the way firms can share distribution, production inputs, information, and technologies.GROWTH POLES/CENTERS“. . . economic space consists of centres (or poles or foci from which centrifugal forces emanate and to which centripeal forces are attacted”(Perroux, 1950, p. 96). Perroux mentioned that establishments of each firm are “geographically dispersed,” and “bounds of organization of varying strength” are formed among them(Perroux, 1950, p. 94).INTERFIRM NETWORKS". . . a network organization linking firms or economic agents represents an intermediate 'system of governance' that lies between hierarchic organization ('the firm') on the one hand, and 'classical' or spot transactions ('the market'), on the other."Teubal, Yinnon, and Zuscovitch. 1991. "Networks and Market Creation." Research Policy, p. 381.TYPES OF NETWORKS¾ Interfirm (component supplier-assemblernetworks and user-producer networks).¾ Employment networks. ¾ Innovator networks. ¾ Information and communication networks.¾ Social networks, ¾ Political networks.INTERFIRM NETWORK CHARACTERISTICS¾ Recurring transactions and interactions. ¾ Long-run stable relationship.¾ Creation of pool of knowledge; therefore, contributes to interfirm learning. ¾ May or may not cross spatial boundaries (compare interfirm networks within an industrial district, such as Silicon Valley, versus networks across oceans, such as communication networks).LEARNING REGION DEFINED¾A learning region is one in which industry, community, government, and educational centers in a region all work together in collective-learning environments to help the region develop. ¾For the firms, the learning may be based on intrafirm, interfirm, and/or regional coalitions.LEARNING REGIONS AS DEVELOPMENT COALITIONSDevelopment coalitions range ¾from small and medium workplaces ¾to regions ¾to larger networks of firms ¾to entire nations. Ennals and Gustavsen (1999) In this case, not all learning regions are clusters.Ennals and Gustavsen (1999)FOUR TYPES OF KNOWLEDGE¾ KNOW-WHAT--knowledge of facts; easy to codify.¾ KNOW-WHY--knowledge of principles that exist innature, the human mind, and the society; some is relatively easy to codify.¾