Scandinavian Working Papers in Economics

Working Papers,
University of Aarhus, Aarhus School of Business, Department of Economics

No 03-26: Industrial clusters, firm location and productivity – Some empirical evidence for Danish firms

Erik Strøjer Madsen (), Valdemar Smith () and Mogens Dilling-Hansen ()
Additional contact information
Erik Strøjer Madsen: Department of Economics, Aarhus School of Business, Postal: Prismet, Silkeborgvej 2, DK 8000 Aarhus C, Denmark
Valdemar Smith: Department of Economics, Aarhus School of Business, Postal: Prismet, Silkeborgvej 2, DK 8000 Aarhus C, Denmark
Mogens Dilling-Hansen: University of Aarhus, Postal: Economic Institute, Aarhus Universitet, Bartholins Alle, bygning 322, Universitetsparken, 8000 Århus C,

Abstract: According to the economic literature, industrial clusters are groups of firms on the same location composing a production system with spillovers that can be vertical and/or horizontal. This paper focuses on horizontal clusters by exploring the spatial distribution of industrial clusters in Denmark. The key issue in the theoretical part of the paper is whether firms located in industrial clusters are more productive than their counterparts located separately outside industrial agglomerations. Firms located in clusters are potentially more productive than other firms because of the agglomeration advantages of e.g. networks, knowledge spillovers, human capital mobility etc. In the empirical part of the paper, industrial clusters are identified using municipalities as the spatial dimension. In the first part of the analysis, clusters are identified at the NACE-2 digit industrial level. Next, using firm-level data for the 1990s the relative ‘cluster-firm’ productivity is estimated. The study finds evidence of a significantly higher productivity in clusters. However, the magnitude of the cluster advantages varies a lot across industries and is highest in textile.

Keywords: Industrial clusters; productivity

JEL-codes: D24; L60

17 pages, May 26, 2003

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