Working Paper Series in Economics and Institutions of Innovation,
Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies

Abstract: It is argued that the introduction of new technology is leading toward the decentralization of the production and consumption of creative products and industries. But creative industries and workers may benefit from being around large markets, access to shared labor, network interactions and economies of scale as well as scope. We hypothesize that the combined effects of scale and scope economies shape significant geographic concentration of the entertainment industry. We test for this using data for 297 U.S. metropolitan areas from 1970-2000 for the entertainment industry overall and its key sub-segments. The findings indicate show that the entertainment industry is concentrated in New York and Los Angeles which significantly outperform other large regions. We further note the rise of one or two highly specialized locations in individual segments of the entertainment industry such as Nashville in music or Las Vegas for dancers. We also find some dispersal of entertainment activity to smaller centers. We conclude that the entertainment industry is characterized by a biurificated spatial structure – with concentration driven by the conjoined effects of scale and scope economies growing at the very top (among the very largest city-regions) and dispersal growing at the bottom.

Keywords: Entertainment; agglomeration; economies of scale; economies of scope

JEL-codes: R11; R12; Z11

40 pages, January 15, 2009

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