Edited by Charlie Karlsson, Börje Johansson and Roger R. Stough
Chapter 14: Agglomeration Economies and Firm Growth: Testing for Spatial Externalities in the Dutch ICT Industry
Frank G. van Oort and Erik Stam INTRODUCTION 14.1 The role accorded to agglomeration economies in determining growth has long been a central theme in urban and regional economics. In theoretical terms, the topic has acquired greater importance in years following seminal contributions by Romer (1986) and Lucas (1988) where economic growth was modelled in an endogenous framework. In these types of models, knowledge spillovers between economic agents, an important source of agglomeration economies, play a crucial role in the growth and innovation process leading to external economies of scale in production. At the core of the new growth theory lies the concept of technological change as a non-rival and partially excludable good (as opposed to the neoclassical view of knowledge as an entirely public good). On this basis, new technological knowledge is usually tacit, meaning that its accessibility, as well as its growth spillovers, are bounded by geographic proximity of high-tech firms or knowledge institutions, and by the nature and extent of the interactions among these actors in an innovation system (Acs, 2002). A large and growing empirical literature has grown around testing this idea using data from cities (Glaeser et al., 1992; Henderson et al., 1995; Dumais et al., 2002; Van Oort, 2004). The assumption here is that if knowledge spillovers are important to employment growth (via its components new firm formation and firm growth), they should be more easily identified in cities where many people are concentrated in a relatively small and confined space and where knowledge...
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