Agglomeration and Firm Turnover in Punjab
| Autor: | Marjan Nasir |
|---|---|
| Rok vydání: | 2017 |
| Předmět: |
Job creation
Economies of agglomeration 05 social sciences 0211 other engineering and technologies 0507 social and economic geography 021107 urban & regional planning 02 engineering and technology Competition (economics) Product (business) Econometric model Resource (project management) Economy Turnover Business 050703 geography Productivity Industrial organization |
| Zdroj: | THE LAHORE JOURNAL OF ECONOMICS. 22:19-36 |
| ISSN: | 1811-5446 |
| DOI: | 10.35536/lje.2017.v22.i1.a2 |
| Popis: | (ProQuest: ... denotes formulae omitted.)1.IntroductionWhile the literature on industrial organization has traditionally highlighted the role of new firms as stimulators of economic development, more recent research has focused on the factors affecting the establishment and performance of new firms. Firm entry is associated with employment changes, product and technological innovation and other structural changes in the industry concerned. Furthermore, as incumbent firms face greater competition from new firms, this results in improved productivity, which might otherwise have crowded them out. This paper looks at the effect of agglomeration on firm entry and exit in Punjab's manufacturing sector.Evidence of industrial agglomeration and the factors causing the geographical concentration of firms in Pakistan has been put forward by Burki and Khan (2010). They show that industries tend to be concentrated in districts with an infrastructure (in the form of road density), access to markets and resources such as skilled labor. Accordingly, new firms are more likely to locate near similar firms to take advantage of positive spillovers in the form of shared resources and knowledge or technological spillovers.The study's aim is to determine why industrial agglomeration tends to attract new businesses. The literature on industrial organization in Pakistan has not studied firm entry and exit rates or their determinants primarily due to insufficient data. This study uses data from the Punjab Directory of Industries, available for 2002, 2006 and 2010, to map selected industries in which firms either exist in clusters or are highly dispersed. It thus aims to contribute to the existing literature by looking at the impact of spatial and industrial concentration on the entry and exit rates of manufacturing firms in Punjab. The results support other studies that have found that firm entry and exit rates are higher in more agglomerated industries.The literature on firm entry and agglomeration is discussed in Section 2. Section 3 presents a theoretical model, Section 4 describes the data used, which is then mapped in Section 5. The econometric model and results are presented in Sections 6 and 7, respectively. Section 8 concludes the paper.2.Literature ReviewStudies in this field have looked at factors that limit or attract the entry of new establishments by analyzing the manufacturing, retail and nonfinancial sectors at the firm or plant level. According to Hopenhayn (1992), firms in the manufacturing sector tend to be replaced by new entrants over five-year periods, with a similar trend in job turnover. The literature on firm entry differentiates between new entrants - also referred to as 'greenfield' firms - and existing or diversifying firms that have set up plants in different geographical areas and/or expanded their range of products.The importance of studying entry rates lies in their contribution to regional development. Whether these benefits are direct (such as job creation) or indirect (such as improvements in supply conditions), new establishments tend to stimulate economic development. They augment the industry's resource flows (Roberts & Thompson, 2003) by affecting its productivity and contributing to product and technological innovation. Moreover, these entrants increase competition in the existing market, thus affecting firms' output, pricing and nonpricing decisions. However, Fritsch and Mueller (2004) suggest that these benefits can take as long as eight years to materialize.Several studies have looked at agglomeration as a source of firm entry and exit, including Devereux, Griffith and Simpson (2004); Dumais, Ellison and Glaeser (2002); Carlton (1983); Rosenthal and Strange (2010); and De Silva and McComb (2011). Their findings suggest that agglomeration has a significant impact on the entry of small firms and lowtech firms and on the survival rate of existing firms. … |
| Databáze: | OpenAIRE |
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