The impacts of spatial positioning on regional new venture creation and firm mortality over the industry life cycle

The conventional explanation of the geographic concentration of economic activities attributes the persistence of industry clusters to the local agglomeration externalities within each cluster. By overemphasizing local agglomeration externalities, the existing literature essentially treats clusters as separate and isolated entities and thus risks overlooking competitive and collaborative dynamics across clusters. We argue that the spatial distribution of an industry matters as well because regional competitiveness is affected not only by its local agglomeration externalities but also by the agglomeration externalities in nearby clusters. Furthermore, to complement previous agglomeration research, which tends to take a static view, the impact of spatial distribution on regional competitiveness is examined across two stages of the industry life cycle. The findings from a longitudinal study of Canada's telecommunication equipment manufacturing industry reveal that being close to strong agglomeration externalities in other places increases a place's ability to create more new ventures when an industry grows but decreases a place's ability to sustain existing firms and its ability to create more new ventures when an industry shakes out.