Papers in Evolutionary Economic Geography

May 15, 2013

# 13.09 Spinoffs and Clustering

Filed under: 2013 — Tags: , , , , — mattehartog @ 8:53 am

Russell Golman, Steven Klepper

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Geographic clustering of industries is typically attributed to localized, pecuniary or non-pecuniary externalities. Recent studies across innovative industries suggest that explosive cluster growth is associated with the entry and success of spinoff firms. We develop a model to explain the patterns regarding cluster growth and spinoff formation and performance, without relying on agglomeration externalities. Clustering naturally follows from spinoffs locating near their parents. In our model, firms grow and spinoffs form through the discovery of new submarkets based on innovation. Rapid and successful innovation creates more opportunities for spinoff entry and drives a region’s growth.

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