The impact of spatial concentration on enterprise performance
The impact of spatial concentration on enterprise performance

Summary/Abstract: The objective of this paper is to reveal the impact of spatial concentration of business in the Russian citieson enterprise productivity. The hypotheses are the following: urbanization level and home market potentialpositively affect enterprise performance; localization economies are positive and start decreasing aftersome point due to congestion and excessive competition; regional transport infrastructure, business climateand human capital positively affect enterprise performance. We use firm level data augmented with city andregional data. Fixed effects are applied in order to deal with endogeneity. Agglomeration economies are consideredin the light of opportunities for knowledge spillovers, input sharing and labor market pooling. Our resultsconfirm that agglomeration economies and home market potential are important for the enterprise performance.We find positive urbanization and diversity economies, while localization economies have an invertedU shape. Results can be used to improve regional policy. For instance, significance of home market potentialemphasizes the importance of transport infrastructure. Significance of agglomeration effects impliesthat if a sufficiently large number of firms work in a city, performance of each firm improves.

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