The Rise (and Fall) of Tech Clusters

Arbeitspapier

Tech clusters play a growing role in knowledge-based economies by accommodating high-tech firms and providing an environment that fosters location-dependent knowledge spillovers and promote R&D investments by .rms. Yet, not much is known about the economic conditions under which such entities may form in equilibrium without government interventions. This paper develops a spatial equilibrium model with a competitive final sector and a monopolistically competitive intermediate sector, which allows us to determine necessary and sufficient conditions for a tech cluster to emerge as an equilibrium outcome. We show that strongly localized knowledge spillovers, skilled labor abundance, and low commuting costs are key drivers for a tech cluster to form. Not only is the productivity of the final sector higher when intermediate firms cluster, but a tech cluster hosts more intermediate firms and more R&D and production activities, and yields greater worker welfare, compared to what a dispersed pattern would generate. With continual improvements in infrastructure and communication technology that lowers coordination costs, tech clusters will eventually be fragmented.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 8527

Classification and Topics

• Classification: Wirtschaft ; Exchange and Production Economies ; Firm Organization and Market Structure ; Technological Change: Choices and Consequences; Diffusion Processes ; General Equilibrium and Welfare Economic Analysis of Regional Economies
• Subject: high-tech city ; knowledge spillovers ; intermediate firm clustering ; land use ; commuting ; R&D

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Kichko, Sergey ; Liang, Wen-Jung ; Mai, Chao-Cheng ; Thisse, Jacques-Francois ; Wang, Ping
• Event: Veröffentlichung
• (who): Center for Economic Studies and Ifo Institute (CESifo)
• (where): Munich
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/226229
• Last update: 10.03.2025, 11:45 AM CET