Implications of Agglomeration Economics and Market Access for Firm Growth in Food Manufacturing
Schmit, Todd M.; Hall, Jeffrey S.
With the persistant changes in technology and increased competition in food manufacturing, it is important to reassess the effects of agglomeration economies and market access on the performance of firms in the industry. Using survey data from a recent survey of New York state food processors, an ordered logit analysis reveals that firm growth is related to important upstream and downstream market conditions as reflected in increased access to agricultural inputs and growing population canters. The clustering of similar manufacturers has negative effects on firm growth in rural areas, but these effects are not significant in urban areas. For these reasons, policies that promote intra-industry or cross-industry collaboration would likely benefit food manufacturers, but these benefits would be limited to firms in close geographic proximity to one another. Moreover, in rural areas especially, manufacturing firms and community planners need to be aware of possible negative effects of competition from growing concentrations of firms so that these issues can be addressed before local business growth is adversely affected.
WP 2011-10 March 2011
Charles H. Dyson School of Applied Economics and Management, Cornell University