Clusters, Agglomeration, and Economic Development Potential: Empirical Evidence Based on the Advent of Slab Casting by U.S. Steel Minimills

Ten new steel plants were constructed in the United States from 1989 to 2001, each taking advantage of new steel slab casting technologies that gave scrap-based minimills access to the flat-products market. This market had been served previously exclusively by ore-based integrated mills. Some of the new minimills were built in established steel industry agglomerations. Others were built in greenfield locations with little or no prior steelmaking activity. This research, based on direct observation and plant visits, brings new evidence to bear on the nature and importance of agglomeration economies associated with steel production by analyzing industry clusters related to the advent of slab casting by steel minimills. The authors find that industry clusters can play an important role in the process of market entry; however, certain product and firm characteristics can shape the nature of industry agglomerations and their effect on firms and regions.