Competitors, Complementors, Parents and Places : Explaining Regional Agglomeration in the U.S. Auto Industry

Taking the early U.S. automobile industry as an example, we evaluate four competing hypotheses on regional industry agglomeration: intra-industry local externalities,inter-industry local externalities, employee spinouts, and location fixed-effects. Our findings suggest that spillovers from the precedent industry (carriage and wagon in the case of automobile) play an important role. Spinouts play a secondary role and may work as a special type of intra-industry spillovers. The presence of other firms in the same industry has a negligible (or even negative) effect. Finally, local inputs account for some agglomeration in the short run, but the effects are much more profound in the long run