Spatial Econometric Analysis of Agglomeration Economies Associated with the Geographical Distribution of the U.S. Biotech Industry

This dissertation analyzed spatial agglomeration economies associated with the geographical distribution of the U.S. biotech industry. Three location issues associated with the biotech industry were addressed in the study. The first study utilized a Bayesian spatial tobit model and examined the overall and regional differences in factors affecting the location of the U.S. biotech industry. The second study examined the inter- and intra-industry spatial association of biotech related research and development (R&D) and testing facilities across all contiguous U.S. counties employing a Spatial Two-Stage Least Squares model. Finally, the interdependence between different subsectors of the U.S. biotech industry was analyzed using a Seemingly Unrelated Regression model.The first study confirmed the hypothesis of spatial agglomeration for the spatial structure of the biotech industry, indicating that biotech firms are positively correlated across counties, resulting in clustering of biotech production. Availability of venture capital firms, research institutions, and hospitals were found to have the most significant impact on the location of biotech firms. Results from regional models indicate that biotech firms willing to locate in the West prefer to establish in metro-counties with easy access to research institutes and skilled labor pool. Conversely, firms that are willing to locate in the Northeast prefer counties with easy access to funding sources and hospitals for research, testing and marketing of new biotech products.Spatial clustering of biotech research and testing activities was confirmed in the second study. Proximity to manufacturing firms and research universities, and availability of venture capital firms were found to have the most significant impact on the location of R&D and testing facilities. Results indicated that public as well as private spillovers are at work in the R&D and testing industry, resulting in their spatial clustering.Agricultural biotechnology firms preference to locate in counties with large farmland, low median housing values and average hourly wage, and a high unemployment rate was indicated in the third study. Conversely, results indicate that firms belonging to drug and pharmaceuticals, and medical devices and equipment subsectors prefer to locate in counties with high standards of living and in close proximity of research institutes and hospitals to access skilled-labor, and develop and test new drugs.