Industry diversity, competition and firm relatedness: the impact on employment before and after the 2008 global financial crisis

ABSTRACT

Industry diversity, competition and firm relatedness: the impact on employment before and after the 2008 global financial crisis. Regional Studies. This study investigates the extent to which indicators of external-scale economies impacted employment growth in Canada over the period 2004–11. It focuses on knowledge spillovers between firms while accounting for Marshallian specialization, Jacobs’ diversity and competition by industry, as well as related and unrelated firm varieties in terms of employment and sales. It is found that the employment growth effects of local competition and diversity are positive, while the effect of Marshallian specialization is negative. Diversification is found to be particularly important for employment growth during the global financial crisis and immediately thereafter.

摘要

产业多样化，竞争与企业相关性：2008 年全球金融危机之前与之后对就业的影响。Regional Studies。本研究探讨外部规模经济对加拿大在 2004 年至 2011 年期间的就业成长之影响幅度。本文聚焦企业之间的知识外溢，同时考量马歇尔专殊化，各产业别的雅各布斯多样性与竞争，以及根据就业与销售的相关和非相关的厂商多样性。研究发现，在地竞争和多样性对就业成长的影响是正面的，而马歇尔专殊化的影响是负面的。研究发现，在全球经济危机以及危机过后的立即时刻，多样化对就业成长而言特别重要。

RÉSUMÉ

La diversité industrielle, la concurrence et les liens interentreprises: l’impact sur l’emploi avant et après la crise financière mondiale de 2008. Regional Studies. Cette étude examine jusqu’à quel point les indicateurs des économies d’échelle externe avaient un impact sur la croissance de l’emploi au Canada entre 2004 et 2011. L’étude porte sur les retombées de la connaissance interentreprises tout en tenant compte de la spécialisation de type marshallien, la diversité d’après Jacobs et la concurrence par industrie, ainsi qu’une typologie des entreprises connexes et non connexes en termes de leur niveau d’emploi et de leur chiffre d’affaire. Il s’avère que l’impact de la concurrence locale et de la diversité sur la croissance de l’emploi est positif, tandis que l’impact de la spécialisation de type marshallien est négatif. Il s’avère aussi que la diversification est particulièrement importante pour ce qui est de la croissance de l’emploi pendant la crise financière mondiale et immédiatement après.

ZUSAMMENFASSUNG

Branchenvielfalt, Wettbewerb und Firmenverwandtschaft: Auswirkung auf Beschäftigung vor und nach der weltweiten Finanzkrise von 2008. Regional Studies. In dieser Studie wird untersucht, wie stark sich die Indikatoren von externen Skaleneffekten auf das Beschäftigungswachstum in Kanada im Zeitraum von 2004 bis 2011 auswirkten. Im Mittelpunkt stehen Wissensübertragungen zwischen Firmen unter Berücksichtigung von marshallscher Spezialisierung, jacobscher Vielfalt, branchenspezifischem Wettbewerb sowie der verbundenen und unverbundenen Firmenvielfalt in den Bereichen Beschäftigung und Umsatz. Es zeigt sich, dass sich lokaler Wettbewerb und Vielfalt positiv auf das Beschäftigungswachstum auswirken, während der Effekt der marshallschen Spezialisierung negativ ausfällt. Die Diversifizierung erweist sich als besonders wichtig für das Beschäftigungswachstum während der weltweiten Finanzkrise sowie unmittelbar danach.

RESUMEN

Diversidad industrial, competencia y relación entre empresas: el impacto en el empleo antes y después de la crisis financiera internacional de 2008. Regional Studies. En este estudio investigamos en qué medida tuvieron los indicadores de las economías de escala externas un efecto en el crecimiento del empleo en Canadá durante el periodo entre 2004 y 2011. Nos centramos en la difusión de conocimiento entre las empresas teniendo en cuenta la especialización marshalliana, la diversidad de Jacobs y la competencia dentro de cada industria, así como las variedades vinculadas e independientes de las empresas en términos de empleo y ventas. Se muestra que los efectos en el crecimiento de empleo de la competencia local y la diversidad son positivos, mientras que el efecto de la especialización marshalliana es negativo. Se observa que la diversificación tiene particular importancia para el crecimiento de empleo durante la crisis financiera internacional y también inmediatamente después.

KEYWORDS:

• external-scale economies
• employment growth
• entropy of variety
• firms
• Canada

关键词:

• 外部规模经济
• 就业成长
• 变异熵
• 企业
• 加拿大

MOTS-CLÉS:

• économies d’échelle externe
• croissance de l’emploi
• entropie et variété
• entreprises
• Canada

SCHLÜSSELWÖRTER:

• externe Skaleneffekte
• Beschäftigungswachstum
• Entropie von Vielfalt
• Firmen
• Kanada

PALABRAS CLAVES:

• economías de escala externas
• crecimiento del empleo
• entropía de variedad
• empresas
• Canadá

JEL:

• C21
• G1
• R11

ACKNOWLEDGEMENTS

The authors are grateful to the participants at the 2013 research seminar series at the Institute for Regional Research (IfR), University of Kiel, Germany, and the 2014 Uddevalla Symposium, Sweden, for helpful suggestions and comments. They also thank Hendrik Lüth, IfR, for outstanding research assistance.

DISCLOSURE STATEMENT

No potential conflict of interest was reported by the authors. https://dx.doi.org/10.1080/00343404.2016.1254766

SUPPLEMENTAL DATA

Supplemental data for this article can be accessed at https://dx.doi.org/10.1080/00343404.2016.1254766

Notes

1. Dixit and Stiglitz (1977) further contend that diversity and variety in consumer goods or in producer inputs can yield external-scale economies as consumers’ welfare depends on the variety of goods they can obtain in a specific region. Duranton and Puga (2003) provide a comprehensive review of the two strands of the literature and propose the key microfoundations of external-scale economies: sharing, matching and learning, corresponding to the three elements of Marshall’s ‘industrial district-argument’: labour market pooling, specialized suppliers and knowledge spillovers.

2. For a detailed literature review, see Appendix A1 in the supplemental data online.

3. Each observation is a particular CSD industry, where not every CSD has the exact same industries. The six largest firms (measured by employment) within each of the 2509 CSDs are selected, giving a total of 2509 × 6 = 15,054 observations (CSD industries). The frequency distribution of industries among the 2509 CSDs can be found in Figure A1 in the supplemental data online; it is evident that both concentration and diversity of Canadian industries are present in the data, with very few industries concentrated in fewer than 10 CSDs and only few industries are omnipresent in over 2000 CSDs. Moreover, the results are not sensitive to whether the SIC or the NAIC industry classification is used (see the results in the last two columns of Table A2 in the supplemental data online). To explore spatial spillovers across regions, as many regions as possible are included in the study, and hence the first choice of regions is CSD, albeit the census division (CD) classification is also used in the robustness checks in Table A1 in the supplemental data online. The number of industries in each CSD ranges from three to 12. If too many industries, say nine, were considered for each CSD, one would effectively exclude many observations, as CSDs with fewer than nine industries would not be considered. Hence, following Glaeser et al. (1992) and Van Soest et al. (2006), the six largest industries in each CSD are selected for the core regressions. To ensure the results are not driven by the numbers of industries in the index, four and eight industries per CSD are included in Table A1. Note that five and seven industries per CSD were also tried, but that did not change the principal results (not reported here).

4. The Grubbs outlier test (Grubbs, 1969) was performed to detect the number of outliers for each of the seven key explanatory variables. Of the 15,054 observations in the core sample, 1476 outliers exist for the concentration variable, 125 for competition, 25 for , 33 for , 39 for , 0 for , and 0 for . Excluding these outliers from the sample did not significantly affect the results in terms of sign, significance or the magnitude of the coefficients of all key explanatory variables (see the results in the third last column in Table A2: standard deviation).

5. Johanssen and Quigley (2003) forward the hypothesis that networks can play a role in facilitating exchange, both within and between regional agglomerations, leading to complementarities between agglomeration and networks.

6. The correlation table in Table A3 in the supplemental data online suggests high correlations between the related and unrelated diversity measures (. Furthermore, these variables have variance inflation factors (VIFs) well in excess of 10 (see Table A4 in the supplemental data online), thus giving further support for the presence of multicollinearity.

7. The four firm relatedness variables are much better indicators of diversity than the general diversity variable, Diversity_ind, which measures the share of employment in the other five largest industries per CSD and, as such, does not capture the diversity in sales. Furthermore, Diversity_ind does not distinguish between related and unrelated varieties. Therefore, the general diversity measure fails to capture the change in diversity during 2008–11 because both related and unrelated variety based on employment become much more prominent during the crisis period.

 

Additional information

Funding

Bodo Steiner gratefully acknowledges financial support from the University of Alberta, which enabled him to initiate and conduct part of this research at the University of Kiel, IfR, as part of his sabbatical. He would in particular like to acknowledge research support that he received from Professor Johannes Bröcker, IfR. Jakob B. Madsen acknowledges financial support from the Velux Fund Visiting Professor Program that enabled him to undertake the research while visiting the University of Southern Denmark.