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How Does Size Matter? Investigating the Relationships Among Plant Size, Industrial Structure, and Manufacturing Productivity

March 2011

Written by: Joshua Drucker

Working Paper Number:

CES-11-08

Abstract

Industrial concentration and market power have been studied extensively at the national scale, in fields ranging from economics and industrial organization to regional science and economic development. At the regional scale, however, industrial structure and firm size relationships have received little attention outside of non-generalizable case studies, primarily because accurate measurements require difficult-to-obtain plant- or firm-level information. Readily available secondary data sources on establishment size distributions (such as County Business Patterns or the Census of Manufactures) cannot be linked to performance information for particular establishments or firms. Yet region-specific industrial structure may be a crucial determinant of firm performance and thus regional economic fortunes as well (Chinitz 1961; Christopherson and Clark 2007). This paper examines how industrial concentration and agglomeration economies impact plant performance, focusing on the influence of establishment size in mediating these effects. The Longitudinal Research Database of the U.S. Census Bureau is accessed to construct production functions for three manufacturing industries nationwide. These production functions, specified at the establishment level, incorporate characteristics of establishments, industries, and regions, including spatially-differentiated measures of agglomeration economies. Establishment size is evaluated both as an absolute metric and relative to other regional industry plants, as theory suggests that absolute size may be most pertinent to agglomeration benefits but relative size more relevant to industrial structure (Caves and Barton 1990; Bothner 2005). The research builds on earlier work by the author that establishes a direct link between regional industry concentration and the productivity of manufacturing establishments.

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Keywords Keywords are automatically generated using KeyBERT, a powerful and innovative keyword extraction tool that utilizes BERT embeddings to ensure high-quality and contextually relevant keywords.

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:
quantity, production, macroeconomic, manufacturing, enterprise, industrial, growth, produce, sector, regional, metropolitan, regional economic, region, industry concentration, regional industry, regional industries, agglomeration economies, agglomeration

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:
Census of Manufactures, Annual Survey of Manufactures, Standard Industrial Classification, Small Business Administration, Longitudinal Research Database, National Science Foundation, County Business Patterns, Environmental Protection Agency, Chicago Census Research Data Center, United States Census Bureau, European Commission, Herfindahl-Hirschman, Ewing Marion Kauffman Foundation

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