When the location of a firm affects its productivity

Should firms give in to the sirens of globalization? Stimulating R & D, sharing knowledge, skills, subcontracting … Productivity rises when firms in the same sector are in geographical proximity analyzes the latest Femise report.


« La proximité spatiale et les performances des entreprises: comment les économies basées sur la localisation peuvent-elles contribuer au processus de transition dans la région méditerranéenne ? ». Le Femise répond à cette question dans son dernier rapport. Photo F.D

“Spatial proximity and business performance: how can location-based economies contribute to the transition process in the Mediterranean region? “. Femise answers this question in its latest report. ©F.D

Agglomerations of economic activity contain all the links in the value chain, know-how and qualified workforce in a specific area. These are valuable assets for a firm, as well as for a country as a whole. It is enough to take the cases of agglomeration zones in Turkey and in Tunisia. As the world’s 15th largest producer of vehicles, Turkey has 12 active car manufacturers and nearly 5,000 OEMs (including around 250 foreign investors). Fiat, Oyak-Renault and their equipment manufacturers are focusing on Bursa, the European capital of vehicle production.

In Tunisia, SMEs are in contact with aeronautical multinationals (Stelia, a subsidiary of Eads / Airbus) on the El-Mghira aeropole, an industrial platform of 200 ha south of Tunis. ” How can location-based economies help the transition process in the Mediterranean region?“, questions Femise in its latest report FEM 41-09. The project, edited by Anna Ferragina of the University of Salerno in Italy, analyzes the link between spatial proximity and business performance. It issues recommendations on public policies and observes the impact of innovation spillovers in a context of geographic and sectoral concentration.


Productivity, innovation and foreign direct investment

Despite the challenges of globalization, location is what makes a difference,” says the document. Femise notes an improvement in the productivity of firms located in the automotive or aeronautical clusters of Turkey, Italy and Tunisia. Technologically and geographically close, they benefit from the circulation of knowledge, especially when it comes to innovation actors.

The Femise report notes some interesting variables accross countries. While foreign firms play a decisive role in Turkey, clusters of domestic SMEs create negative externalities, with Femise citing the example of congestion. The emergence of clusters, generates spatial inequalities and large disparities across regions. In Tunisia the majority of firms are located in coastal areas. Wealth and jobs are therefore concentrated on the coastal strip. For the authors of the report, the country must invest in transport infrastructure in order to develop regional complementarities.
If Italy remains far removed from the extreme fractures observed in Turkey and Tunisia, the Femise report notes significant agglomeration effects stimulating the productivity of firms.

Access the FEMISE report by clicking here

Article by in partnership with Econostrum 

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