High Tech Firm Performance as a Factor of Agglomeration

1014 WordsJan 30, 20184 Pages
High Tech Firm Performance as a Factor of Agglomeration Student's Name Course Title March 2, 2013 Abstract Contrary to widely-held assumptions, Folta, Cooper, and Baik (2006) discovered that the economic benefits of high tech firm agglomeration reached a point when the diseconomies of agglomeration began to dominate. Based on their analysis of metropolitan statistical areas (MSAs) in the United States, this threshold was reached in clusters with about 65 firms. They concluded that at this tipping point, increased competition for innovators increased the likelihood of these individual leaving to start their own ventures. The result of increased entrepreneur mobility was decreased firm performance and higher failure rates. This article review examines the methods, results, and conclusions of Folta and colleagues and how influential their work has been in this area of research. High Tech Firm Performance as a Factor of Agglomeration A number of researchers and their findings have suggested that geographic clustering or agglomeration has a positive effect on the performance of high tech firms (reviewed by Wennberg and Lindqvist, 2010). While most studies have looked at firm performance in terms of profitability and private equity investment, others have considered the impact on the local economy in terms of jobs, salaries, tax revenues, and the creation of inter- and intra-industry partnerships. The assumption has been that agglomeration provides a net positive effect

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