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Processing trade competition and cooperation in the
David Newlands
1. Industrial Clusters: A Critical Reading of Different Theories
1.1Standard Agglomeration Theory, From Marshall Onwards
Marshall, in his writings on Sheffield, Lancashire and other British regions,
viewed the main source of external economies as the commons ’, the
infrastructure and other services from which each individual firm in an
industrial district might draw (Marshall, 1921). Examples include, in modern
terminology, improved j ob search and j ob matching, more favorable access to
capital finance and inter-firm labor migration. The availability of such common
resources to a number of firms then enhances their size and diversity as both
capital and labor are attracted to such areas to exploit the larger markets for
their services. This in turn leads to reductions in factor prices and/or increases
in factor productivities. These are the ways in which the external benefit to
firms of a location in the industrial district manifests itself. Unit production
costs will be lower within the industrial district than out with it.
Parallel to his studies of industrial organization, in the various editions of
his Principles of Economics, Marshall ( 1890, 1920) helped develop what was
to become standard agglomeration theory. This was then built upon
subsequently by a number of writers. For example, Scitovsky (1954) identified
a further category of pecuniary external economies’, Perroux (1955)
1
contributed his famous theory of growth poles, and Chinitz (196 1) applied the
notion of agglomeration economies to the economic development of New York
and Pittsburgh. More recently, Krugman (1991, 1995)
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