Working Paper: CEPR ID: DP10921
Authors: Kristian Behrens; Vera Sharunova
Abstract: Multiunit firms can draw on internal resources, thus their plants should depend less on external agglomeration benefits than comparable standalone plants. Because interacting at a distance is costly, multiunit firms should also be geographically 'compact'. We dissect the microgeographic location patterns of hundreds of thousands of Canadian establishments and find robust evidence for these predictions: multiunit firms are compact, and their plants locate in areas offering potentially less external agglomeration benefits. Within firms, plants with stronger vertical links are geographically more central. The latter effect is stronger for plants in high transport cost industries that produce durables and source a larger share of non-homogeneous inputs. These findings suggest that vertical supply chains are important in explaining firms' internal spatial organization.
Keywords: interfirm linkages; intrafirm linkages; microgeographic location patterns; multiunit firms; spatial organization of firms
JEL Codes: D22; L22; R12; R32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| multiunit firms' geographical compactness (R32) | access to external input suppliers (O36) |
| larger multiunit firms (L25) | proximity to potential input suppliers (R32) |
| internal resource transfers (F24) | reliance on external agglomeration benefits (R32) |
| stronger vertical supply chains (L14) | central location within multiunit firms (L22) |
| high transportation cost industries (L93) | central location within multiunit firms (L22) |
| plants producing durable goods (L68) | central location within multiunit firms (L22) |
| plants sourcing larger share of non-homogeneous inputs (L79) | central location within multiunit firms (L22) |