Working Paper: NBER ID: w23018
Authors: Nathan Goldschlag; Julia Lane; Bruce Weinberg; Nikolas Zolas
Abstract: This paper using transaction based data to provide new insights into the link between the geographic proximity of businesses and associated economic activity. It contributes to the literature by developing both two new measures of distance and a set of stylized facts on the distances between observed transactions between vendors and customers for a research intensive sector – universities. We show that spending on research inputs is more likely to be expended at businesses physically closer to universities than those farther away. That relationship is stronger for High Tech and R&D performing businesses than businesses in general, which is consistent with theories emphasizing the role of tacit knowledge. We find that firms behave in a way that is consistent with the notion that propinquity is good for business: if a firm supplies a project at a university in a given year, it is more likely to open an establishment near that university in subsequent years than other firms. We also investigate the link between transactional distance and economic activity and show that when a vendor has been a supplier to a project at least one time, that vendor is subsequently more likely to be a vendor on the same or related project.
Keywords: geographic proximity; economic activity; vendor-university transactions; R&D; high-tech industries
JEL Codes: O31; R1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Proximity (R32) | Spending on research inputs (O32) |
| Spending on research inputs (O32) | Vendor engagement (L14) |
| Vendor engagement (L14) | Business location decisions (R30) |
| Prior vendor relationships (L14) | Future transactions (L14) |