The Core Issue of Economic Geography

In the context of economic geography, agglomeration may refer to a concentration in space of some entity, or the process by which such a spatial formation is created. While the dictionary definitions signal that agglomeration is to be understood as an unsystematic, haphazard process, where some entities pile up together in space but are not really affected in any particular way, economic geographers tend to think of agglomeration as something that can be explained by some sort of rationale on behalf of the actors involved, and with profound effect on economic outcomes in terms of productivity, competitiveness, or prosperity.

There is reason to take the issue of agglomeration seriously. Much may be learned about the role of space and place in economic processes by trying to pinpoint the driving forces that make for agglomeration in space of economic activity. Indeed, many would argue that spatial agglomeration is the phenomenon that ultimately motivates and defines the existence of economic geography as an academic discipline.

We would argue that the defining issue of economic geography is the need to explain concentrations of population and of economic activity: the distinction be tween manufacturing belt and farm belt, the existence of cities, the role of industry clusters. Broadly speaking, all these concentrations form and survive because of some form of agglomeration economies, in which spatial con centration itself creates the favorable economic en vironment that supports further and continued concentration. (Fujita et al., 1999: 4)

To complicate things, the concept of agglomeration has come to denote several sociospatial phenomena as the above quotation illustrates. It can refer to the tendency for people and economic activity in general to concentrate in big cities or economic core regions. Remarkably large proportions of global value creation take place in a limited number of highly concentrated core regions. It can also refer to the fact that firms within the same or closely related industries often tend to gather at certain places, to form specialized clusters or districts.

Early attempts to define the economic advantages gained by agglomerative behavior were framed by a division into two sorts of agglomeration economies. Thus, urbanization economies came to denote those advantages to be gained by location in a large and dense urban area, while the notion of localization economies referred to advantages gained by locating close to other similar or related forms. While this distinction is well established, one should note that similar factors are often held to make up both mechanisms.

It is the latter aspect of agglomeration – the 'birds of a feather flock together' phenomenon – that makes up the main focus of this article. This sort of spatial agglomeration of similar and related firms and industries is most easily illustrated by pointing to some world known examples. Thus, most people cannot think of geographical notions like Hollywood, Silicon Valley, Detroit, or The City of London without associating them with the industries that define and dominate them (movies, infor mation and communication technology (ICT), cars, and financial services, respectively). Indeed, in the most extreme cases, it is difficult to think of an industry or its products without thinking in parallel of the particular places where its core activities are assembled. Figure 1 shows some more or less well known leading regional agglomerations, or clusters, in Europe.

Throughout the twentieth century, a literature proliferated which, taken together, contributes to the formulation of a theory of why industry agglomeration emerges, and in what ways location in proximity of similar or related firms contributes to the competitiveness of an individual firm. Among the 'classics' in this field of research can be mentioned Alfred Marshall, Alfred Weber, Edgar Hoover, Gunnar Myrdal, and Allen Pred. After a period of relative neglect during the 1970s and 1980s, the period since the early 1990s has seen reemerging research efforts being devoted to analyzing and explaining localization economies. Major contributions to this revival have been signed by geographers like Allen Scott, alongside business strategists like Michael Porter and economists like Paul Krugman. Despite quite different points of departure and methodologies, they have all come to regard spatial agglomeration of similar and related economic activity as a key starting point for understanding the workings and transformations of the world economy:

The endemic tendency in capitalism for dense localized clusters of productive activity to appear at different lo cations on the landscape has major implications for growth and productivity. These clusters are constituted as transactions intensive regional economies which are in turn caught up in structures of interdependency stretch ing across the entire globe. (Scott, 1998: 398)

Today's economic map of the world is dominated by (y) critical masses in one place of unusual competitive success in particular fields. Clusters are a striking feature of virtually every national, regional, state, and even metropolitan economy, especially in more economically advanced nations. (Porter, 1998: 78)

Agglomeration the clustering of economic activity, created and sustained by some sort of circular logic occurs at many different levels, from the local shopping districts that serve residential areas within cities to spe cialized economic regions like Silicon Valley (or the City of London) that serve the world market as a whole. (Fujita et al., 1999: 1)

While being pursued by scholars who represent different academic disciplines and traditions, and analyze the role of geographical space in economic process as part of rather disparate wider agendas, the point of departure here is that there exists a common research agenda across various disciplines: that of understanding the role of space and place in industrial development in general, and the phenomenon of spatial agglomeration of similar and related economic activity in particular.

A note on terminology should be entered here. The agglomeration phenomenon is dealt with in the literature under different headings. Alfred Marshall's classical – and still in many ways unsurpassed – contribution to the topic uses the concept of localization to analyze the coming into existence of 'industrial districts'. In recent years, clusters and clustering have been the most widely circulated terms, following the work by Michael Porter. It has been argued by some that the agglomeration concept would refer exclusively to the spatial concentration of firms and industries, while the cluster concept would refer to spatial collocation in combination with functional linkage between the parties involved. For the purpose of this article, however, the terms agglomeration, localization, and clustering are treated as synonyms.