Spatial agglomeration and location determinants: Evidence from the US communications equipment manufacturing industry

This paper examines the spatial agglomeration of the communications equipment manufacturing (CEM) industry in the US metropolitan statistical areas. We examine the influence of vertical industrial linkages, horizontal industrial linkages and corporate taxation on the locational choice of CEM establishments using discrete count data regression models. Panel data regression models are used for sensitivity tests. Our results suggest that both types of linkages have significant positive impacts on the spatial agglomeration of the CEM industry, indicating that input-output connections are geographically localised. Our findings support the hypothesis that the presence of vertical linkages suppliers and horizontal linkages in a metropolitan area could facilitate the spatial agglomeration of CEM establishments there. We also find that higher state corporate taxes can impede the choice of location of CEM establishments within a state. These findings suggest that state policymakers can improve the pro-business environment and attract CEM establishments in their state by lowering corporate taxes and by increasing potential horizontal and vertical industrial linkages.