Product Differentiation in Industrial Agglomeration

Authors: Pengfei Li*, University of Calgary
Topics: Business Geography
Keywords: product differentiation, industrial clusters, cellphone, Shenzhen
Session Type: Virtual Paper
Day: 4/10/2021
Start / End Time: 1:30 PM / 2:45 PM
Room: Virtual 16
Presentation File: No File Uploaded

The study examines how industrial agglomeration directs new product development.
I suggest there exist two forces that drive product development in opposite directions:
agglomeration externalities converge product design while localized competition
diverges it. The two forces rest on inter-firm relations and interactions, which
can be restructured by technological change, particularly radical architectural innovation.
I argue the two effects become salient after a dominant product architecture. An
analysis of the cellphone industry in China reports significant negative agglomeration
economies and positive localized competition on product differentiation in Shenzhen
for 4G smartphones, but not for 2G and 3G feature phones. The findings suggest a
firm’s location in its geographical space shapes its position in product space, moderated
by dominant design innovations.

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