On the conceptualization of agglomeration economies: The case of new firm formation in the Dutch ICT sector

Frank G. van Oort*, Oedzge A.L.C. Atzema

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

80 Citations (Scopus)


In this research we look at the factors that determine new firm formation in the information and communications technology (ICT) sector among 580 municipalities in the Netherlands. In particular, we examine the role of agglomeration economies and other locational attributes in determining where new firms locate. Both proximity (contiguous) and heterogeneous (non-contiguous) structures at the local, regional and national level are significant when considering localised firm formation. This result supports previous evidence that high-technology enterprises tend to co-locate in areas where economic activity is spatially dense. The major point of our argument is that controversial research results in the literature concerning explanatory spatial circumstances that most favorably induce dynamic and innovative externalities (to a large extent) can be attributed to the lack of consistent spatial research designs that allow the modelling of multiple spatial scale and composition effects. More specifically, we argue that the incubation hypothesis needs adjusting to the appropriate spatial levels and units of analysis: that of the agglomerated region. Finally, we argue that the lack of consistent inclusion of life-cycle aspects of firms in the present mainstream literature on dynamic externalities also contributes to controversies in research outcomes. These findings are important for spatial economic policy indicating that investment in new technologies and economic structures should enhance the prospects for spillover effects at the local level.

Original languageEnglish
Pages (from-to)263-290
Number of pages28
JournalAnnals of Regional Science
Issue number2
Publication statusPublished - Jun 2004


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