"Top-Down versus Bottom-Up" Agglomeration effects among Chinese domestic firms

Abstract: Industrial Parks in China have played a crucial role in attracting foreign investment and in enhancing regional development. However, there is an open question: do industrial parks develop comparable effects as natural grown clusters? Following agglomeration theory that highlighted the economic advantages from proximity between firms, and making use of a rich dataset from the Chinese domestic firms, this paper estimates the relationship between agglomeration effects and the performance of firms. The results show that firms located within industrial parks are more innovative and present better performance; however there is not evidence that linkages between firms have the same positive relation what contradicts the theory.