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Enterprises, External Economies, and Economic Development

University of North Carolina, Chapel Hill

There has recently been a revival of interest in the planning community in the role of interfirm synergies, externalities, and spillovers as sources of competitive advantage for groups of colocated businesses (e.g., in industrial districts, clusters, and complexes). An increasing number of cities and states are adopting a variety of economic development planning initiatives based on the advantages of geographic concentration. This article reviews and critiques the central theoretical and empirical approaches to the concept of spatial external economies and the firm, with a view toward clarifying the core range of definitions and perspectives. It suggests that these often competing perspectives must be better meshed to yield richer and more robust planning and policy prescriptions.

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