The Role of Destination Spatial Spillovers and Technological Intensity in the Location of Manufacturing and Services Firms

Focusing on the characteristics of destinations, we seek to identify the relevance of spatial spillovers while driving location choices of manufacturing and services firms. With this objective, we apply a spatial conditional logit equation to model empirically the behaviour of 1 092 864 firms established in 316 municipalities of the Spanish Mediterranean Arc during the period 1998–2008. Our econometric specification allows us to identify both types of external spatial effects, direct or locally bounded, and indirect or associated-neighbourhood spatial effects. Further, we propose a broad indicator of spatial spillovers generated by a given destination. Empirical findings show that spatial spillovers generated by destinations have greater impacts on the location decisions of manufacturing companies compared with those of services. When we break down the sample by technological intensity of activities, we observe that spatial spillovers are more willing to affect decisions of knowledge-intensive companies relative to those of less knowledge-intensive ones, which stay more locally bounded.