The Performance of Seaport Clusters - RePub - Erasmus Universiteit ...

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The Performance of Seaport Clusters
economies in ‘localization economies’, for specific industries and ‘urbanization economies’,
forces towards the concentration of economic activities in cities. Examples of urbanization
economies include the presence of business services and a large (consumer) market.
For clusters, the localization economies are more relevant, since clusters are concentrations
of activities with a distinctive economic specialization. However, since the distinction
between localization economies and urbanization economies is not crystal clear, we stick to
the term agglomeration economies. In line with Krugman (1995), we discuss three
‘Marshallian’ agglomeration economies.
A first agglomeration economy already discussed by Marshall is a shared labor market. In a
geographical cluster, labor is widely available because of the presence of a variety of firms
with a similar labor demand. Marshall terms this a ‘constant market for skill’ (Marshall, 1890,
p. 271). Skilled workers are attracted to the cluster and clusters also provide a sufficiently
large scale for providing specific types of education and training. Because of the ‘constant
market for skill’, it is relatively attractive for workers to invest in specific training and
education. Search costs to find qualified labor are relatively low, because of the large labor
pool. Intermediaries that specialize in recruiting labor arise in many cases.
A final relevant aspect is the costs of firing labor. Since alternative employment opportunities
inside a cluster are relatively high, employees are in general less dependent on one
particular employer and therefore firing costs in general are likely to be relatively low. In
clusters, job mobility is generally speaking high (see Panniccia, 1999 and for the case of
Silicon Valley, Saxenian, 1994).
The second agglomeration economy is the presence of customers and suppliers within a
cluster. Locating in a cluster is attractive for firms ‘downstream’ in the value chain, when
other firms in the cluster can provide specialized inputs. For firms ‘upstream’ in the value
chain, the presence of (potential) customers is attractive. The presence of suppliers and
customers is an advantage since ‘trade costs’ are higher for transactions with firms outside
the cluster. Furthermore, a concentration of similar firms allows for specialization of firms in
the cluster. Specialization enhances the performance of a cluster since firms in the cluster
are offered better, tailor-made products and services.