Powered by Proximity? The Micro-Locational Behaviour of Knowledge-Intensive Businesses

Abstract

This paper studies the emergence of Knowledge Intensive Business Services (KIBS) in cities and seeks to establish the economic factors that favour their development. KIBS have the capacity to produce and diffuse knowledge and innovation rapidly, thereby acting as catalysts for city-wide economic growth. While research on the agglomeration of KIBS has been largely conducted at the regional or national level, the intra-metropolitan scale has received considerably less attention despite the relevance of micro-location in the knowledge diffusion literature. Using an anonymised firm-level dataset of Singaporean firms, we use a spatially weighted Ellison-Glaeser index to demonstrate significant clustering of KIBS in urban locations. Furthermore, we find that client concentration and same KIBS type concentration are significant predictors of KIBS agglomeration, but proximity to firms of a different KIBS type and the business reputation of an area are not, potentially indicating that Marshallian localisation agglomeration economies are more powerful than Jacobian urbanisation economies for predicting the urban location patterns of KIBS.