Does geographic proximity matter? Evidence from clustered and non-clustered aeronautic firms in Germany

This paper analyses what types of inter-firm linkages are stronger between geographically proximate firms compared to distant firms. It compares survey results of clustered and dispersed firms in the German aeronautic (supplying) industry. Results show that geographic proximity is relevant and statistically significant for inter-firm linkages that may lead to the following effects: labour market pooling; knowledge spillovers; demanding local customers; and trust-based effects. All in all, results suggest that if agglomerative advantages are at work they are, at best, operating weakly. However, the results of this case study are not sufficient to confirm or disprove the theoretical arguments of agglomeration advantages.