University of Twente Student Theses


The Financial Performance of Cluster Firms in Germany

Fuhrken, Kevin (2023) The Financial Performance of Cluster Firms in Germany.

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Abstract:This thesis uses statistical analysis to determine whether spatial agglomeration externalities manifest in the enhanced financial performance of cluster firms in Germany. Cluster theory remains a continuously debated phenomenon due to a wide range of cluster definitions, ambiguous empirical research and the involvement of multiple research streams, for example, economics, spatial sciences and sociology. Nevertheless, the common denominator in cluster theory is the increased innovative performance of cluster firms due to positive externalities compared to non-cluster firms. Hence, the financial performance of cluster firms should be enhanced because of their exposure to positive externalities. This thesis is based on the foundations of Marshall-Arrow-Romer’s theories on intra-industry externalities and Porter’s theories on the competitive advantage of firms. Following the theory outline, a novel approach for empirical research within cluster theory is developed. Empirical data of over 25.000 German companies across 110 industries has been gathered. A developed Python algorithm identified clusters within each firm’s 5km, 15km and 25km radii. Following the cluster identification, Kruskal-Wallis variance analyses were conducted for each industry. The conducted empirical research does not find a significant difference in financial performance between cluster and non-cluster firms. What becomes apparent is that the focus on solely spatial agglomeration of same industry firms does not lead to enhanced financial performance. Hence, positive agglomeration externalities are triggered by additional factors besides spatial agglomeration. The objective to provide an empirical analysis of the financial performance of German cluster firms in comparison to their non-cluster peers has been met by this work. However, further research needs to be conducted to determine which additional factors provide positive spatial agglomeration externalities leading to increased innovative output and, thus, enhanced financial performance.
Item Type:Essay (Master)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:83 economics, 85 business administration, organizational science
Programme:Business Administration MSc (60644)
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