Co-location of skill-related suppliers: advancing coagglomeration research using firm-to-firm network data

Firms in industry clusters benefit from locating close to suppliers and customers. However, the pervasiveness of global value chains questions the need for co-location in buyer–supplier relationships. We propose that supply-chain partners are more likely to co-locate if they exchange not only goods but also know-how, implying superadditivity of Marshallian agglomeration channels. We test this in a coagglomeration framework using microdata for Hungary—a small, open economy deeply embedded in global value chains—examining co-location, labor flows, and value chains between firms and industries. We find that supply chains foster co-location primarily among firms in skill-related industries.