Clustering and firm performance in project-based industries: the case of the global video game industry, 1972-2007

Explanations of spatial clustering based on localization externalities are being by recent empirical evidence showing that firms in clusters do not firms outside clusters. We propose that these findings may be driven by particularities of the industrial settings chosen in these studies. We argue that project-based industries, negative localization externalities associated with grow proportionally with cluster size, while positive localization increase more than proportionally with cluster size. By studying the patterns of 4607 firms and 1229 subsidiaries in the global video game , we find that the net effect of clustering becomes positive after a cluster a critical size. We further unravel the subtleties of the video game industry differentiating between exits by failure and exit by acquisition and conclude being acquired is best considered as a sign of success rather than as a business .