Spatial fragmentation of industries by functions

Abstract

We show that key functions are spatially clustered with, or dispersed from, each other even within manufacturing industries in West Germany, and that these clustering or dispersion patterns have changed significantly during recent decades. Estimating levels and changes (1992–2007) of localizations and colocalizations of selected functions (production, headquarter services, R&D) within 27 West German industries by means of (Formula presented.) densities, we identify two broad groups of industries. In “fragmenting” industries, which account for half of manufacturing employment, functions were more clustered with each other than the industry as a whole after the fall of the Iron Curtain but have, in accordance with regional theories of spatial fragmentation, been unbundled spatially from each other subsequently. In “integrating” industries, by contrast, which account for one-third of manufacturing employment, functions were initially dispersed from each other but have subsequently been rebundled spatially with each other. This spatial rebundling may be a consequence of offshoring, i.e., international fragmentation.