Shoulders and shadows of giants: intra-regional distribution of the digital industry in Germany

Abstract

This paper investigates digital firm birth activity in municipalities in the urban hinterland of core cities in Germany. It conducts panel fixed-effect regressions for monocentric and polycentric urban labour market regions covering the years 1995–2017. The digital industry’s regional distribution is shaped significantly by the closest core cities: municipalities in monocentric urban regions (MURs) profit from urban population growth and universities’ general knowledge. Municipalities in polycentric urban regions (PURs), however, are affected by industry-specific externalities, that is, an above-average growth in the share of firm birth of their closest urban cores. Overall, agglomeration externalities experience spatial decay relative to the core size with all regions benefiting from their own industry-enhancing urbanization externalities as captured by population growth and universities.