LABOR-MARKET IMPERFECTIONS AND THE AGGLOMERATION OF FIRMS - EVIDENCE FROM THE EMERGENT PERIOD OF THE US SEMICONDUCTOR INDUSTRY

The regional literature suggests that local labor markets offer signif icant operating advantages to firms in knowledge-intensive industries and thus influence the development of contemporary industrial location patterns. Utilizing two data sets containing information on the emplo yment changes of US semiconductor engineers during the critical format ive period (1950-75), the author tests the pooling and anchoring hypot heses of urban economic theory while extending the theory to incorpora te the effects of labor and firm specialization. Findings include: (1) moderate evidence of locality centered labor pooling in this occupati on during this early time period; (2) no evidence of anchoring by nonm arket actors, such as universities and government laboratories or by e arly labor markets; and (3) evidence that agglomerations of firms deve lop as a result of imperfect skill-opportunity matches. The results di scount frequently offered explanations for the emergence of industrial agglomerations and suggest that agglomerations are not the outcome of firms' searches for operating efficiencies but may be a product of en trepreneurship induced by particular 'permanently failing' firms.