PM-03-01-1-03-047-Majewska_Truskolaski

S u g g e s t e d c i t a t i o n :
Majewska, J., & Truskolaski, S. (2017). Spatial concentration of economic activity and competitiveness of Central European
regions. In Wach, K., Knežević, B., & Šimurina, N. (Eds.), Challenges for international business in Central and Eastern
Europe („Przedsiębiorczość Międzynarodowa” vol. 3, no. 1). Kraków: Cracow University of Economics, pp. 45-64.

Spatial concentration of economic activity
and competitiveness of Central European regions1

Justyna Majewska1
Szymon Truskolaski2

Poznań University of Economics and Business,
Department of International Economics

al. Niepodległości 10, 61-875 Poznań, Poland
e-mail: 1 justyna.majewska@ue.poznan.pl 2 szymon.truskolaski@ue.poznan.pl

Abstract:
The paper tackles with a still somewhat underdeveloped aspect of regional competiveness which
regards to spillover effects stemming from spatial proximity of highly competitive neighbors. Alt-
hough spillover effects are well recognized in the literature, we focus more on inter-regional con-
centration of business activity when enterprises are located in a particular district which is not far
from the agglomeration center but not the center itself. We check for statistical significance of
spatial autocorrelation measures (local Moran’s Ii statistic) in order to identify spillovers between
districts in Central European countries (Germany, Poland, Czech Republic and Slovakia). We use
variables indicating Knowledge Intensive Services (KIS), in particular hi-tech KIS and information
and communication services (including computer science). We compare 2009 with 2015 to notice
agglomeration dynamics. We observe statistically significant spillover effects in Central European
countries in urbanization-type clusters as well as strengthening of the effect over time. Taking into
consideration more detailed data for Poland we conclude that while hi-tech KIS mostly spill over
to neighboring districts, the reverse pattern may be observed for computer science (programming
and consultancy). One explanation is that this subsector relies on highly demanded workforce and
a prestigious localization (in the agglomeration centers) works as a bargaining chip to attract pro-
grammers. In order to measure the spillover effects more precisely it is recommended to define and
measure the neighborhood of agglomeration centers using localization of firms based on GPS co-
ordinates instead of centroids (geometric means) of districts – as shown in example of Poland.

Keywords: spatial agglomeration; spillover; regional competitiveness; KIS; Central European countries
JEL codes: R12, O31, O57

1. INTRODUCTION

The competitiveness of regions stems not only from their own resources and poten-
tial, but also from the positive effects generated by the strong (in terms of economic
development) regions adjacent to them. It is related to the occurrence of spatial and

1 The paper came into being within research project funded by the National Science Centre, Poland (No.
2014/13/D/HS4/01715).

48 Justyna Majewska, Szymon Truskolaski

functional interdependence of regions, as well as the external effects of spatial con-
centration of economic activity (agglomeration), including spillover effects (unin-
tentional spatial interaction when the developmental processes, knowledge, produc-
tivity, innovations and so on spread between neighboring regions). In fact – accord-
ing to Marshall (1920), Hoover (1936) and Jacobs (1969) – the basic premise of the
spatial proximity and concentration of economic activity is that it can be beneficial
due to agglomeration externalities to the overall economy as well as to sectors and
firms clustered in a particular location (Prager & Thisse, 2012). This includes ag-
glomeration externalities associated with the flow of knowledge, human resources
(Ács 2002, 2005), or internationalization of services. It should be noted that spatial
agglomeration (identified at low levels of data disaggregation eg. districts) as well
as its externalities spread outside the boundaries of territorial units. This is why
inter-regional effects of agglomeration (spillover effects) should be taken into con-
sideration by analyzing the comprehensive regional competitiveness.

However, the strength and direction of the spatial correlation of the adjacent
areas is different – in some regions strong spillover effects can be observed while in
the others reverse processes – ie. diminishing spillovers – occur (centripetal effects
of agglomeration centers). The challenge is therefore to measure the effects of spill-
ing over of such development impulses including knowledge, entrepreneurship, for-
eign tourist flows and other effects of agglomeration of economic activity. In partic-
ular, the questions arise: how to measure inter-regional spillover effects with regard
to knowledge and intellectual capital, what is the strength of those effects, and in
which direction the phenomenon takes place in regions of Central Europe.

We employ the explorative spatial data analysis (ESDA) applying spatial sta-
tistics of autocorrelation (local Moran’s Ii statistic) under the so-called Local Indi-
cators of Spatial Association (Anselin 1995, 2010) in order to measure geographic
spillovers along with PQStat software for spatial analysis.

We use the data collected by National Central Statistical Offices of Central
European countries at district level (the number of enterprises registered in a given
section and division of the NACE classification – the Statistical Classification of
Economic Activities in the European Community), reflecting Hi-tech KIS
(Knowledge Intensive Services), in particular ICT (Information and Communica-
tion Technologies) for the period of 2009-2015. Additionally we use the full data-
base on individual firms registered in section I of Polish Classification of Activities
(PCA, which is equivalent to NACE) within “food services activities” (division 56)
in order to determine the “real” centers of agglomeration in each district – instead
of using their centroids – in measuring the neighborhood and spatial autocorrela-
tion. We use geostatistical information (GPS coordinates) of the enterprises (de-
rived by geocoding their location on the basis of firms’ addresses) in order to obtain
the accuracy of the results in measuring the neighborhood.

The rest of the paper is organized as follows. Section 2 provides an overview
of the literature on regional competitiveness as a result of agglomeration economies.
In particular we discuss how spatial concentration of economic activity, spatial prox-
imity, and spatial interdependency affect regional competitiveness of territorial

Spatial concentration of economic activity and competitiveness of Central… 49

units. We give a special importance to agglomeration externalities and effects as
drivers of inter-regional competiveness. It is followed by Section 3 that shows the
impact of Knowledge Intensive Services on regional competitiveness. Section 4 de-
scribes the research methods and data sources. Section 5 presents the research and
results. It shows spillover effects of agglomeration phenomenon reflecting inter-re-
gional competitiveness of Polish districts. The final section concludes and draws
implications as well as shows limitations and further research directions.

2. REGIONAL COMPETITIVENESS AS A RESULT
OF AGGLOMERATION ECONOMIES

The ability to compete, that is, to act and survive in a competitive environment, can
be considered within many aspects. Territorial (spatial) aspect of competitiveness
is of growing interest in the literature. The competitiveness of municipalities, cities
and counties as spatially separate parts of the national economy (Gorynia
& Łaźniewska, ed. 2009, p. 52; Enright & Newton, 2004; Crouch & Ritchie 2000;
Hall 2007) is frequently discussed. The competitiveness of territorial units refers to
many theoretical and methodological aspects. It has to do with the diversity of ways
of defining and operationalizing the notion of competitiveness (the attribute and
process understanding of competitiveness, recognition of its side effects from the
perspective of its factors, the distinction of interdependent concepts of competitive-
ness in the strict sense, ability to compete and competitive position).

In today's regional competitive processes, simultaneous competing of busi-
nesses and environment in which they operate is noticeable (Markowski, 1999,
p. 102). The competitiveness position of businesses depends not only on their own
actions but also on the efficiency of the territorial socio-economic systems. Com-
petitiveness of areas is therefore of an indirect nature (providing conditions to com-
pete of various entities functioning in a given area) and direct (competing of terri-
torial units in attracting investors or tourists along with income and other benefits
for the region (Nawrot & Zmyślony, 2009, p. 65)).

The comprehensive analysis of the competitiveness of areas diversifies and
verifies both comparative and competitive advantage of spatial units (Dwyer
& Kim, 2003; Crouch & Ritchie, 2005; Vanhove, 2011), where the first refers to
the available resources of the area (tourist attractiveness, location, intensity and di-
versity or specialization of spatially concentrated economic activity, etc.), and the
latter to how they are used (land management). However, in contemporary regional
studies, there is a growing need to take into account the neighborhood of territorial
units (spatial interdependence) and its importance in creating conditions to com-
pete. An example could be the last survey conducted by the Central Statistical Of-
fice for the tourist attractiveness of the Polish districts where measures of regional
attractiveness were constructed taking into account the spatial proximity of dis-
tricts. This had a significant impact on the results (GUS, 2015). Furthermore inter-
regional agglomeration effects in tourism as spatial interactions between Polish dis-
tricts were investigated within this context by Majewska (2015).

50 Justyna Majewska, Szymon Truskolaski

The externalities specific to the agglomeration (spatial concentration of eco-
nomic activity) and drivers of the phenomenon were introduced to the economic
literature by Marshall (1920), Ohlin (1933) and Hoover (1936). Since the 1920
study by Marshall, the variables traditionally considered as sources of the agglom-
eration economies are as follows (Prager & Thisse, 2012, p. 27): 1) the availability
of business services (sharing), 2) the presence of specialized labor (matching), 3)
the emergence and spread of new ideas (learning), and 4) the supply of modern
infrastructure (sharing). According to the traditional localization theory, firms con-
centrate around low-cost and/or high-demand locations (Baum & Haveman, 1997).
Lower transaction costs lead to competitive advantage and equally to other effects
of agglomeration such as: diffusion of knowledge, formation of firms offering com-
plementary services or formation of social and business networks Krugman, 1991;
Ottaviano, 2011. Apart from the cost factors, an important role in the localization
decision is played by the demand (large and growing markets), and a circular cau-
sality can be noticed in the form of feedback relations between the firms’ concen-
tration and the growing markets. The increase in profitability due to localization
decisions becomes a source of competitive advantage. The ability to communicate
through informal channels which promotes physical proximity between companies
and consumers also contributes to the competitive advantage. The result of the links
between entities, interactions and knowledge transfer is a positive correlation be-
tween the agglomeration of economic activity and productivity (Duration & Puga
2004). It is also argued that for example innovation improving the competitiveness
in the hotel sector is derived not directly from mere spatial proximity of firms in
the same industry, but from the formation of a special production environment
(Rodríguez-Victoria, Puig, & Gonzlez-Loureiro, 2016).

The positive agglomeration effects resulting from the concentration of eco-
nomic activities are transmitted both within and between industries. Therefore, alt-
hough the agglomeration economies may be grouped in various manners, in the
contemporary literature two main different types of agglomeration economies are
distinguished: specialisation (localisation) and diversity (urbanisation) externalities
(Ács, 2005; Beaudry & Schiffauerova, 2009; Knoben, 2009). The localisation econ-
omies usually take the form of Marshall-Arrow-Romer (MAR) externalities, which
operate mainly within a specific industry. The localisation economies are the ad-
vantages that firms in a single industry (or a set of closely related industries) gain
from being placed in the same location. These promote positive externalities and
thus economic growth within industries. The second type, the so-called Jacobs’s
externalities, work across sectors and stem from a local variety of producers (Ja-
cobs, 1969); they refer to the so-called co-agglomeration, i.e., the tendency of dif-
ferent industries to locate near each other (Ellison, Glaeser & Kerr, 2007; Kolko
2010). In Jacobs’s view, it is the industrial diversity (heterogeneity) rather than
specialisation that is seen as the most important regional growth factor (Ács, 2002).
Thus, the urbanisation economies are the advantages gained by firms, regardless of
the sector, from being located together.

Spatial concentration of economic activity and competitiveness of Central… 51

As the consequence of localised sources and the advantages of agglomera-
tion, regional clusters, defined as the concentration of economic activity, emerge.
They differ in regard to the scope and the scale of the spatial concentration of the
economic activity as well as spatial interdependencies in neighborhood. The spa-
tial concentration of economic agents itself does not necessarily involve strong
linkages and interactions among them. Nonetheless, the probability of such ties
increases with the growing number of agents and the decrease in the distance
between them (Brodzicki & Kuczewska, 2012, p. 62).

Previously and recently researchers have explored and commented the im-
portance of spatial concentration of firms and spatial proximity in enhancing
innovation (including regional innovation systems), productivity, diffusion of
knowledge, formation of social and business networks and other positive ag-
glomeration effects (Ács, 2002; Duranton & Puga, 2004; Asheim, & Gertler,
2004; Sørensen, 2007; Weidenfeld, Williams & Butler, 2010; Prager & Thisse,
2012). However there is still room to analyse geographical/spatial and method-
ological context of agglomeration phenomenon which is accompanied by
spillover effects and their impact on inter-regional competitiveness. The need
to analyze the competitiveness in a wide inter-regional context stems from the
presence of spatial externalities resulting in spillover effects between neighbor-
ing regions. It is conveyed through such channels as the flow of knowledge and
human capital, technology transfer, or investments.

It is often argued that innovation is created and sustained through a highly
localised process as exhibits strong geographical clustering in areas where spe-
cialized inputs, services and resources (including competition, interactive learn-
ing or institutional conditions) necessary for the innovation process are concen-
trated (Asheim & Gertler, 2005; Wolfe, 2009). Moreover in the rapidly chang-
ing knowledge-based economy innovation process is based on creative use of
various forms of knowledge (Vinding, 2002; Alves, 2007). Innovation “remains
fundamentally an application of knowledge” (Schaper & Volery, 2007, p. 64),
which is best achieved through networks that serve as both repositories and
generators of innovative ideas and information.

At the same time it should be mentioned that over the years the concept of
innovation has changed towards more interactive, cumulative and cooperative phe-
nomenon (Rothwell, 1992; Aralica, Račić, & Radić, 2005). Inter-organisational in-
teraction and related external knowledge is believed to support innovativeness (Co-
hen, & Levinthal, 1990; Muller & Zenker, 2001). This is consistent with the con-
cept of “open innovation” (Chesbrough & Garman, 2009) which – in contrast to the
process of internal innovation – focuses on participation and collaboration of ex-
ternal firms (customers and suppliers) in generating innovative ideas. Suppliers’
knowledge can also be used to streamline decision-making processes through align-
ing customer requirements with supplier capabilities (Shu Mei Tseng, 2009). The
innovation process is by its nature knowledge-intensive, therefore innovations rely
to a large extent on the presence of knowledge-intensive services (KIS) (OECD
2003, p. 26). Thus with the rapid development of information and communication

52 Justyna Majewska, Szymon Truskolaski

technologies (ICT) and other knowledge-intensive services (KIS) a significant re-
search direction emerged – as knowledge transfer in spatial concentrated areas is
vital to innovation, and for competitiveness.

3. THE IMPACT OF KNOWLEDGE-INTENSIVE SERVICES
ON REGIONAL COMPETITIVENESS

KIS is defined as services that involve economic activities which are intended to
result in the creation, accumulation or dissemination of knowledge. Following
Miles et al. (1995) and den Hertog (2000), ICTs are considered one of three major
knowledge-intensive services (KIS) sectors.

The service sector is divided into: knowledge-intensive services and less
knowledge-intensive services according to the approach defined as a method which
classifies production and service activities in accordance with the intensity of R&D
(expenditure on R&D / value added). This approach is based on The Statistical
Classification of Economic Activities in the European Community - NACE.

The following sectors of NACE are included into KIS: Post and Telecom-
munications, Computer Science, Research and Development, Water Transport,
Aviation, Real estate, Rental of machinery and equipment, Other business ac-
tivities, Financial intermediation, Education, Health care and Social Assistance,
Cultural activities, Recreation and Sport.

An important subgroup of knowledge-intensive services is called high-tech
KIS. The group includes: Post and Telecommunications, Computer Science, Re-
search and Development. Computer Science (division 62 of section J within NACE,
ie. computer programming and consultancy) can be identified as ICT services.
Other services are classified as less knowledge-intensive.

KIS-providers play a special role in innovation systems, and therefore in
enhancing regional competitiveness. They serve as sources of innovations (initi-
ating and developing innovation activities in client organizations), facilitators of
innovations (supporting the innovation process of an organization) and as carriers
of innovations (aiding in transferring existing knowledge so that it can be applied
in a new context) (Miles et al., 1995). Thus, using KIS enables firms to conduct
their own innovative activities. In particular, ICT-use constitutes not only an in-
novation in itself but also enhances the innovation process by shortening dis-
tances and saving on costs and time, as well as facilitating information transfer
and the promotion of a higher quality of decision-making (Vilaseca-Requena et
al., 2007; Czarnitzki & Spielkamp, 2003; Amit & Zott, 2001). There is a general,
strong preference for locally provided KIS (OECD, 2006). The evidence of local
sourcing (location of KIS-related providers) may support the importance of geo-
graphical proximity and the generation of clusters and networks in strengthening
the innovative system in which the firms operate (Ács, 2002).

Innovation policy focuses on stimulating innovativeness or enhancing the
ability to adopt innovations developed abroad. Both paths rely heavily on possibil-
ities to broaden the intellectual capital in a country or region. Developed countries

Spatial concentration of economic activity and competitiveness of Central… 53

or regions are in clear comparative advantage as the higher level of intellectual
capital enables faster rate of both technology creation and adoption (as endogenous
source of growth according to P. Romer, P. Aghion and P. Howitt). Less developed
countries (LDCs) need first to develop intellectual capital to be able to take the
benefit of existence of innovative production factors. Despite the comparative dis-
advantage in innovation many LDCs implement policies aimed at development of
highly technologically advanced products (eg. biotech or nanotech projects) what
results in insular type of development in regions where hi-tech “isles” neighbor
traditional production of low-tech goods (Kubielas, 2009, p. 277).

In Poland, for example, which in the context of innovation should be classified
as a LDC, innovation policy is also conducted towards supporting the development of
high-tech products. However, it is worth noting that the requirements of EU programs,
which constitute a significant source of funds for innovation policy, require that the
support is not provided directly to innovators, but is channeled to support the devel-
opment of innovative business environment – such as technology parks, incubators,
clusters, etc. Despite low evaluation of effectiveness of the funds, the development of
the business environment secures that the aid goes to the companies which existence
is due to market forces – the demand for advanced products and services and supply
of innovative ideas (intellectual capital) – and not due to government support. In the
Polish case, this means primarily the development of services based on ICT.

4. MEASURING SPATIAL CONCENTRATION AND SPILLOVER
EFFECTS AS INTER-REGIONAL AGGLOMERATION

The occurrence of inter-regional spatial concentration, ie. agglomeration phe-
nomenon including spillover effects as well as patterns of local spatial relation-
ship between the territorial units (regions) can be identified using spatial statistics
(Anselin, 1995, 2010; Kopczewska, 2011; Páez & Scott, 2004; Schabenberger
& Gotway, 2005), in particular Local Indicators of Spatial Association (LISA)
within exploratory spatial data analysis (ESDA).

In a general approach to modeling spatial association there are two exploratory
techniques for the local analysis of spatial association, namely Getis and Ord’s dis-
tance-based statistics (Getis & Ord, 1992; Ord & Getis, 1995) and Anselin’s (1995)
local decomposition of a global statistic of spatial association (Páez & Scott, 2004,
p. 55). The local Moran’s Ii statistic belongs to the most common (within LISA)
measures of spatial interdependence (autocorrelation) of spatial variables in neigh-
boring regions, and thus allows the identification of spatial autocorrelation pro-
cesses (Anselin, 1995; Schabenberger & Gotway, 2005).

It has been successfully used in the research on spatial distribution of tourist
flows, formation of clusters in tourism and spatial spillover effects in regional
tourism growth as well as the issues of spatial interactions between tourism des-
tinations (Yang, & Wong, 2013; Yang & Fik, 2014; Yang, Fik, & Zhang, 2016).
In particular, Majewska (2015) identifies and empirically measures interregional

54 Justyna Majewska, Szymon Truskolaski

effects of spatial agglomeration in tourism considering the occurrence and
strength of geographic spillover effects in Poland.

Local Moran’s Ii statistic is weighted correlation coefficient used for detection
in the random distribution of the variable X of deviations with spatial characteris-
tics. It allows to determine whether neighbouring areas are more similar to each
other (in terms of variable X), than would result from the stochastic nature of the
phenomenon studied (Mora and Moreno 2010). Moran’s Ii statistic is expressed by
the following formula (Anselin, 1995; Schabenberger & Gotway, 2005, p. 24):

�i =
(�i − �̅)∑ ij(�j − �̅)

��

∑ (�i − �̅

��
)

2/�
(1)

where:
�i(�j) - value of the variable X in the region �(�),

� - number of regions,
�̅ - the arithmetic mean of the variable X,
ij - elements of the spatial weights matrix W (line standardization) be-

tween units i and j.

Local Moran's Ii statistic is based on a neighborhood matrix (the spatial lag
operators W). A spatial weights matrix W is simply a matrix (n × n) containing
weights �� that describe the degree of spatial relatedness (i.e. contiguity, proximity
and/or connectivity) between units of analysis i and j (Páez & Scott, 2004). There
are different ways of defining the neighborhood and building spatial weights ma-
trices (Griffith, 1996; Páez & Scott, 2004) which, on one hand, is its limita-
tion/weakness due to the sensitivity of the statistic on the type of spatial weights
matrix (neighborhood matrix). On the other hand, it allows to modify and improve
the measurement results due to the possibility to correct the neighborhood matrix
using GIS (GPS coordinates) as proposed previously (Majewska, 2016).

The rules of neighbourhood used in the local Moran statistics (and other
indicators of spatial association) often operate on the distance between the cen-
troids of adjacent territorial units (Anselin, 1995; Schabenberger & Gotway,
2005; Lloyd, 2010). Then the neighbours are regions where the distance between
the centroids of districts, that is, their geometric centres, regional capitals, cen-
tres designated on the basis of location data of entities (GPS coordinates), etc.
does not exceed a specified number d of km.

In this study we use both: 1) centroids (for the whole group of districts of
Central European countries) and 2) central tendencies of the localization of enter-
prises (for Polish districts) as centres of agglomerations – the data in the latter case
were only available for Poland. It should be noted that GPS coordinates of individ-
ual enterprises allow to determine the centres of districts more precisely comparing
to centroids – as they are closer to the actual agglomeration processes in the regions.

Spatial concentration of economic activity and competitiveness of Central… 55

5. INTER-REGIONAL COMPETITIVENESS – AGGLOMERATION

AND SPILLOVER EFFECTS ON THE EXAMPLE
OF CENTRAL EUROPEAN DISTRICTS

The research was performed with respect to the districts of four Central European
countries, ie. Germany, Poland, Czech Republic and Slovakia (N = 960 of territorial
entities) and based on the data collected by Central Statistical Office of each coun-
try for the period 2009-2015, describing the competitiveness of regions form the
perspective of spatial agglomeration effects. In the study, we used three variables
as: 1) the share of information and communication (NACE section J) in total num-
ber of firms registered in a given district of Central European countries as well as
2) the share of Hi-tech KIS and 3) the share of ICT in total number of firms regis-
tered in Polish districts – as a special case within the Central European countries.
It should be mentioned that two of the six subsectors (at the division level) domi-
nated the information and communication services sector in the EU-28, namely
computer programming and consultancy (Division 62) and telecommunications
(Division 61). These two subsectors generated close to three quarters (71.1%) of
sectorial value added (Eurostat Statistics Explained, 2016).

In measuring the neighborhood and spatial autocorrelation we use two ap-
proaches. First, for the whole group of districts in Central European countries we used
geometric centers of districts (centroids). Then, considering Poland as a special case
study we use GPS coordinates of enterprises (generated with a dedicated tool to geo-
code their addresses). The central tendencies of the localization of firms were desig-
nated by calculating mean latitude and longitude coordinates to represent centers of
agglomeration in each of 380 Polish district. In this article GPS coordinates of entities
registered in Section I of PKD as “food services activities” (division 56, N = 96 775
firms) were used as an approximation of spatial concentration of economic activity.
On this basis, new spatial weights matrices were built allowing to determine local Mo-
ran Ii statistics and investigate the occurrence of spatial dependencies of neighboring
districts in relation to KIS (high-tech KIS and ICT). Those variables reflects the exist-
ence of positive agglomeration externalities which can spilling over the neighborhood
and enhancing inter-regional competitiveness of territorial units.

The neighborhood matrices were defined by the radius of the distance d be-
tween the centers of districts (d = 25 km). They were set, on the one hand, as geo-
metric means (for the whole group of districts within Central European countries)
and, on the other hand, as central tendencies, ie. the average value of GPS coordi-
nates of enterprises of section I and division 56 located in each district in Poland.

Maps below (figures 1-2) present the results of spatial autocorrelation statis-
tics – Moran's local Ii – obtained using PQStat software with regards to districts of
Central European countries. Statistically significant values of the statistic are pre-
sented for 2009 and for 2015 in respect to the share of information and communi-
cation (NACE section J) companies in total number of firms registered in a given
district.

56 Justyna Majewska, Szymon Truskolaski

Figure 1. Significant local Moran’s Ii statistics in relation to the share
of section J (information and communication) in total number of economic activities

registered in districts of Central European countries in 2009 (p < 0.01).
Source: own work based on data collected by Central Statistical Offices of Central European

countries with the use of PQStat software.

Figure 2. Significant local Moran’s Ii statistics in relation to the share
of section J (information and communication) in total number of economic activities

registered in districts of Central European countries in 2015 (p < 0.01).
Source: own work based on data collected by Central Statistical Offices of Central European

countries with the use of PQStat software.

Spatial concentration of economic activity and competitiveness of Central… 57

A comparable number of statistically significant districts in 2009 and 2015 years
may be noticed (93 and 92, respectively), but in the initial period of the study they
occurred mainly in the south-western part of the analyzed group of countries (Ger-
many) – Ruhr agglomeration with Essen and Cologne, or agglomerations of: Stuttgart,
Frankfurt, Nuremberg and Munich. Especially worth attention is that almost no clus-
ters of districts with similar high values of shares of Section J enterprises in the eco-
nomic structure occurred in Poland (spillover effects in this period related only the
capital city of Warsaw). In 2015 eastern and southern regions, ie. in Poland (Warsaw,
Poznań and Wrocław) and Slovakia (Bratislava agglomeration, region of Nitra,
Trnava, Banska Bystrica and Kosice) gained in importance at the expense of Germany.

A small number of clusters of districts characterized by a high share of infor-
mation and communication services sector in the economic structure of districts in
Poland and the Czech Republic is due to the low average value of these shares
compared with Germany and Slovakia (see. table 1), ie. lower importance of
Knowledge Intensive Services in the economy.

Table 1. The average value of shares of Section J enterprises in the economic structure of dis-
tricts based on the number of entities registered in these districts by section in 2009 and 2015

Country
Average share of section J (information and communication)

in total number of firms in districts
2009 2015

Germany 2.89% 2.80%
Poland 1.42% 1.87%
Czech Republic 2.07% 1.35%
Slovakia 2.97% 3.98%

Source: own work based on data collected by Central Statistical Offices of Central European countries.

In the next step, values of Moran’s Ii statistics were calculated using only data on
Polish districts to check for the occurrence of spillover effects of knowledge-intensive
activities in these regions exclusively. The results are shown below on a map (figure 3).

In addition to previously designated clusters in agglomerations of Warsaw,
Poznań and Wrocław, clusters of high values of the shares of Section J enter-
prises in the economic structure of the districts also revealed in agglomerations
of Kraków, Gdańsk, Rzeszów and Silesian conurbation. These are areas that
create positive neighborhood externalities increasing the competitiveness of the
whole regions they are located in (innovative activities associated with
knowledge-intensive services spill over to the neighborhood). These centrifugal
effects strengthened over the six analyzed years in agglomerations of Kraków
and Wrocław, decreased in case of Bydgoszcz and the surrounding districts.

Moreover we take into consideration others variables for Polish districts,
namely: 1) the share of Hi-tech KIS and 2) the share of ICT in total number of
firms registered in Polish districts. Maps below (figures 4-5) present the results
of spatial autocorrelation statistics (Moran’s local Ii).

58 Justyna Majewska, Szymon Truskolaski

Figure 3. Significant local Moran’s Ii statistics for two different points in time
(2009 (a) and 2015 (b)) – in relation to the share of section J (information
and communication) in total number of firms in Polish districts (p < 0.01)

Source: own work based on Central Statistical Office data with the use of PQStat software.

Figure 4. Significant local Moran’s Ii statistics for two different points in time
(2009 (a) and 2015 (b)) – in relation to the share of Hi-tech KIS in total number

of economic activities registered in Polish districts (p < 0.01)
Source: own work based on Central Statistical Office data with the use of PQStat software.

Figure 5. Significant local Moran’s Ii statistics for two different points in time
(2009 (a) and 2015 (b)) – in relation to the share of ICT in total number

of economic activities registered in Polish districts (p < 0.01)
Source: own work based on Central Statistical Office data with the use of PQStat software.

(a)

(b)

Spatial concentration of economic activity and competitiveness of Central… 59

We observed a statistical significant tendency to cluster by neighboring districts

similar to each other by the high values of these two variables (share of Hi-tech KIS
providers and share of ICTs providers in the total number of enterprises registered
and localized in a given district). It means that there are spatial interrelations between
some districts and in some cases we can observe inter-regional effects of agglomera-
tion phenomenon that reflect spillovers with regard to KIS-based measures.

Taking into consideration Hi-tech KIS variable it should be noted that there
are 8 main centers of inter-regional competitiveness where agglomeration and
spillover effects can be observed, such as agglomerations: Warsaw, Poznań,
Wrocław, Tricity, Szczecin, Kraków, Silesian conurbation and Rzeszów – on the
south-east part of Poland. Comparing the results of local Moran’s Ii statistics be-
tween 2009 and 2015 it can also be seen that spillover effects grew broader and
stronger for the district of Kraków (Kraków itself in 2009), Żyrardów (south-west-
ern part of Warsaw agglomeration) and Oława (Wrocław agglomeration). Con-
versely, the disappearance or weakening of the spillover effect was observed in the
case of Bydgoszcz and the district of Bydgoszcz, and Zielona Góra, and Nowa Sól.
The effect of a “sucking in” in the case of Rzeszów and Rzeszów district in relation
to the surrounding districts (strzyżowski) is also worth noting.

The disappearance or weakening of the spillover effects is even clearer in re-
lation to the share of ICT providers in the economic structure of districts (Silesian
conurbation, agglomerations of Rzeszów and Szczecin). Increasing spatial interde-
pendence is apparent (but in the narrower number of territorial units) in eg. of
stronger Wrocław and trzebnicki districts with weaker remaining districts of
Wrocław agglomeration, or in Warsaw agglomeration where the situation is simi-
lar). The opposite tendency was recorded in Kraków agglomeration – the strength-
ening interdependence in an inter-regional cluster composed of Kraków and the
Kraków district. Inter-regional effects of Kraków agglomeration and spillover im-
prove the competitiveness of the whole area, including districts located within fur-
ther radius from the center of the agglomeration.

6. CONCLUSIONS, LIMITATIONS AND FURTHER RESEARCH

In the study we tested spatial autocorrelation of neighboring regions with regards to
variables on KIS-oriented measures using the example of four Central European
countries (Germany, Poland, Czech Republic and Slovakia). The methodology based
on local statistics of spatial association and GPS coordinates (used only in case of
Poland) allowed us modelling agglomeration processes. As the main implication of
the study within methodological context we identified spillover effects in neighbor-
ing regions as indicators of highly competitive districts in Central European coun-
tries. However it should be noted that we do not observe any cross-border agglomer-
ation, ie. the phenomenon of spatial agglomeration in the international context.

Under the cognitive effects of our study we observed three types of spatial
association effects taking into consideration changes in time (2009 vs. 2015): 1)

60 Justyna Majewska, Szymon Truskolaski

strengthening spillover effects with regards to information and communication sec-
tors (eg. Warsaw and Wrocław agglomerations as well as Bratislava or Kosice), 2)
diminishing spillovers (centripetal effects of agglomeration centers – eg. in Nurem-
berg, Prague or Rzeszów in the south-east part of Poland), and 3) dispersion effects
e.g. in Wolfsburg in Germany or in Polish Bydgoszcz.

The results of the study indicate inter-regional competitiveness of territorial
units in Central European countries, which are gaining momentum due to the phe-
nomenon of positive spillover effects of spatial agglomeration. This applies mainly
to clusters of urbanization – cities – that create the functional relationship of vary-
ing strength and range with the surrounding districts. This reflects a trend of hi-tech
KIS companies to locate in the vicinity of large cities. However, it is different with
regard to the ICT sector where spillover effects mostly disappear over the years
2009-2015. This demonstrates the high bargaining power of IT employees who are
not necessarily interested in commuting outside the city of residence.

The results may optimize localization decisions and geomarketing of en-
terprises as well as planning and management of districts (administrative units).
Regions where geographic spillovers are the main driver of the development
should combine marketing activities with the regions that generate spillovers.
Such collaborative marketing is necessary to enhance competitiveness of re-
gions without important resources or development potential but localized in the
vicinity of strong regions generating spillover effects.

The main limitations of the research are applied to LISA measures (local Moran
Ii statistics) which are sensitive to the localization, size and shape of the analyzed
territorial units (determining neighborhood). Thus, in order to measure the spillover
effects more precisely it is recommended to define and measure the neighborhood of
agglomeration centers using localization of firms based on GPS coordinates instead
of centroids of districts – as shown in example of Poland. It seems to be of special
importance in case of districts in East Germany which are much bigger in size com-
pared to those located in west part of the country. Thus, potential spillover effects (of
eg. Berlin) could not be captured as many centroids of neighboring regions were far-
ther to each other than the range determined to delimit the neighborhood.

Additionally, the spatial interrelation of neighboring regions seems to be de-
pendent on various regional features. Thus, in-depth assessment of the existence,
strength and direction of spillover effects using case-study analyses of different ag-
glomerations may be required to compliment the picture.

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