The purpose of this article is to substantiate the effects of industrial clusters on constituent individual factories, focusing on the case of the machinery industry in Tokyo in the late Meiji Era. Recently, while the role of small and medium-sized factories in the development of the Japanese economy has come to be evaluated positively, it has also been recognized that many, especially small and medium-sized, factories often formed clusters. Therefore, it is important to investigate the effects of clusters on their constituent factories in order to understand the mechanism of economic development. For this purpose, I use a comprehensive list of factories which covers small and medium-sized factories dating back to the early stages of industrialization. There are principally two conceptual frameworks on industrial clustering. The one focuses on quantitative agglomeration of firms in general, and the other focuses on "flexible specialization" in addition to quantitative agglomeration. In this paper, I use the former framework to examine the broad effects of industrial clusters, such as information sharing, formation of skilled labor market, and development of related industries. First, I analyze quantitatively the influences of clustering, using the panel data constructed from five lists of factories issued in 1904, 1906, 1909, 1911 and 1916. Through this analysis, I show that the establishment of factories was more active inside clusters, factories tended to move out of clusters when they expanded their business, and survivability of factories was higher inside the clusters. Then, I investigate the reasons for these phenomena using descriptive materials, and I conclude that "gathering effects" such as "flexible specialization", a skilled labor market, related industries and the sharing of information played an important role, which was backed by the historical environment of high worker mobility and little transactional relationship between large and small factories.
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