Agglomeration economies, mechanisation and changes in product quality: The post‐war development of the sake brewery clusters in Japan, 1980–2020

Abstract

Agglomeration economies contribute to firm performance; however, their changing roles are rarely analysed. This study explores how technology choices and the changing nature of agglomeration economies affected firm performance in the Japanese sake (rice wine) brewing industry from 1980 to 2020. Using plant‐level data, we find that agglomeration benefits arose from sales of sake from small unknown firms to large established firms when production was labour‐intensive. These inter‐firm transactions, however, diminished as scale economies emerged with mechanisation. As the demand for high‐quality sake increased, collective internalisation of information spillover benefits appears to become a major source of agglomeration economies.