The role of agglomeration economies for SME transnationalisation: Bypassing the global urban service nexus?

A growing number of West European Small and Medium Sized Enterprises (SMEs) attempt to reap the benefits of low production costs and growing demand in emerging Asian economies, by way of firm transnationalization. Successful transnationalization entails adaptation to completely different institutional environments. This requires the acquisition of both foreign knowledge and social networks. The economic geography literature tends to stress the importance of agglomeration externalities in this regard, since it is in large agglomerations where transnational connections are common. This paper gauges the the role of agglomeration externalities for eleven Dutch transnational SMEs that built a subsidiary in East or Southeast Asia. Contrary to expectations, agglomeration externalities in the home environment played a limited role. The researched SMEs source knowledge abroad, on conferences and with their non-local suppliers. Advanced producer services played a very modest role in this regard: the global urban service nexus emphasized by world cities research is often circumvented. As such, the findings of this paper do not corroborate the idea that regional resilience in less urbanized areas ought to stem from embracing urbanization. Instead, analyzing resilience should employ a finer distinction of different kinds of agglomeration externalities and their respective geographical ranges and scales.