Analyzing the Effect of Spatial Concentration of Upstream Industries on the Growth of Downstream Industries in Iran: Evidence from the Base Metals Value Chain

Document Type : applicative

Author

Economics - Faculty of Economics - Shahid Bahonar University of Kerman - Kerman - Iran

10.30473/jier.2026.76386.1522

Abstract

Abstract:


The primary objective of this study is to empirically investigate the impact of upstream industrial clusters on the growth of downstream industries across the provinces of Iran. To this end, the research focuses on the base metals value chain. The Location Quotient (LQ) index was calculated for the base metals production industry (ISIC code C03.024) across 31 provinces for the period spanning 2011 to 2021 (Persian years 1390-1400). Subsequently, utilizing a panel data model with fixed effects, the study analyzed the effect of this index on the value-added growth of two key downstream industries: "Fabricated Metal Products" and "Motor Vehicles."

The estimation results reveal that spatial concentration within the upstream base metals industry exerts a positive and statistically significant influence on the growth of its downstream counterparts. This effect is considerably more pronounced in the fabricated metal products sector (coefficient of 0.185) than in the motor vehicles sector (coefficient of 0.112), suggesting the presence of stronger backward linkages and more significant knowledge spillovers within the base metals value chain.

The findings indicate that the geographic concentration of interconnected industries acts as a primary engine for regional industrial growth. This is achieved by reducing transaction costs, enhancing productivity, and expanding learning networks. Accordingly, national industrial development policies should prioritize strengthening and deepening existing industrial clusters rather than dispersing activities, in order to leverage spatial synergies and regional advantages on the path toward sustainable growth.

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References

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DOI: https://doi.org/10.1162/003465303765299881
Journal of Industrial Economics researches
Volume 9, Issue 33
October 2025
Pages 12-33

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History

  • Receive Date: 06 November 2025
  • Revise Date: 01 January 2026
  • Accept Date: 27 April 2026

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