Unpacking the nuances of industrial agglomerations and their impact on manufacturing firm performance in emerging economies

Purpose This paper aims to analyze how different types of location (industrial clusters, urban agglomerations and isolated areas) shape firm performance in emerging economies. It also examines whether innovativeness, understood as a firm’s capability to adapt and transform its activities, mediates the location–performance relationship. Design/methodology/approach The authors use firm-level data from 190 Ecuadorian textile and apparel SMEs (2014–2019). Locations are classified through location quotients, and innovativeness is operationalized via a composite index derived from principal component analysis. Hypotheses are tested using analysis of variance and regression models. Findings Results indicate that firms in industrial clusters outperform those in other locations, but the location alone does not guarantee superior performance. Innovativeness strengthens profitability, particularly in industrial clusters, while isolated firms rely more on efficiency-driven strategies. Interaction effects are weak, reflecting both data imbalance and the contingent nature of location–innovation linkages. Practical implications Managers should adopt innovation-oriented business models to capitalize on agglomeration benefits. Policymakers, in turn, must design territorially sensitive instruments for industrial clusters, urban agglomerations and isolated areas. Social implications Supporting innovativeness outside major agglomerations can foster regional development and reduce inequality. Originality To the best of the authors’ knowledge, this study offers one of the first systematic analyses linking agglomeration typologies and innovativeness to firm performance in Latin America. It refines distinctions between industrial clusters, urban agglomeration and isolated areas and conceptualizes innovativeness as a dynamic capability in institutionally weak environments.