Intertemporal triangular spatiality of agglomeration-clustering-knowledge spillovers

Abstract This study develops and tests an Intertemporal Triangular Spatiality (ITS) framework to explain how agglomeration, clustering, and knowledge spillovers shape firm entry and location choice in emerging markets. Using Costa Rica’s Free Trade Zone regime as a policy-discontinuity setting, the paper analyzes geocoded firm-level data for 652 firms from 1990 to 2022, distinguishing multinational enterprises and specialized exporting companies across industrial parks. The empirical strategy combines lagged Herfindahl–Hirschman concentration measures with time-varying gravity ratios capturing spatial proximity and evolving inter-park relationships, estimated through negative binomial models of new firm formation. Results show that firm entry is driven less by FTZ designation alone than by spatially embedded market structure. Immediate proximity and broader regional accessibility increase entry, while intermediate proximity generates competitive substitution. Once gravity controls are introduced, local industrial concentration discourages entry, indicating that firms seek accessible markets while avoiding excessive competition. The study contributes by formalizing ITS as a dynamic mechanism linking policy-induced FDI, technology transfer, knowledge spillovers, and entrepreneurial development. The study’s originality lies in modeling knowledge spillovers as time-dependent, spatially nested, and scale-sensitive forces shaping agglomeration and clustering outcomes.