Several studies have indicated that industrial agglomeration—the geographical concentrations of people and firms (Glaeser 2010)—can lead to increased innovation through knowledge spillovers and collaborative opportunities (Porter, 1998; Audretsch and Feldman, 1996). The proximity of firms often leads to easier dissemination of ideas and expertise, potentially fostering innovation (Marshall, 1890). However, other researchers argue that agglomeration might lead to homogenization of ideas and reduce the diversity necessary for breakthrough innovations (Jacobs, 1969).
In the Philippines, industrial agglomeration may be observed in industrial zones, which include Philippine Economic Zone Authority (PEZA) zones (Reyes-Macasaquit 2008). In 2009, the Survey of Innovation activities mentioned that “Location matters: firms in PEZA, all other things equal, are more likely to be innovators than firms in other areas. The evidence is strongest for product innovation, and innovation activity, in general, when comparing PEZA with Cebu firms. This result is consistent, with what is found in the literature, that firms within economic zones are more likely to be innovators.” (Albert et al. 2011, p. 24)
The 2021 Survey of Innovation Activities however showed a shift in the relationships: Compared to firms in PEZA zones, Firms in Visayas and Mindanao are more innovation active, have more product, process and organizational innovation. Thus, it would be crucial to delve further into the innovation activities in the country, and explore other industry clusters that potentially influence firm innovation.