Agglomeration and Market Entry in the U.S. Steel Industry: Empirical Evidence Based on the Advent of Slab Casting by U.S. Steel Minimills

Abstract

Ten new steel plants were constructed in the United States from 1989-2001, each taking advantage of new technologies that gave scrap-based minimills access to the market for flat products based on the casting of steel slabs. Earlier, this market was the exclusive domain of ore-based integrated mills. This research brings new evidence to bear on the nature and importance of agglomeration economies, by analyzing industry clusters related to the advent of new slab casting technologies. The analysis is based on direct observation and plant visits to all of the new mills created by the new technologies. We find that industry clusters can play an important role in the process of market entry, and that specific factors related to product and firm characteristics help to determine the nature of agglomeration economies and their effects on firms and regions.