Regional analysis of business agglomeration patterns in knowledge-intensive service sectors in Romania

This study examines the dynamics of knowledge-intensive services (KIS) companies in Romanian regions, focussing on the role of average wages, immigration, and educational attainment, among a complex set of local conditions. Panel data collected for 42 administrative regions (NUTS 3 level) of Romania for 2008-2022 were analysed using the generalised method of moments (GMM) model. The empirical findings reveal that regions with a higher initial presence of KIS companies experienced significant growth in the following years. The results show that KIS companies tend to be located in regions with lower average wages, indicating a preference for controlled labour costs over access to high-wage skilled labour. In addition, the impact of international immigration is mixed, with temporary immigrants negatively associated with KIS agglomeration in some areas. Contrary to previous research results, regions with higher educational enrolment do not attract more KIS companies, suggesting a possible mismatch between educational output and industry needs. Positive GDP per capita coefficients confirm that economic growth strongly attracts KIS firms' agglomeration. These results highlight the complex interaction between local economic factors and the growth of KIS sectors, suggesting the need for nuanced policy approaches to promote regional development through knowledge-intensive industries.