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Location Choices Across the Value Chain: How Activity and Capability Influence Collocation

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  • Juan Alcácer

    ()
    (Stern School of Business, New York University, 40 West 4th Street, Tisch Hall 7-10, New York, New York 10012)

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    Abstract

    There has been a recent revival of interest in the geographic component of firm strategy. Recent research suggests that two opposing forces--competition costs and agglomeration benefits--determine whether firms collocate in a given geographic market. Unexplored is (1) whether these forces have different impacts on R& D, production, and sales subsidiaries, leading to diverse collocation levels, and (2) how firm capabilities impact collocation by increasing or decreasing competition costs and agglomeration benefits. I explore these questions using the worldwide location decisions of firms in the cellular handset industry. I find that production and sales subsidiaries are more geographically dispersed, and R& D subsidiaries are more concentrated, than a random distribution would predict. When distinguishing firms by their capabilities, I find that more-capable firms collocate less than less-capable firms, regardless of the activity performed.

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    File URL: http://dx.doi.org/10.1287/mnsc.1060.0658
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    Bibliographic Info

    Article provided by INFORMS in its journal Management Science.

    Volume (Year): 52 (2006)
    Issue (Month): 10 (October)
    Pages: 1457-1471

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    Handle: RePEc:inm:ormnsc:v:52:y:2006:i:10:p:1457-1471

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    Related research

    Keywords: FDI; location choice; firm heterogeneity;

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    Cited by:
    1. Mercedes Delgado & Michael E. Porter & Scott Stern, 2012. "Clusters, Convergence, and Economic Performance," NBER Working Papers 18250, National Bureau of Economic Research, Inc.
    2. Juan Alcacer & Mercedes Delgado, 2012. "Spatial Organization of Firms: Internal and External Agglomeration Economies and Location Choices Through the Value Chain," Working Papers 12-33, Center for Economic Studies, U.S. Census Bureau.
    3. J. Knoben, 2009. "Localized inter-organizational linkages, agglomeration effects, and the innovative performance of firms," The Annals of Regional Science, Springer, vol. 43(3), pages 757-779, September.
    4. Ron Boschma & Koen Frenken, 2011. "The emerging empirics of evolutionary economic geography," Papers in Evolutionary Economic Geography (PEEG) 1101, Utrecht University, Section of Economic Geography, revised Jan 2011.
    5. Canfei He & Xiaojun Xiao, 2011. "Geography of Multinational Corporations and Functional Specialization in Chinese Cities," Symphonya. Emerging Issues in Management, University of Milano-Bicocca, issue 1 Global .
    6. Picone, Gabriel A. & Ridley, David B. & Zandbergen, Paul A., 2009. "Distance decreases with differentiation: Strategic agglomeration by retailers," International Journal of Industrial Organization, Elsevier, vol. 27(3), pages 463-473, May.

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