Location Choices Across the Value Chain: How Activity and Capability Influence Collocation
AbstractThere 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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Bibliographic InfoArticle provided by INFORMS in its journal Management Science.
Volume (Year): 52 (2006)
Issue (Month): 10 (October)
FDI; location choice; firm heterogeneity;
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