On the evolution of the spatial economy with multi-uni-multi-plant firms: the impact of IT development

This paper examines how the decline of communication costs between management and production facilities within firms and the decrease in trade costs of manufactured goods affect the spatial organization of a two-region economy with multi-unit-multi-plant firms. The development of information technology decreases the costs of communication and trade costs. Thus, the fragmentation of firms is promoted. Our result indicates that, with decreasing communication costs, firms producing low trade-cost products (such as sonsumer electronic) tend to concentrate their manufacturing plants in low wage countries. In contrast, firms producing high trade-cost products (such as automobiles) tendo to have multiple plants serving to segmented marketes, even in the absence of wage differentials.