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The Internet, industrial location, and geographic markets

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  • Johannes Traxler

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Abstract

Over the past years the commercial use of the global computer network Internet has steadily increased. The main focus of the paper is on the potential spatial consequences of Internet adoption and use, analyzed from a theoretical perspective. The commercial use of the Internet can have a wide range of potential implications for the local and regional economy. Spatial changes, however, typically do not result from telecommunications technologies directly, but rather from organizational changes in businesses in reaction to advances in telecommunication. Starting with organizational theories of the firm, the paper first discusses the changes that take place in companies that use the Internet for various activities. At the firm level, cost reduction and changes in the internal structure of the firm are probably the most commonly expected and anticipated results. The use of this technology also changes the inter-firm relations and provides new possibilities for business start-ups. The potential spatial implications resulting from these changes, in particular for cities, might be serious and far-reaching. Regions that can provide the necessary technology in sufficient capacity will become more competitive and have an advantage over others that are not part of the global network. Distance will become less relevant, since virtual proximity and connectivity gain importance. The Internet increases the flexibility in the companies? location decisions and allows firms to expand their geographic markets and to operate at a global scale regardless of their location. In the second part, the paper discusses the economic impacts of the Internet and the potential spatial consequences in the framework of the global economy and the information society. The main focus here is on agglomeration and network theories and their different treatment of the role of information and of information technologies. The paper concludes with first results of an empirical study of the Internet use by private research laboratories in the United States.

Suggested Citation

  • Johannes Traxler, 1998. "The Internet, industrial location, and geographic markets," ERSA conference papers ersa98p345, European Regional Science Association.
  • Handle: RePEc:wiw:wiwrsa:ersa98p345
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    References listed on IDEAS

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    1. Erik Brynjolffson, 1991. "An Incomplete Contracts Theory of Information, Technology and Organization," Working Paper Series 126, MIT Center for Coordination Science.
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    3. E Romanoff & S H Levine, 1993. "Information, interindustry dynamics, and the service industries," Environment and Planning A, Pion Ltd, London, vol. 25(3), pages 305-316, March.
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    6. Brynjolfsson, Erik. & Hitt, Lorin M., 1994. "Information technology as a factor of production : the role of differences among firms," Working papers 3715-94. CCSTR ; #173., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    7. A G Hoare, 1975. "Linkage flows, locational evaluation, and industrial geography: a case study of Greater London," Environment and Planning A, Pion Ltd, London, vol. 7(1), pages 41-58, January.
    8. Brynjolfsson, Erik., 1991. "An incomplete contracts theory of information, technology and organization," Working papers #126. Working paper (Sloa, Massachusetts Institute of Technology (MIT), Sloan School of Management.
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