Location Choices Across the Value Chain: How Activity and Capability Influence Agglomeration and Competition Effects

33 Pages Posted: 30 Nov 2003

See all articles by Juan Alcacer

Juan Alcacer

Harvard University - Strategy Unit

Date Written: October 2003

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 - impact a firm's geographic strategy, along with location traits. Unexplored is (1) how the tradeoff between these opposite forces changes according to the activity a firm performs in a given location - R&D, production or sales - and (2) how firm capabilities increase or decrease competition costs and agglomeration benefits. I explore these questions using the worldwide location decisions of firms in the cellular handset industry. I find that, compared to a random distribution of activities across locations, production and sales subsidiaries are more geographically dispersed and R&D subsidiaries are more concentrated. When distinguishing firms by their capabilities, I find that more-capable firms co-locate less than less-capable firms, regardless of the activity performed.

Keywords: FDI, location choice, firm heterogeneity

JEL Classification: F23, L13, D43, M10

Suggested Citation

Alcacer, Juan, Location Choices Across the Value Chain: How Activity and Capability Influence Agglomeration and Competition Effects (October 2003). Available at SSRN: https://ssrn.com/abstract=460621 or http://dx.doi.org/10.2139/ssrn.460621

Juan Alcacer (Contact Author)

Harvard University - Strategy Unit ( email )

Harvard Business School
Soldiers Field Road
Boston, MA 02163
United States
617 495-6338 (Phone)
617 495-0355 (Fax)

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