HOTELLING'S “MAIN STREET” WITH MORE THAN TWO COMPETITORS*

ABSTRACT. I analyze oligopolistic competition among three or more firms located on Hotelling's (1929) Main Street and show that in contrast with Hotelling's duopoly, the symmetric locational structure supports a noncooperative equilibrium in prices. However, in a two-stage game of location choice in the first stage, and price choice in the second stage, there exists no subgame-perfect equilibrium where the whole market is served. This is because, starting from any locational pattern, firms have incentives to move toward the central firm. This strong version of the Principle of Minimum Differentiation destroys the possibility of a locational equilibrium. The results are a direct consequence of the existence of boundaries in the space of location. The sharp difference between these results and those of the standard circular model (whose product space lacks boundaries) shows that the general use of the circular model as an approximation to the line interval model may be unwarranted.     

LOCATION AND MARKET POWER HOTELLING REVISITED*

ABSTRACT This paper analyzes the determination of industry structure in a product market, given a monopolistic factor market. The characteristics of industry structure examined include the number of firms, their pricing and locational pattern. It is shown how a monopolistic factor owner–a landowner–structures the product market in order to extract maximum rent. Asymmetry characterizes the resulting locational pattern. All the product market firms charge different prices in equilibrium. No matter how large the number of firms competing in the product market, the landowner can always guarantee himself positive profits. The paper concludes with a discussion of possible applications and tests of the theory.     

Strategic Considerations for Innovation and Commercialization in the US Biotechnology Sector

This paper examines the importance of alliances as an innovation strategy utilized by US biotechnology firms. In doing so, the role of alliances with universities vis-à-vis alliances with industrial companies is emphasized. The biotechnology sector is dominated by few large and many small firms. The small firms are research focused or technology developers. Several large firms are now integrated biopharmaceutical companies. Very few small firms can survive without strengthening their relationships with universities, biotechnology or pharmaceutical or other large companies. These relationships range from licensing agreements, export–import connections to various forms of alliances for R&D, product development and marketing. Large firms supplement in-house R&D by acquiring research products and/or new technologies from small firms as well as universities. A survey of US biotechnology companies is used to show the emergence of alliance relationships, which continue to highlight university linkages, emphasize connections of biotechnology firms with other biotechnology entrepreneurs, and an ongoing effort to build a synergistic relationship with pharmaceutical or other large companies. Most linkages are not confined to the local area; the main locational attribute is the science base or the labour market.     

Firm Heterogeneity in Biotech: Absorptive Capacity,Strategies and Local-Regional Connections

This paper focuses on the characteristics of biotech firms with various levels of research and development (R&D) activity. It is done by exploring the relationship between R&D intensity, alliances and the extent of regionalization of firms' activities using evidence from a survey of US-based biotechnology firms. We profile two firm prototypes: research-oriented firms and product-oriented firms, focusing on their characteristics, strategies and operations. These include activities devoted to exploration and exploitation through alliances with universities (more exploration) and with pharmaceutical companies (exploration and exploitation), and locational needs which facilitate both exploration and exploitation.     

Restructuring of a metropolitan industrial park: case study in Herzeliyya, Israel

The nature and magnitude of the restructuring processes are unveiled in Herzeliyya Industrial Park, a satellite park of metropolitan Tel Aviv. The processes are explored in the context of Israel's recent entry into the post-industrial age and its swift integration into the "global" economy, using survey data of a sample of 104 firms. Since the mid-1980s the park has experienced functional upgrading in a process of "invasion and succession". Upgrading has been accompanied by high "mortality" rates of firms, and by large-scale renewal. Among the attributes reflecting the functional upgrading are the extended spatial reach of firms for clients and joint venturers, and of their organizational affiliations, expanding far beyond the metropolis into the world at large. The newly arriving firms tend to reveal a different set of locational factors than do the veteran ones. Future research avenues are set out.     

ARE LOCAL MILIEUS THE KEY TO INNOVATION PERFORMANCE?*

ABSTRACT This study investigates how local milieus foster innovation success in firms. We complement the common practice of linking firm performance indicators to regional characteristics with survey evidence on the perceived importance of locational factors. While the former approach assumes that location characteristics affect all firms in the same way, the survey allows us to model how firms judge the attractiveness of locations using a heterogeneous set of criteria. It turns out that the availability of highly skilled labor and the proximity to suppliers matter for firms' innovation performance. Interestingly, location factors obtained from the survey provide a more accurate explanation of how local milieus facilitate innovation.     

CAPITALIZATION OF LOCAL AND REGIONAL ATTRIBUTES INTO WAGES AND RENTS: DIFFERENCES ACROSS RESIDENTIAL,COMMERCIAL AND MIXED-USE COMMUNITIES*

ABSTRACT. The extent to which the value of locational attributes is capitalized into wages rather than rents is analyzed in a general equilibrium framework. This paper differs from earlier work by taking into account local and regional attributes and makes distinctions among residential, commercial, and mixed-use communities. The theory implies that in localities with both individuals and firms, wages and rents are simultaneously determined, while in exclusively residential localities the model is recursive. The major theoretical insights are consistent with estimations of the model using data from the University of Michigan's Panel Study of Income Dynamics.     

Perceptions of office rent determinants by real estate brokerage firms in Istanbul

Studies on the office rent prediction models have been on the rise for the last quarter of this century. The extent of variables used in the proposed models changes significantly, reflecting variations in locational and/or economical conditions of the region. The viewpoint of brokerage firms on the effectiveness of these academically defined variables is important. The benefit of obtaining these viewpoints is two-fold. Firstly, it will provide some evidence on whether or not the reported influences of these variables remain the same in different markets, in this case, in the I˙stanbul office market. Secondly, it may define how well practitioners' criteria fit academically defined variables during the decision-making process for a new office investment, especially in the I˙stanbul office market. The study derives the currently well established locational, building, econometric and contract variables from previously published research. Two different influence scales of these variables were constructed. The first scale was based on the result of a survey study administrated to 10 leading real estate brokerage firms in I˙stanbul and the second was based on the reported influences from previous publications. Comparing the influence scales, contradictory and parallel findings were determined, indicative conclusions, revealing the unique structure of I˙stanbul, were drawn. Among the 47 comparable office rent variables, the influence of 17 was found to agree well in both scales. Except econometric variables, most variables in I˙stanbul revealed different influences than globally determined influences.     

TRAFFIC CONGESTION,POLYCENTRICITY, AND INTRAURBAN FIRM LOCATION CHOICES: A NESTED LOGIT MODEL FOR THE LOS ANGELES METROPOLITAN AREA

This study empirically investigates traffic congestion effects on agglomeration through the lens of firm location decisions. A discrete choice model is applied to examine new establishments’ location choices within the Los Angeles metropolitan area. Employment centers are defined as the choice set to explore the nature and role of intraurban agglomerations. The results show that metro‐wide congestion negatively affects the location choices of firms in the high‐order office‐related activities, while local congestion have positive impacts on those firms’ location decisions. In contrast, firms in production‐related activities are positively influenced by regional congestion but are negatively affected by local congestion levels.     

Intermodal freight terminals: locality and industrial linkages

The areas around eight Canadian intermodal freight terminals form the focus of this study. Two basic research questions are addressed: What is the character of the zones adjacent to the terminals and what is the functional tie between industries located in these zones and the terminals themselves? There are three seaports (Halifax, Montreal and Vancouver), three airports (Dorval‐Montreal, Pearson‐Toronto and Vancouver) and two rail yards (both in the Toronto region) in the study. In total, 196 manufacturing and wholesaling firms were part of the study. Transportation land use is areally most extensive in six of the eight terminal zones. Industrial land use, while significant in area, is not the most dominant land use surrounding any of the terminals. No one socio‐economic characteristic defines the areas around the terminals. Businesses in close proximity to the terminals make rather modest use of the terminals. Less the 30 percent of the interviewed firms used the nearby terminal for their freight shipments; only 3 percent of the firms indicated that proximity to the terminal was a primary locational consideration. The relationship between industrial location and the terminals is more indirect, than direct, based on the high level of accessibility found in the terminal zones.     

COMPETING BY DESIGN, SPECIALIZATION AND CUSTOMIZATION: MANUFACTURING LOCKS IN THE WEST MIDLANDS (UK)

The past thirty years have seen major shifts and improvements in manufacturing productivity, bringing greater output but fewer jobs. As a result, manufacturing is now less visible in "post-industrial" societies. Nevertheless, manufacturing still matters in developed market economies but our understanding of manufacturing has failed to evolve with developments in the management and organization of production processes. This paper explores the lock industry in the West Midlands (UK), a traditional low-tech manufacturing sector. West Midlands lock companies that produced standardized, mass-produced products have experienced intensive competition from low-cost producers. Many of these firms have downsized their operations in the UK. Nevertheless, this is only one response to intensified competition. Lock firms located in the West Midlands are unable to compete on price and have shifted away from the production of mass-produced locks to concentrate on high value-added niche markets. The firms have developed inimitability strategies based around design, expertise, specialization, customization and nearness to market that assist them in maintaining their revenue and profit streams. Niche manufacturers have been far less susceptible and relatively immune to foreign competition and they continue to diversify product ranges by targeting specialist end-users. The emphasis is on producing high-quality locks in small batches that can be produced just-in-time to meet customers' requirements. The continued survival of these lock firms is based upon a strategy that includes the development of product-based competitive advantage combined with locational advantage and supported by efficient, responsive and customer-focused manufacturing processes.     

DOES AGGLOMERATION MATTER EVERYWHERE?: NEW FIRM LOCATION DECISIONS IN RURAL AND URBAN MARKETS*

We test whether commonly used measures of agglomeration economies encourage new firm entry in both urban and rural markets. Using new firm location decisions in Iowa and North Carolina, we find that measured agglomeration economies increase the probability of new firm entry in both urban and rural areas. Firms are more likely to locate in markets with an existing cluster of firms in the same industry, with greater concentrations of upstream suppliers or downstream customers, and with a larger proportion of college‐educated workers in the local labor supply. Firms are less likely to enter markets with no incumbent firms in the sector or where production is concentrated in relatively few sectors. The same factors encourage both stand‐alone start‐ups and establishments built by multiplant firms. Commuting decisions exhibit the same pattern as new firm entry with workers commuting from low to high agglomeration markets. Because agglomeration economies are important for rural firm entry also, policies encouraging new firm entry should focus on relatively few job centers rather than encouraging new firm entry in every small town.     

POLICY-INDUCED DISTORTIONS IN SPATIAL COST SURFACES: THE CASE OF ONTARIO HYDRO

Underlying much of location theory is a presumption that the costs and revenues of enterprise vary from place to place. Such variations describe spatial cost and revenue surfaces to which locational decisions may be referenced. Changes in Ontario Hydro's pricing practices between 1906 and 1981 illustrate the substantial impact of policy on three major sources of spatial variation in costs. In consequence, it appears that locational decisions are increasingly referenced to artificial, policy-distorted cost surfaces. Prospects of achieving a spatially efficient configuration of economic activity appear to be severely compromised.
La «théorie d'emplacement >> se fonde sur la présomption que les dépenses et les revenus d'une enterprise varient selon l'endroit ou elle est située. Le choix de l'emplacement d'un project est affecté par ces variations de couts d'espace et de possibilités de revenus. Les changements dans les practiques des prix d'hydro Ontario entre 1906 et 1981 illustrent les impacts considerables de cette politique sur trois sources principales de variations des couts. Il semble cependant que les décisions basées sur la «théorie d'emplacement >> soient faussées d'autant plus que les couts se révélent irrealistes. Base sur cette théorie les chances de parvenir a une situation économique optimale apparaissent être sévérement compromises.     

Teaching industrial location — secondary data: second best?

Abstract

The study of industrial location has undergone several changes of emphasis. Neo‐classical location theories have been supplemented by studies based on the locational behaviour of individual firms. In turn, the value of these has been challenged by those of a structuralist persuasion. In order to engage in the resultant academic debates in an informed way, students need to know how specific businesses use geographic space. Ways of enhancing their knowledge by linking documentary searches with group presentations and field days are described here, both in general terms and by means of a case study.     

国际物流企业进入中国的路径及空间网络

以国际物流企业为研究对象,考察国际物流企业在中国的进入路径与空间网络构筑规律。首先,划分了国际物流企业进入中国的发展阶段,分析了其结构特征和进入扩张模式,探讨了国际物流企业进入与中国物流政策与市场门槛的关系;然后,重点考察了国际物流企业的中国网络结构,包括网络单元类型分异与功能分异,深入分析了其区位选择,重点包括企业总部和网络单元的区位选择法则与空间规律。最后,以敦豪速递为案例,分析了20世纪80年代以来在中国的网络拓展过程与区位选择的规律。本文有助于进一步考察外资在中国的网络建设与市场拓展规律。     

The rôle of transport in firms' spatial organization: evidence from the Spanish food processing industry

This paper explores the role of transport in the spatial organization of food processing firms in Spain. A framework is developed through the analysis of the various mechanisms by which transport affects firms, and the identification of key elements and recent trends in spatial firm organization. Empirical evidence from interviews suggests that with modern logistic strategies transport is becoming more important. In a time‐based competitive environment, transport plays an important role in efforts to reduce delivery times, and increase reliability and flexibility in deliveries, as well as customer responsiveness. Not only does transport influence firms' location decisions, but also by adjusting to transport improvements firms are found to reconfigure their spatial organization.     

PRICE AND LOCATION CONJECTURES IN MEDIUM- AND LONG-RUN SPATIAL COMPETITION MODELS*

ABSTRACT. This paper examines medium-run and long-run equilibria in unbounded (circular) and bounded (linear) one-dimensional multifirm markets. A price-location adjustment model is outlined that dows simulation of the spatial equilibrium when these firms anticipate reactions from their nearest spatial rivals. Thus, the market equilibrium is derived from the interdependent but atomistic decisions of the competing firms and is not imposed by some outside observer or agency. Ail conjectures are exogenous; the three well-known price conjectures (Greenhut-Ohta, Hotelling-Smithies, and Losch) are highlighted; and the relevant comparative statics are provided.     

THE DETERMINANTS OF LOCALIZATION AND URBANIZATION ECONOMIES: EVIDENCE FROM THE LOCATION OF NEW FIRMS IN SPAIN

The objective of this paper is to analyze why firms in some industries locate in specialized economic environments (localization economies) while those in other industries prefer large city locations (urbanization economies). To this end, we examine the location decisions of new manufacturing firms in Spain at the city level and for narrowly defined industries. First, we estimate firm location models to obtain estimates that reflect the importance of localization and urbanization economies in each industry. Then, we regress these estimates on industry characteristics related to the potential importance of labor market pooling, input sharing, and knowledge spillovers. Urbanization effects are high in knowledge‐intensive industries, suggesting that firms locate in large cities to benefit from knowledge spillovers. We also find that localization effects are high in industries that employ workers whose skills are more industry‐specific, suggesting that industries locate in specialized economic environments to share a common pool of specialized workers.     

New patterns in the locational choice of immigrants in Spain

During recent years, Spain has experienced an important revolution in its migration flows. With the 2008–2013 Spanish financial crisis, the model of economic growth that attracted a large number of foreign people disappeared, and the entry of immigrants for reasons other than economic issues gained relevance. Linked with this phenomenon are the new patterns of locational choice across provinces and the variation in the nature of immigrants. In this paper, we examine the differential patterns and drivers of immigration across Spanish regions before and after the financial crisis. Special attention is paid to the question of how the characteristics of individual migrants influence their locational preferences. To answer this question, we use the Dirichlet multinomial regression model. The results obtained show a sharp change in the locational patterns of Spanish immigrants after the economic recession, confirming that traditional economic incentives are less relevant, while non-economic factors linked with a better lifestyle gain importance. They also reveal that, regardless of the economic conditions, network effects are strong. Finally, and what is probably more important for us, our estimates support the hypothesis that the locational preferences rely on the interaction between the immigrants’ characteristics and the underlying locational features.