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Journal of Economic Integration 2003 March;18(1) :60-104.
Local vs. Global Location of Firms and Industries

Miroslav N. Jovanovi 

UN Economic Commission for Europe
Copyright ©2003 Journal of Economic Integration
Where economic activity will locate in the future is one of the most important questions in economics. Even though advances in technology have reduced the cost of transport, communication and information gathering and processing, hence curtailing the 'distance penalty', local proximity (clusters) of firms that produce similar, competing and/or related products together with supporting institutions still matter. Economies of scale, activity-specific backward and forward linkages (indivisible production), accumulated knowledge and skills, innovation, existence of sophisticated customers and a fall in transportation costs play relevant roles in the 'protection' of clusters and absolute locational advantages of certain locations. 'Global' competitiveness often depends on highly concentrated 'local' knowledge, capabilities and common tacit codes of behaviour which can be found in a geographical concentration (cluster) of firms.
Keywords: Global | Local/KWD> Cluster | Linkages | History | Lock-in
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