History of
firm
The
firm has a history and this history is likely to have an influence on the
locational outcome of the process. This locational outcome is therefore a
conditional one in the specific nature of these are conditional effects is
important for any theory of firm relocation. Another way to look at this is to
separate the relocation process in to two sequential steps: firm the decision
to move and second conditional upon a move the decision to relocate to another.
A
similar distinction is between push and pull factors of the migration. Location in theory focuses on
the packing optimal locational choice which is about locational factors
determining the attractively of a site for firm location or pull factors.
Relocation theory also takes in to account the first step the push out of the
present location. In this section we will emphasis both elements of relocation.
We follow the classification in three types of location theories given above.
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The
neo- classical approach which is derived from standard classical economic
theory focuses on cost- minimizing or profit- maximizing in theories. General a
Packers principles of the classical a location theory which goes back to Adam
Smith are given in Isard 1956. In Weber’s approach 1929 the transportation
costs of industry inputs and outputs determine a least transportation- cost
surface.
Other
location factors such as labor or external economies determine similar least
cost surfaces. By aggregating the cost surfaces of all location factors a
total- cost surface is derived. In a similar vein a spatial revenue surface may
be calculated. The firm is able to make a profit in any location where total
revenues exceed total costs. By subtracting the total cost surface from the
revenue surface the total area is divided in to profitable and unprofitable
areas.
In
this regard the concept of the spatial margins to profitability for a firm may
be defined Rawstron 1985; Taylor in 1970 Smith, a 1966, 1971; McDermott packing
1973. These margins enclose the spatial area within which the firm is able to
make a best profit. In an equilibrium situation the best optimal location for
the firm is fixed and relocation is not necessary.
However both the firm and the environment may
change over time which may be denoted as firm internal and external factors.
Factors external to the firm are for instance changing factor prices or
changing external effects e.g congestion. These will lead to a changing space
of the cost- and revenue surfaces and hence of the spatital margins to
profitability of the firm.
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