Article ID: | iaor20081165 |
Country: | United States |
Volume: | 52 |
Issue: | 10 |
Start Page Number: | 1457 |
End Page Number: | 1471 |
Publication Date: | Oct 2006 |
Journal: | Management Science |
Authors: | Alccer Juan |
Keywords: | geography & environment, organization |
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 – determine whether firms collocate in a given geographic market. Unexplored is (1) whether these forces have different impacts on R&D, production, and sales subsidiaries, leading to diverse collocation levels, and (2) how firm capabilities impact collocation by increasing or decreasing competition costs and agglomeration benefits. I explore these questions using the worldwide location decisions of firms in the cellular handset industry. I find that production and sales subsidiaries are more geographically dispersed, and R&D subsidiaries are more concentrated, than a random distribution would predict. When distinguishing firms by their capabilities, I find that more-capable firms collocate less than less-capable firms, regardless of the activity performed.