Innovation, Agglomeration and Regional Competition
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Innovation, Agglomeration and Regional Competition

Edited by Charlie Karlsson, Börje Johansson and Roger R. Stough

This book provides a state-of-the-art overview of current research on regional competition and co-operation. Developing our current understanding of the new role of regions and their behaviour, this book addresses questions such as: How and why do regions compete? How does competition between border regions operate? Which regions are successful and which regions fail? What are the implications of regional competition in terms of resource allocation, the location of economic activities and the distribution of incomes? The book illuminates a number of critical theoretical end empirical issues relating to the competitive and cooperative nature of regions, as well as highlighting a number of new case studies from a variety of countries.
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Chapter 11: Location of New Industries: The ICT Sector 1990–2000

Börje Johansson and Thomas Paulsson


Börje Johansson and Thomas Paulsson INTRODUCTION 11.1 Location of Firms and Establishments in New Industries The study of how economic activities are located has a long tradition, and in retrospect one can conclude that the development path of ideas is indeed dwindling. A milestone along this path is the theory of resourcebased comparative advantages that springs from Ricardo’s suggestion that the available technology differs between regions (countries). This idea was transformed by Ohlin (1933) into a theory of how resource abundance in a region provides the region with comparative advantages that affect location. The resource abundance argument has been further exploited in models that focus on localized knowledge as a production factor (for example Andersson and Mantsinen, 1980; Romer, 1990). In the current presentation regional knowledge resources are present only implicitly, embedded in two types of agglomeration externalities. In Weber (1909) the perspective is shifted completely to consider the interaction costs between supplier and customer as the factor influencing where firms locate. In this context an individual firm may consider how its location affects the costs of inputs to its production (supply) activity, and it may also consider how its delivery price is influenced by the accessibility to customers buying its output. Thus, in a Weber type of model we may consider how increasing distance to input suppliers raises input costs, and how increasing distance to customers reduces net returns from sales. From these two phenomena one can derive two location externalities. In the von Thünen (1826) class...

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