Industrial location and competitiveness

The interaction between the extent of location advantages and the intensity of firm competition relative to the size of the market jointly determines the location of industrial activity. Technology, factor endowments, geography, and scale economies are influential for determining location advantages, while agglomeration, variety, proximity, and market access are important for determining the intensity of firm competition relative to the size of the market. This implies, as illustrated below, that sometimes what appears to be a minor change in the balance of the forces determining industrial location, may turn out to have drastic consequences for the global distribution of manufacturing activity. After a brief overview of the strong industrial sectors for a selection of countries, we provide some information on the ongoing process of globalization. Next, we review some of the forces determining industrial location and give recent changes, which are the result of these forces. Finally, we discuss the importance of local interactions between producers, consumers, and firms for determining competitiveness and the location of industrial activity.