ABSTRACT
With international capital increasingly perceived as footloose, many countries have accelerated their entry into what David (1984) has termed “location tournaments” policy adjustments, promotional campaigns, and incentive programs designed to attract investment by multinational firms. Their participation reflects the belief that history matters; that locational advantage, once gained, tends to perpetuate itself. Some location theorists support this view by stressing the importance of agglomeration economies in industrial location. Others, however, contend that location decisions are dominated by classical sources of comparative advantage such as relative wages, market size, and transport costs. Some also suggest that international investors may discount agglomeration benefits, preferring multiple sites as a hedge against risk.
