ABSTRACT
Space is inextricably bound up with economic activity. This statement is prompted by the rather banal observation that all forms of production require space. But it also derives from the fact that not all geographical areas afford the same opportunities for production and development. The uneven distribution of raw materials, production factors (capital and labour) and demand (final goods markets) requires firms, and productive activities in general, to select their locations just as they select their production factors and technology. And just as the choice of the factors and technology decisively influences the productive capacity of firms and their position on the market, so location crucially determines the productive capacities of firms and, in aggregate terms, of the geographical areas in which they are located. To ignore this dimension – as traditional economic theory does – is to disregard a factor that sheds significant light on the mechanisms underlying firms’ behaviour and economic activities in general, which drive economic development.1
