ABSTRACT
This chapter summarizes some of the empirical evidence in favor of Location theory. It considers the implications these results have for economic development practice. The chapter offers a reinterpretation of classical location theory that is consistent with the strong tendency of growth industries to grow primarily in those metropolitan areas where they already have a strong presence. Location theory as applied to firms' choices of geographical location states that a firm chooses its location to maximize its expected profits. Location decisions thus involve a balancing of demand and cost considerations. When it comes to straight manufacturing of already designed products, high-tech firms do act like traditional manufacturers in making their location decisions. Considerations of feasibility and verifiability cause accounting reports, particularly financial accounting reports that are accessible to outside observers, to be based on identifiable transactions between the firm, its employees, its suppliers, and its customers. The literatures of both urban and industrial economics suggest that localization economies are important.
