The rise, fall and rise again of industrial location theory

In this paper we will argue that new academic fashions, new international institutional arrangements, new communications technology and new developments in data availability, have all renewed the need for a redevelopment of analytical industrial location theory. Our paper will argue that the microeconomic foundations of industrial location theory must now be reconsidered. In particular, the methodological basis of traditional industrial location models needs to be reconciled with recent models of clustering, the new economic geography literature, and also more aggregate systemic levels of analysis. We will argue that in order to do this it is necessary: first, to specify the transactions-cost assumptions underlying these various approaches; second, to adopt broader definitions of spatial transactions costs; and third, to incorporate environmental characteristics within an orthodox location-production type of framework. The insights gained by this integrated micro-level approach will also provide new directions for more aggregate systemic approaches, as well as clarifying the both the strengths and limitations of the currently fashionable models of clustering.