Basic Location Factors

Basic Location Factors

Location factors can be subdivided into three general functional categories:

  • Site. Specific micro-geographical (local) characteristics of the site, including the availability of land, basic utilities, visibility (for activities related to retail or prestige such as head offices), amenities (quality of life), and the level of access to local transportation (such as the proximity to a highway or a public transit station). These factors have an important effect on the costs associated with a location.
  • Accessibility. Include a number of opportunity factors related to a location, mainly labor (average wages, availability, level of qualification), materials (mainly for raw materials dependent activities), energy, markets (local, regional and global), and accessibility to suppliers and customers (important for intermediate activities). These factors tend to have a meso (regional) connotation.
  • Socioeconomic environment. Specific macro-geographical characteristics that can apply to jurisdictional units (nation, region, municipality). They consider capital availability (investment, venture capital), various subsidies and incentives, regulations, taxation, and available technology.

The role and importance of each factor depend on the nature of the activity for which locational behavior is being investigated. This explains the highly diverse locational behavior of firms in the global economy. Firms involved in the gathering and processing of raw materials will tend to locate close to the sources of these materials or next to major transfer points such as ports. Firms involved in high added-value activities, namely electronics, will tend to cluster around suppliers and institutions providing qualified labor (e.g. university and technical colleges). Each locational decision is the outcome of different criteria, not always apparently rational. This is particularly the case where non-visible incentives are provided, such as taxation abatement.