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Geographic concentration and decentralisation

ICT can contribute to a loosening of the traditional ties of economic location, leading to some new forms of geographic distribution. In this context, many researchers have identified two complementary forces whereby economic functions tend to seek out new locations if significant cost, efficiency, quality or other advantages can be found:

1. geographic concentration can occur when activities previously dispersed find that the advantages of new forms of geographic proximity outweigh the need for the links existing in their former locations. For example, the benefits of building highly specialised teams involved in R&D, business services, high-tech manufacturing, access to specialised and fast changing knowledge, etc., not just within a given company but, often more important, between similar or complementary companies, can be decisive.

2. geographic decentralisation most typically occurs where dispersed sites can offer labour and/production cost advantages, pools of excess labour supply for activities confronting labour shortage or high labour competition in existing sites, proximity to significant markets or clusters of activity, etc.

It is important to stress that other factors determining geographic location are also at work (such as historical inertia, where activities continue over long periods of time even when their original economic rationale may be diminished, government policy, cultural and personal factors, etc.), and that in any given situation a whole range of complementary and contradictory factors are likely to be in play (Millard, 2002b).

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© 2002, Institute for Employment Studies