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Globalization and the Diffusion of ICTs Impact on the Importance of Geography and Locations of Firms

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Document pages: 21 pages

Abstract: At the dawn of the 21st century, the world ever seems a smaller place: transportation costs continue to fall as planes, trains and automobiles enable efficient transit between most locations; ICTs provide virtually instantaneous and unlimited information flow around the world; and the world’s major corporations operate increasingly on a global scale (Balue, 1977). One might reasonably ask whether location really matters anymore. Indeed, a Senior Editor for the Economist has gone so far as to proclaim the ‘death of distance’ (Cairncross, 1997). Despite these trends (perhaps even because of them), the last few years have witnessed a rapid rise in interest in geography and locations of firms. Economists, sociologists and strategy scholars have become particularly interested in the advantages that co-location may offer firms (e.g., Lucas, 1988; Krugman, 1991 and Porter, 1990). All argue that while the importance of distance declines, strategic interest in location of firms appears greater than ever. The importances of economies of agglomeration have been increasing too. Therefore, this paper argues based on the main points that even if the wave of globalization and diffusion of ICTs have made the world economic activity look a lot like borderless, but the geography and locations of firms are still very important.

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