Behavioural approach to industrial location Location factor Behavioural approach to industrial location

Who can influence the industrial location?

Types of industrialists’ behaviour Rational economic men have the bahaviour of profit maximization People with bounded rationality have the behaviour of profit satisfaction But some industrialists have to consider social factors, political and environmental factors

浙江东阳爆发大规模警民冲突 据报，东阳市政府有意将化工厂和农药厂等污染大户，搬到东阳市南部的画溪镇，但当地居民强烈反对，部份老年居民开始在这些厂里驻扎，阻碍工厂运作。 上周六，市政府打算强行赶走占领工厂的居民，期间政府的车辆压死压伤几名居民，同时又派大批公安人员包围反对兴建工厂的村庄。政府的行动激怒了居民，由于当时天正下雨，在场的官方工作人员都穿著雨衣，数万居民见穿雨衣的人就打，据报很多官员被打伤。由于现场情况混乱，救护人员不敢贸然进入现场救援。 11.4.2005 自由亞洲電台

Weber’s industrial location theory Decision-maker is an optimizer who has perfect knowledge to make a wise decision aims at maximizing profits or minimizing costs also called an economic man

Reality decision-maker is a satisfier who may not have all the information required to make the best choice, i.e. they have bounded knowledge aims at non-material goals/psychic income influenced much by personal preferences and values as by profit

Economic man & optimizer

Behavioural Matrix

Pred’s behavioural matrix

Sole entrepreneurs Financial incentives Personal preferences Risk-taking ability Site preference (home-town effect, family and personal ties, sense of belonging) Amount of perfect information about an industrial location and the ability to analyze it Psychological reasons (mental images of industrial location Chance factor

Home town effect The growth of the Ford Motor Co. in Detroit – Henry Ford (founder) happened to be born there and he set up the industry in his hometown. William Morris’s pioneering of the car industry in Oxford in early 20th century.

Corporate industrialists to maintain certain amount of profit to please the shareholders to minimize the risk and secure status and position in the company

Decision-making process

How does a TNC make a decision?

TNCs Toyota chose to set up a plant at Burnaston near Derby partly because of the co-operation and positive attitude of the local authority.

Government & environmentalists non-economic factors are more important than the economic factors affected by social and environmental considerations

References Michael Raw, Manufacturing Industry: the impact of Change, Chapter 7, Decision-making Roger Hayter, Dynamics of Industrial Location, Simon Fraser University, Chapter 6, The Location of Factories as a Decision Making Process