A DYNAMIC MODEL OF FIRM MIGRATION

Industrial location theory is one of the oldest branches of regional economics. However, theories of firm relocation and migration are virtually nonexistant. In location theory, once the firm has made its initial site selection the problem is "solved." There is no reference to the possibility that a firm might move, presumably because it is assumed that relocation costs are prohibitive to the firm. This omission ignores the fact that in reality some firms do indeed relocate. The objective of this thesis has been to develop a microeconomic model which explains why firms do move and one which possesses the predictive ability to determine where they might relocate.;The importance of the dynamic model of firm migration is in the fact that it establishes a theoretical framework in which to analyze the relocation phenomenon. By explaining why, when, and where a firm might move, the model provides the theoretical underpinnings for empirical research. Further, by showing the reasons why firms move, the model can provide state development boards with unique firm-specific information which may yield the "swing" factor in the firm's selection of a new location.;The approach used has been to develop a static relocation model by adding a location choice variable to the initial location model and applying comparative static analysis to predict where the firm will move. It is the introduction of time which yields a firm migration model. That is, firm migration theory involves the reassessment of the location and relocation theories in a dynamic framework. Implicit in the introduction of time is the idea that a firm is an ongoing entity. That is, the move decision is an internal planning problem and through this internalization of the move decision, the firm is presented as a timeless ongoing entity capable of controlling its own destiny.