The Adam Smith Address: Location, Clusters, and the "New" Microeconomics of Competition
The new microeconomics of competition is contained in frameworks that structure the complexity of competition and inform managers of choices that they must make. The role of location has shifted from factor endowments and size to productivity growth; factor inputs are abundant and accessed via globalization. To increase productivity, factor inputs must improve in efficiency, quality, and ultimately specialization in particular cluster areas, which are critical masses of companies in a particular location. Governments have significant roles in creating an environment that supports rising productivity, and companies have an agenda that stems beyond building offices or factories. This paper also relates the impacts of this approach to contemporary policy issues, particularly the environment and inequality.
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