The Geographic Component of Production Technology

In today’s global economy manufacturing companies are continuously re-evaluating their location. In many instances companies decide to relocate some or all of their manufacturing activities to so called low labor cost countries. However, the perception that this is cost effective is not always correct. In many instances the costs of producing in low labor cost countries are highly under estimated. In some instances the costs of the production alone, i.e. excluding logistics cost, are already higher than producing in so called high labor cost countries. Previous research suggests that some of the reasons for these higher costs are related to the particular geographic environment. This study is focused on increasing our understanding of the relationship between geographically determined factors and production technology. Understanding the relationship between geographical factors and production factors allows insight into production location and companies may learn to avoid wrongly moving production away from the developed, high labor cost, countries. For governments; knowledge on geographically determined factors places governments in a better position to selectively nurture specific industries based on their geography-production technology relationship.