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Entrepreneurial location: strategic trend for region development?

Noelio D. Spinola1

Aliger S. Pereira2

Tatiana A. Spinola3

Abstract

This paper discusses the Theory of Location that belongs to the classical school of Spatial Economics, valid until today. Examines the determinants of industries and service activities locations, a topic rarely addressed by the literature. Then makes critical remarks on the policy of industrial location in the state of Bahia, especially over the decades from 1960 to 2000. It is concluded with the direct correlation between the application of the fundamentals theories and the degree of cultural development in a society

Keywords: Spatial economics, Business location; Service economy; Regional development; Bahia.

JEL Classification: R110; R120

Perhaps his greatest enemy is orthodoxy ... is true: the main enemy is precisely the orthodoxy always repeat the same recipe, the same therapy to cure different types of diseases, not admitting the complexity want to reduce it at all costs; while real things are always a little more complicated.

Albert Hirschmann, 1999

Introduction

Thirty years ago Aydalot Philipe, a master of French Regional and Urban Economics said that "the theory of location was in crisis." (1985, p. 50).This is because the theoretical framework that supported the locational studies, notably the contributions of Von Thünen (1783/1850), Alfred Weber (1868/1958),4 Lösch (1906/1945), and Walter Isard (1919/2010)5, the pillars of this theory has a relative reduction of an essential element of its epistemological basis represented by the costs of

1 PHD in Geography. Professor : University Salvador ( UNIFACS). E-mail: dantasle@uol.com.br2 PHD in Urban and Regional Development. Professor: University of Bahia(UNEB) and University Salvador ( UNIFACS). E-mail: p.gaba@uol.com.b3 MASTER in Business Administration. Professor: University Salvador (UNIFACS).. E-mail: tspinola@uol.com.br4 Not to be confused with his brother Max Weber

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transportation, weighing in local decisions had diminished its importance as a function of the benefits of technological progress. In fact you can not compare these days to the time with weight vs. km transported vs. time which had prevailed in the late nineteenth century and early twentieth century, but the assertion that the share of transportation costs in the total cost of the product has been dwindling, it may even be true for cases of products with high added value, but in the case of agricultural commodities, this cost still has great relevance, as shown by Caixeta and Oliveira Filho (1997).

But local decision depends not only on transportation costs, the classics about the subject spoke at length about this.

This approach reflects a Eurocentric view that not necessarily can be generalized to other countries. What happens in practice is the effects of territorial domination by large corporations, transnational and multinational monopolies or oligopolies that divide the space according to their overall convenience of their strategic plans. On the other hand national governments learned the concepts of externalities and began, in their policies, to attract investment, to create "industrial districts" based and supported by fiscal and financial incentives to become irresistible local attractions. Micro and small enterprises given their cultural conditioning operate in a regime of monopolistic competition with high entropy, located where lies the entrepreneur or sometimes in the case of modern segments, large companies are attracted by a remora6 effect. They do not obey the general locational logic. For this reason they have a low survival rate. The choice of a new location is a problem that concerns almost solely to the large company. According to Fortes (2013) and the area covered, the little company operates in their own geographic area and has little interest in the general movement of the branch, using raw materials found near the applying company or work in the easy acquisition and transportation and even in pre-fabricated materials. So the small company manufacturing unit only shifts it is imposed.

Today it can be considered overcame the complaint of spatial economists and geographers concerning the lack of space by mainstream economic theory. The production in the space field is already abundant and compensates for past omissions. What emerged again, this is from 1991/1992, was the focus of the new economic geography (NEG) by Paul Krugman, in his book - said by some as seminal - entitled Geography and Trade. This is because while the traditional economic

5 Considered by many the founder of Regional Science, for his work in dissemination and advocacy of the classics in the field, notably the Germans, and the instrumentation presented in his books, the most important Location and Space-economy: the General Theory Relating to Industrial Location, Market Areas, Land Use, Trade, and Urban Structure. Cambridge: MIT, 1956, and Methods of Regional Analysis: an Introduction to Regional Science. Cambridge: MIT, 1960. Never translated into Portuguese. Isard location theory introduced into the input transport concept defined as "movement of a weighted product unit per unit distance."6 According to FishBase (2013) are small fish of the genus Echeneis (Echeneis naucrates Linnaeus 1758) which have the dorsal fin transformed into a sucker, with which they attach to whales and sharks, benefiting hunting its host and can travel great distances.

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studies analyzed the locational phenomena on the paradigm of diminishing returns and perfect competition, this new approach reversed the key with a new paradigm that focuses on increasing returns to scale and oligopolistic competition. In fact the contribution of Krugman is not unprecedented, at least in relation to competition and the market, since August Lösch, prematurely disappeared in 1945, presented in his book The Economics of Location,7 a complete system of general equilibrium, integrating the space in which, according to Mendes (2009, p.1) the interaction of different firms, in the pursuit of their best locations, not only produced the global optimum, as structured regions economy. With competition, were formed, therefore, the areas of influence of network products and markets, generating the overall balance of locations. It is as stated Leme (1990 p.161/172) "the Lösch model determine the size of the market" best "for the balance of two opposing tendencies: the economy of scale, leading to market growth and the cost of transportation take reducing the market. In its direct form, the model is used for sizing the market selling the finished product and in its reverse form, the model is used to quantify the buying market.” What is interesting is that Krugman does not mention the Lösch in his works.

This article revisits some important points of the Theory of Location, not only in relation to industries, as has been conventional, but also in relation to services, an area that has not received the attention it deserves. Besides this introduction and the conclusion features two sections that discuss different aspects of the topic. The first section deals with the operational aspects of the theory based on the formulations of Weber ([1909] 1929), Lösch ([1940] 1954) and Isard (1956.1960) brilliantly synthesized by Mota (1968) and related to the industry. The second section examines the location of services from Von Thünen ([1863] 2009), Christaller ([1933] 1996), Alonso (1964), Richardson (1979) and Polese (1998). Space limitations did not allow it to detail in the issue related to Industrial Districts Marshalianos and its derivatives innovative and neither Krugman's NGE.

1. The industrial location

It is known from the literature various locational guidance that alone or in combination should justify the installation of an industry in a given territory assuming that in the rational plan, they seek to maximize their results as Lösch (([1940] 1954) advocated, for whom the alternative was to find the place of higher profit, thus rejecting both the focus of lower transportation costs on the location in which the revenue was greater as explained by Weber (([1909] 1929). Assuming any two propositions can consider that companies in the pursuit of its location guide to: raw materials; market, to the availability of labor, to the availability of energy and a kind of no guidance refers to certain activities whose selling price is not determined by the cost of manufacturing.

7 Published posthumously in English in 1954.

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This scheme is enshrined in locational theories presented in textbooks projects. In fact it may not work in various circumstances, one of the state interference by changing the spatial logic.

With respect to location factors, Mota (1968, p.9) teaches that the influence of these as forces of attraction on industrial activity:

(...) Is exercised in practice in two ways: 1º - to "steer" the industries for those geographic points where changes in transportation costs or the costs of industrial processes are more advantageous for companies; 2º - in the sense of "clustering" or "disperse" industrial activity within the geographic space. [...] In practice, such a classification has became quite difficult in view of the variety and number of them, particularly when taking into consideration the various types of industries. A pulp industry or preserved meats, for example, would not be dependent on, only the raw material and the market, but also the existence of industrial water in the region. Industries that use perishable materials depend considerably of the air humidity. Industries whose waste is harmful to the welfare of the community need to dispose of them properly. There are industries, too, which require extensive facilities, have their location subject to the availability and price of land. This is without taking into account those "intangibles" such as social welfare or community attitudes, which ordinarily influence the decisions of governments and entrepreneurs.

Thus, the location of industries is influenced by factors: regional, technical and locational; spacial, and motivational.

The regional factors

Include transportation costs of materials and supplies and finished products and byproducts; costs for labor and energy beyond the range of the market. Dependent on the geographical advantage that possess these factors act as forces of attraction by the degree of industrial competitiveness that favor. In Brazil, see, eg, the relationship of competition among some companies installed "artificially" in the Northeast, compared to its Southeast, which often is deleted as soon as the taxes are no longer subsidized8.

In a more specific approach to each of these factors will be considered then the constituents of so-called regional factors, namely: transport, raw materials, labor, energy and the market.

8 In this regard see Spinola (2009, p.417)

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Transportation costs (ct ) are a function of the weight to be transported ( p) the distance to be traveled (d ) and the freight to be paid( f ). Can be expressed by the following identity: ct=p . d . f

We consider only the weight and the distance from that taken into account the concepts of actual weight and ideal weight.9

When considering the weight and distance in determining transport costs is also necessary to describe other factors that influence them through the tariff system, such as: 1) the types of transportation - rail, road, inland waterway, sea, air etc..; 2) the extent and direction in the use of transportation, which could change the basics of tariffs according to the volume of goods to be transported and / or distances, as well as lead, sometimes called the freight return, 3) the topography, climate and structure of regional transport systems, which affect the bases of rates or cause additional costs of loading and unloading; 4) the quality of the goods themselves to be transported, which may be more or lower transportability, and 5) the degree of dangerousness of the routes to be traveled to greatly affect the cost of insurance.

Transportation costs are not limited, to the freight costs; them are also included complementary factors such as insurance premiums, social security fees, tariffs, taxes etc. That is why, using the terminology of Ohlin (1933), Hoover (1948) replaces the designation transportation costs by switching costs (transfer costs).

In practice, all these complementary factors, which influence on the costs of transportation should be considered carefully by entrepreneurs, especially because of them depends, sometimes the competitive capacity of enterprises depending on their location.

Since transportation costs directly influence the movement of raw materials and products and the costs of labor and energy are essential in the process of transformation, industrial location, according to an economic focus, can be determined from the following algebraic expression: Ctp=f (Ct ,Cmoe ,Cn) Where: Ctp = total cost of industrial production; Ct = total cost of transportation costs (freight);Cmoe = total cost of spending on labor and energy; Cn = other production costs.

From the expression above can be concluded that with the shipping cost more than the total cost of expenditures on labor and energy,(Ct>Cmoe ) the location of industry will be driven by geographical alternatives dictated by costs transportation.

In the opposite situation where the total cost of expenditures on labor and energy is greater than the cost of transportation(Cmoe>Ct ) the location of industry will be driven by geographical alternatives dictated by the costs of labor and energy.

9 According to Mota (1968, p.22) the ideal weight (ideal weight) lens, adjust the rate differences, so as to enable an estimate of shipping costs based on weight and distance. In reality, there discriminatory tariffs for certain products, and if their differences are not set in relation to the weights of the products will become impossible locational analysis according to the model.

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However in cases where the total cost of expenditures on labor and energy were to equal the cost of shipping(Cmoe=Ct ), the location of industry will be driven by geographical alternatives dictated by other costs.

Considering that transportation costs Ctrefer to the freight of raw - materials and finished products, we have: (Ct=Ct1+C t 2), ie , the transportation costs materials (Ct ) decompose into Ct1which corresponds to the transport costs of inputs and Ct2 that represents the transportation costs of finished products and byproducts. Where (Ct>Cmoe ) , industry will be oriented to the sources of raw materials (Ct1) or the

marketing center ( Ct2), according to the predominance of Ct1∨Ct 2 .

Similarly, decomposing the total costs of expenditures on labor and energy (C moe) , we have: (C moe=C mo+C e) being C mo costs of labor and energy costs C e .

Where C moe>C t industry will be oriented to labor or energy, depending on the predominance of one of the two variables, with reference to (C moe) .

Raw materials

 

In the analysis of industrial location are distinguished initially two types of materials used by industries: materials and material ubiquitous located. The ubiquitous materials, according to Weberian terminology, are those that can be found anywhere. This concept is further split into two more. The ubiquity absolute when the material is fed in a certain region, such as wood in the Amazon, and the relative ubiquity as quartz in the Northeast.

The materials located are those that are only found in well defined geographical areas. Generally, mineral or agricultural products correspond to this classification. Example : oil , iron ore , gold , diamonds , cocoa , coffee , sugar cane .

 Weber also classifies materials as raw and pure . The raw materials are those who lose weight (weight- loosing materials) in the production process, either totally or partially, while the pure materials incorporate all its weight to the product. As an example of the raw material can be cited: limestone in cement, wood in furniture, rubber in tire manufacturing. As for the pure materials , the stone used for stamping or silver and gold used in jewelry manufacturing .

In this aspect of distance x weight should take into account the problem of substitution can be considered as a possible alternative choice between: the use of different materials or combinations thereof in the production process . This is the case of Japan and Italy , for example, that replacing the scrap iron ore could install their steel industries without obtaining deposits of this ore . Thus, in addition to the

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geographic occurrence and weight loss in terms of raw materials should consider their dispensability and mobility .

The degree of transportability of goods is the main feature of industrial products that influence transportation costs . This concept , introduced by Hoover (1948) , can be defined as the result (Rtv) which expresses the ratio between the costs of transportation or transfer per unit product (Ctu ) and the unit value of the product ( Vup) . As the expression : Ctu ÷ Vup ↑ ↓ = Rtv determinant of the degree of transportability of the product , if it has a Rtv ↑ high value , should be considered as more transportable . Moreover, perishable products , fragile or hazardous are less transportable from the assumption that, for them, a lower unit value Rtv ↓ .

The determination of the differences of freight by calculating the degree of transportability ( Rtv ↑ ↓ ) is important to gauge the competitiveness of industries located in different regions .

According to Mota (1968 , p.46 )

As differences freight have in mind the variations that cause transportation costs in the price of delivery of goods. These variations are found in the reverse order of transportability of products. And that's why most transportable products are able to be dispatched by the fastest types of transport such as air , despite higher freight . In practice, therefore , meeting the competitive demands prompt delivery of goods depends , greatly , the transportability of the same .

The manpower

When analyzing these inputs that also make up the regional locational factors rests address two questions : 1 - what are the industries that , strategically , should be targeted to regions or areas where it is most advantageous use of labor or energy ? 2 - to what extent these advantages regional ( or local ) may form in differential marketing for industries ?

In the past the concern with determining locational favored costs , even as Weber took as basis the interest of companies in this minimization . Lösch ( [ 1940 ] 1954) , in turn , believed that the corporate goal was to maximize their profits . A point of view which is taken contemporaneously by Krugman (1992 ) with its apology for increasing returns in economies of scale .

That said , today and in the context of an economy that migrates from one paradigm to another locational knowledge based development and use of new technologies , should be inserted in the factor labor the role of human capital as an important locational attractive .

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The different salary levels in the country , despite the minimum wage , establish considerable regional differences . This is more pronounced when working with the concept of human capital . Between regions , for example, the Northeast and Southeast regions of Brazil, there are advantages and disadvantages in the cost of the manufacturing process as a function of the quality of workmanship.

Gains and cost advantages can be eliminated by various cultural and behavioral factors significantly affecting the performance of workers . This occurs in the productivity of labor and its ability ( and willingness ) of learning. The construction companies , for example , prefer to recruit their manpower unqualified (pedestrians ) in the interior ( hinterland ) instead of labor seaside . Empirical studies have shown that while the first forged in the wild is more hardworking and willing to learn, the second , created by the sea , is more " accommodated " and resistant to change .

Salaries debased also contribute to the reduction in the value of labor and lead to labor at the indifference and contempt for jobs with a consequent reduction in their productivity .

Therefore , you should consider whether such regional differences are real , they can be modified and differentials can be eliminated . Often the cheaper labor is also less efficient , or require the completion of additional training costs and to assure him livelihoods , housing etc. .

Industries can be classified as capital intensive or labor intensive . The following symbols express this classification : 1 ) K / Mo and 2 ) CMo / CP where : K = total investment of the company ; Mo = total labor ; CMo = total cost of labor ; CP = total cost of production.

The higher the capital / labor ( K / Mo ) the company will be more capital intensive and greater the volume of investment per unit of employment created . The lower this ratio the greater the intensity of labor . It means that the jobs generated demanded holding smaller investments, ie: they are cheaper. The expression CMO / CP

measures the weight of expenditures on labor relative to total expenditures of the firm. So intensive companies labor tend to have a high rate of participation of BMC in relation to CP .

The number of jobs generated by the industry has substantially reduced over time due to technological progress that has gradually led to the automation of industrial processes. Even so, some industrial sectors, due to the peculiarities of their production processes, still labor intensive. This is the case of industries of garments, shoes and many others where automation failed to replace the manufacturing steps .

The energy

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From the point of view of physics and according to Ferreira (2009 ) , energy is a property of a system that allows you to do work. Energy can take many forms (thermal , kinetic , electrical , electromagnetic , mechanical , potential, chemical , radiant ) , convertible into each other , and each capable of causing well defined and characteristic phenomena in physical systems . The availability of energy is essential for all industrial activities . Thus companies generally only locate where this input is available in quantity and quality .

The main sources of energy used by industry are derived from non-renewable sources like oil , gas , coal and nuclear power and renewable sources such as water , biomass ( biofuels ) , the sun , wind and hydrogen .

Some companies are electro as aluminum and require an offer on high volume . There are currently no industries that do not waste energy in the manufacture of its products . But when consumption is small , the energy cost is less important than the consistency of supply.

Considering the difficulty of transportation, solid fuel ( wood, coal ) had primary importance as a factor in location since the beginning of the Industrial Revolution to the beginning of the preponderance of liquid and gaseous fuels , in the 1960s . These fuels are easily transported by pipelines . Thus new industrial zones emerged at points served by supply lines to these inputs .

The Brazilian environmental policy recommended the location of industries in the vicinity of sources of supply of liquid or solid fuel , to reduce the risks inherent in their transportability across long distances . Consequently , the location in areas closest to the ports is a widely used alternative to receive these fuels with lower transportation costs and better security .

According to Mota (1968 ) regional factors would be primary causes that influence the spatial distribution of industries .

Technical and locational factors

Highlight the impacts on business competitiveness by economies and diseconomies of agglomeration , economies and diseconomies of scale , and economies and diseconomies of urbanization . They have a great capacity to influence the spatial distribution of industries . While regional factors , analyzed above , determine the distribution , with reference to different regions or several areas , technical and locational factors only relate to a particular region or a particular area . For this reason , concern for the concentration or dispersion of industrial activity in a region or area , according to his influence as agglomerative forces or desaglomerativas.

The technical and locational factors play a significant role in location theory insofar as the global market increasingly leans toward a system of oligopolistic competition.

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According to the model of Weber agglomeration refers to spatial concentrations of industry, resulting from the fact that, for a given quantity of production , it is possible to obtain , by the aggregation of different production units at a common place of production, a lower cost per unit of product ( MOTA , 1968 , p.81 ) .

The industrial agglomeration occurs from economies of scale , economies of localization and urbanization economies .

The increased scale of production of an industry in a particular location, remaining unchanged average costs it produces increasing returns . And thus, their effects on driving complementary industries upstream and downstream of its plant constitute the preliminary stage of industrial agglomeration and the formation of a pole of growth produced by her polarizing effects of a technical nature , lace , psychological and geographical as indicated Perroux (1955) and Paelinck (1965). Also contribute to meeting the agglomeration of firms in the same industry in a particular location for convenience logistic or technical nature or as a result of the economic dimension of location.

The economies of scale associated with agglomeration to respond by getting lower production costs enables any accrued transportation costs for the various units , are absorbed by the reduction of costs arising from productivity gains and complementarity .

Turn the location economies refer to the advantages that accrue to several firms in a single industry, locate yourself in one region or in one area for reasons of historical and cultural nature . These savings are well exemplified by the industrial districts "marshalianos" operating in a structure of flexible specialization as was the case of industrial districts in England and is in Italy , according to Marshall ( [ 1890 ] 2001) and Bagnasco (1977 ) among others .

Save location occur when several companies on a single industry , are associated in one area or in one area, " merge " their individual production units of different scales, a single unit of production in larger scale. Actually these various firms by the association , complementarity and integration within a supply chain , according to Porter (1999 ) , form clusters ( Clusters ) that assures ability bargaining ( bargaining ability ) .

One can also evaluate the location economies in view of the so-called " ancillary industries ," which, regardless of their production scales can obtain better economic advantages from a position closer to locational driving industries . In this respect , the analysis of agglomeration seen an empirically fits also in the programming of regional development .

Urbanization economies in the city or metropolis is considered as a location for broader economic dimension with the economic advantages of their externalities . Cities as far as their technical and scientific development can produce great

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locational advantages for industries branch of information technology . One aspect of urbanization economies , which interests , closely, to regional development programs refers mainly to the possibilities of dovetailed the theory of industrial location with urban planning . Indeed, the " urbanization economies " depend , substantially , the very structure of cities , especially regarding the " land use " and facilities of public services such as transport , communications , energy , water and wastewater etc. Since these factors are not considered , carefully , in the urbanization plans or redevelopment , they will become desaglomerativos factors , as a result of a rise in land values and rents, the cost of time , transportation etc. . Hence the practical importance of " zoning " and the creation of industrial perimeters , with appropriate implementations of urban order as necessary conditions for the expansion of industrial cities . Problems of the same nature emerge , too, when you consider the metropolitan areas , keeping in view the best spatial distribution centers or suburban satellite towns.

Consider special factors relating to the availability of climatic resources such as water, climate , land , services and compatibility with industrial waste .

Finally, among the motivational factors are taken into account the tangible factors such as capital resources and credit , government incentives , and the weight of taxes and fees , and intangible factors not measurable , such as the well- social welfare , community attitudes , and psychological, personal and behavioral characteristics of entrepreneurs.

Market

After all, the objective of business is to produce and sell the binomial whose terms are mutually exclusive, so the market is a determinant of the location of any company.

In any market regime, be it an oligopoly or monopolistic competition in a context of globalization, increasingly pronounced depending on, among other factors, the revolution in transportation and technological progress brought by information technology, microelectronics, robotics etc. ., They are overcoming many concepts of location theory constructed at the beginning and throughout the twentieth century.

Despite the delineation of market areas for one or more industrial companies, depending on the location remains the interrelationship between production costs, transportation costs and the price system, the latter being conditioned by the existence, or not, of mechanisms and practices restricting competition. These practices may be horizontal, which reduce the intensity of competition affecting the interactions between business suppliers of the same market, covering, for example, the combination of price, cooperation between competitors and the construction of barriers to entry. Or may be vertical restrictive practices, which limit the scope of the

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actions of two agents that relate to buyers and sellers throughout the supply chain or the end markets, including behaviors such as price discrimination and the imposition of price lists by the manufacturers on distributors.

Location of services

Besides the intangibility two other characteristics of service activities contributes to the complexity of this segment . They are the heterogeneity and the grip. The heterogeneity makes the services understand the activities of the different categories each with its specificity . This is the case , for example , a consulting firm and a restaurant . The first is a pure service because has only labor as an input , while the second is a service that involves work and trade. This is precisely the second characteristic of services , adherence to their trade. All this makes the complex locational studies . Thus each type of service establishes the conditions for your location .

Nevertheless it is noteworthy that the aspect of location has special importance in all activities of providing services . Because they can not store or transport, services requires that they , for the most part , locate close to the customer.

According Christaller ( [ 1933 ] 1996) in the same way that the services have their goods locations conditioned by factors such as the demand threshold and scope of the right.

Means for searching the minimum threshold of demand to compensate for the presence of the supply of a service in a given site . This is to ensure the viability of the offer . Since the scope of the asset corresponds to the distance and the maximum cost that the buyer is willing to go / support , to acquire or use the service . It is the critical limit on the demand side . The range can be considered eminently social , especially when concerns are placed at the level of functions designed to meet basic needs .

The scope of a well should observe the intensity of consumer need . If needs are frequently the scope is reduced because the farther the service the higher the shipping cost that the consumer will have to bear .Examples : bakery and butcher . When needs are rare range is great . The opportunity cost compensates the offset. Examples : specialist , theater .

Figure 1 - Conditioning Factors on demand service

Threshold Demand

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Range of good

Source:Polèse, 2009, p.296.

These threshold concepts and scope of demand vary depending on the type of asset or its function . In general, the location decision process follows a hierarchical undergoes phases. It is the case of education , health , public safety among many others. This means that the location of such services in a particular place depends on the relationship between the threshold of their search and order this service in their hierarchical scale .

According Spinola (2003) not only the economic aspects influence the location of services. Besides the proximity of the target markets, other factors are also important to the location decision of certain services such as those listed below that take into account each stage of the hierarchy of location decisions. Thus, in regional terms are essential preconditions political stability, cultural acceptance of service, the suitability of the climate and temperature service and regional infrastructure. In national terms, are important requirements: political stability , law and the existence of subsidies , the cost of hand labor , the existence of barriers to entry (import ), the availability of infrastructure , economic stability , the consumer market , the availability of technology and communications infrastructure and transport . In terms of cities : proximity to the consumer market ; indicators and their psychographic and demographic trends , availability of skilled labor , infrastructure, energy, communication and transportation , availability of suppliers and support services , community attitudes in relation to service , hand preference workforce management and operational location of the competition. The specific location requires facilities flows of people and goods ; flux density of people bystanders ; psychographic and demographic data of those bystanders and trends ; parking availability, location of

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competitors , cost of facilities , local infrastructure , availability of support services ; expansion potential .

Different types of services give different weights to the various criteria listed .

Service shops , such as banks, restaurants , shops , hairdressing salons , theaters , cinemas , operations that combine high- touch with high volume of customers served, priority should be located close to its customers . Some of these consumer services may be of interest to locate close to their competitors , so possibly resources to be shared ( eg , in food courts of shopping malls , where different restaurants share tables ) or because this way more clients can be drawn .

Other types of services may require rapid communication such as financial services companies , which need to be in touch with markets and investors worldwide . This may cause the location of such company check greater weight to the communications infrastructure at the site selection . Other firms rely on an efficient transportation network , as in the case of carriers and warehouses wholesalers .

According Gianesi and Corrêa (1994 ) generally services companies working in direct contact with the public call for a location satisfactory provision of a range of facilities such as convenient access for guests , well served by public transportation , a visibility that allows good identification. Being seen from the street in a well signposted ; being on the route of watching the traffic volume on the street that may induce a potential impulse shopping , especially when it comes to people traffic , adequate parking, expansion possibilities; environment: the neighborhood should complement the service externalities, such as safety: the site should ensure tranquility clientele ; competition: advantage of economies agglomeration; regulation: lack of zoning restrictions , area of lower taxes and fees.

It is worth noting that there are several ways and techniques of mathematical modeling that can assist in the decision making process of the location highlighting this case submitted on the Bid Rent Function.

Applying the theoretical Von Thünen, William Alonso (1933/1999) built in 1964 a theory known as Bid Rent Theory according to which the price and demand for properties increase with the distance that separates them from the Central Business District named in the original Central Business District - CBD. According to this theory the different users of the space will compete with each other for the nearest location to the city center. This is based on the thesis that both in services and in the retail trade entrepreneurs want to maximize their profits and are more willing to pay more for a property near the CBD and less by the more distant properties in this area. This theory is based on the reasoning that the more accessible area (i.e., the higher the concentration of the customers) businesses to better... Users of buildings all contribute to establish themselves in the most affordable within the CBD. The amount they are willing to pay is called bid rent or rental price. This can usually be

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demonstrated in a “rental supply curve”, based on the reasoning that the space more accessible, usually in the center, is the most expensive.

Commercial enterprises ( in particular large department stores ) , the banks, doctors' offices and clinics , are willing to pay the higher rent in order to locate in the inner core of the CBD . The inner core is very valuable for these users, since it is traditionally the most accessible location for a large part of the population. Volume audience is essential for department stores, which require a considerable turnover.

The shopping centers that combine the advantages of economies of agglomeration and scale, can escape the CBD precisely because they offer the same space in the alternative trading and related services to leisure. The industry, for environmental and operational usually located in the outer core of the city. Are called “perimeter” industrial area where there is more available to plants, which have often externalities created by the Government.

The popular homes tend to be located in the outlying areas of cities where land prices are lower. This trend depends on topographical circumstances. In some places, depending on the landscape of the area (coast, for example) space is disputed by households of higher income classes.

Figure 2 - Statement function Bid Rent and Land Use

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Source: O'Sullivan, 2003, p.6

Figure 2 works on the assumption of a monocentric city or town dominated by its center . According to O'Sullivan (2003 , p.1 ) the city monocentric urban form was dominant until the early 20th century. In monocentriccity, the commercial and industrial activity is concentrated in the central core.

In general the model of monocentric cities no longer exists in large urban centers that have become polycentric with suburban sub-centers that complement and compete with the nuclear area. Nevertheless many of the current small and medium towns are still monocentric. Moreover, except in situations cataclysmic physical structure of cities do not become so quickly. Habits can change but the structure remains, abandoned or retrofitted.

Also O'Sullivan (2003 , p.6 ) in Figure 2 shows that the market corresponds to the city center ( CBD ) where they are located preferentially service activities ( offices ) because they have the highest cost of friction10 being willing to make a bid maximum rent.11 Then come the industries and subsequently residences.

10 The cost of friction is a sum of the factors of transportation and rent.

11 Indicates how the typical firm is willing to pay for for the different production sites in the city

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The slope of the curve (Fig. 2) indicates that the farther from the center, the increase in transportation costs reduces the willingness to pay while it is best to consume larger lots. I.e., there would be a provision to change the increase in transportation costs due to the possibility of taking up more space.

 According to the cited author, business services while providing a wide range of products share two important characteristics. First, gather processes and distribute information. Since the information becomes obsolete quickly, companies’ offices should be able to collect it and distribute it quickly. Second, company’s offices rely on personal contacts in the collection, processing and distribution of information. For example, accountants explain and interpret for clients information in financial reports. The bank managers are those who possibly take loan to assess your borrowing capacity. The investment advisers are financial firms with clients to assess their attitudes toward risk and your investment plans. Despite digital technology have eliminated the need for many personal contacts and meetings is still very important.

In the case of polycentric cities Fujita, Krugman and Venables (1999) demonstrated that the location decision of a firm is independent of the location of families, but rather the location of the other firms in the city. This is the main contribution of this model, as it brings the discussion between agglomeration forces firms to the context of intra-urban spatial structure. The production function of the firm is changed according to the number of signatures that are close to it. This impact on productivity, or agglomeration economies is introduced into the production function by function locational potential.

Polese (1998, p.314) introduced the following equation applies to the service sector:

Where: T = the total cost of a unit sold; H = a unit sold, example: one hour of technical advice; I = units of information necessary for the production of H (counted in hours / man), L = units of skilled labor necessary for the production of H, counted the same way that I; u = unit cost of input in salaries, commissions, fees, etc..; c = unit cost of communication (per hour, per mile) in spending telecommunications, mail, etc. displacements., including the opportunity cost of shifts and meetings; r = the unit cost of recruitment (per hour / man), the period required for seeking and retaining skilled human resources.

The service company to decide its location should seek to minimize the value of this model assumes that the Polese skilled labor (L) and information (I) are the two main scarce resources that will guide the decisions of the office location.

The template set (c) a unit cost of the communication, namely, the value of transport of information. You can imagine it as a function of distance. It is logical to think that the costs increase as it passes the mail on the phone, this and this to the fax or mail. Being direct interpersonal communication which in turn implies different forms of

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travel (walking, bus, car, train, plane, etc..). The cost curve of communication is very sensitive to the frequency of direct interpersonal contacts.

According to Polese (1998, p.316) each input information (I) has a function of communication costs of its own. Are the opportunity costs of those who constitute the majority of the real cost of communication. Communication costs are sensitive to cultural and sociological barriers - language, social differences, religion and others more, represent obstacles similar geographical barriers (physical) in the case of goods. The input information (I) may assume various forms. As is intrinsic to people (L) assume such a position variant (I). A skilled workforce with high KIB, for example, is not as transportable goods, implying costs often high. Sometimes, depending on the greater or lesser need for interpersonal contact, can be replaced by digital information, reducing transportation costs (displacement ) .12

Polese and Morollon (2009 , p.234 ), the triangle of Figure 3 shows a model of locational guidance for service companies . Here the vertices I, L and M correspond to the points where information costs ( I) , of skilled labor ( L ) , and market access ( M ) reach the lowest level . These are points of attraction for locational services firms.

There are three situations according to the nature of the services concerned: first, the activity whose service line is very sensitive to the distance and their production costs are much sensitive to the diversity of information from subcontractors, consider the pole ( I) more attractive. For the exportable services such as: design and production of software ; investment companies and management of securities portfolios, whose service provision does not necessarily require that a person moves and less centrality influences the choices of location , in the second , the companies with more extensive markets , whose products are information intensive and exported on a large scale will address more polo ( M ), ie up the urban hierarchy ( large cities ) as its market extends and its production function is based on an increasingly diverse network of specialist services in the third, if production depends on specialized sources of skilled labor where substitution possibilities are small ( L ) will be the definitive pole location. This is the case of activities with significant technical content in R & D labs and activities that rely on mobile human resources attracted by a specific quality of life - pictures of senior experts, researchers, doctors etc. .

Finally, it’s important consider what services are - those which Santos (1979) referred to as belonging to the lower loop of the city - locational logic which does not meet the criteria herein. Traditional services are market-oriented and the social and historical circumstances of its business, and the technology used to labor-intensive , the primitive level of organization ; capital reduced , the degree of customer relationship

12 This is the great revolution in services caused by information technology. An expert located in Japan may, by teleconference, to attend a meeting in Brazil or anywhere else in the world accessible by WEB.

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intense and often personal , the location in their own homes or makeshift marginal spaces of old buildings of the CBD. Sometimes this location extends the urban roads in tents, often stylized by the government or sponsoring brands.

Figure 3 - Locational orientation of Services.

3 Bahia: industrial location experience

According Spinola (2003) Bahia was not successful with their experience in the field locational. Industrial districts built in the 1960s and 1970s failed to meet expectations of state planners.

Under the locational aspect of the theory does not hold any resemblance to the so-called " industrial districts marshalianos ". This is because they were created in the style of a topdown process where civil society and economic logic space did not have the slightest interest.

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As noted by Haddad (1992 ) , one of the essential conditions for an economic activity that is localized in a region can promote sustainable development and not just a spur growth cycle unstable and enduring is that there is a diffusion of the dynamism of its economic activity to other sectors of the regional economy. It is worth mentioning that this activity is linked properly with the regional productive system in a process of codependency.

Still , according to Haddad (1992 ) the worst situation for the process of development of a region , under the aspect analyzed , may occur when there is a convergence of the following factors related to the implementation of a new economic activity : a) if the region are exporting products of great weight , generated by the new activity, return shipping tends to occur with excess capacity , reducing the amount of freight ; freight on return lower amounts to competitive capacity for imports , inhibiting it is possible to substitute imports local activities aimed at regional demand ( reduced impact on the linkage effects and induced effects ), b ) whether the profile distribution of wealth and personal income of the new activity is not sufficient to cause deconcentration of distribution obtaining ( or even act towards strengthening the standard hub ) will be smaller induced effects to promote market expansion within regional c ) if the capital invested in the new activity originate in other regions , not able to internalize the financial surpluses generated in the new cycle, which "leak " to developed regions ( reduced financing capacity to promote the diversification of regional productive structure ) d ) if the specific tax legislation demonstrates unequivocal interest in under tax ( or exonerate ) the new activities in international trade and to contribute to anti-inflationary policies , there will be negligible tax purposes for the benefit of the region , e) if the new activity has the technological characteristic using few inputs produced in the production process (low index dispersing or backward chaining ) and on grounds locational only occur in the region investments for the first of those processing activities in order to improve the relative weight value for use in transportation infrastructure will also be reduced the dispersion index or forward chaining . ( Haddad , 1992 , p . 10-11 ) .

It was exactly what happened in the planning of industrial location in their districts in Bahia: Ilheus ,Jequie , Vitória da Conquista and Juazeiro and Industrial Centers of Subaé ( Feira de Santana ), and Aratú Copec, latter two in the Metropolitan Region of Salvador ( RMS ) transformed practice in authentic regional enclaves , at most .

It is important to note about these districts two aspects of the country economic system: first, the model of highly concentration income which requires the production system of industries to operate with a high coefficient of location, ie a tendency towards spatial concentration; and second, being the industrial park dedicated mainly to the production of intermediate goods is imposed for its viability in the existence of economies of scale, agglomeration and urbanization, which are only partially an expendable processing industries and mineral processing, whose location is required with sources of raw materials.

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The spatial consequences of such a model is expressed by the concentration of production in a few points of the territory - the metropolises of Southeast - making the former regional capitals lose control over their respective areas of influence, particularly due to changes in transport systems , if they saw transformed into simple intermediate cities , since spontaneously distribution functions are replaced therein by the greater importance of production.

These characteristics of the economic conflict, originally a policy of industrial decentralization as the industrial districts of Bahia, although this was justified by the need to mitigate regional imbalances. The perception of this reality was, incidentally, which enabled the creation of mechanisms for correction of inter-regional disparity of income, having been Sudene (Northeast Development Office) an illustrative example .

In these circumstances, the policy aimed to the creation of secondary poles of growth, complementary and coordinated with major regional centers - in case the industrial centers and metropolitan Aratú Camaçari - did not materialize for lack of touch with economic reality nationwide.

Should be noted, additionally, the negative economic consequences of the deployment time of the interior districts, where already the strategies of economic growth began to show signs of loss of momentum, making the very strength of tax incentives would prove insufficient to generate and attractiveness of new projects .

On the other hand, unless the existence of specific tax incentives and a weak technical assistance, is not always readily available, was precarious, not to say zero, the articulation between the different instruments of industrialization policy put into practice.

For all these industrial districts were victimized by an error in structural design. The goal state would be more compatible to direct them to the transformation of agricultural products and mineral resources available in their areas of influence. But this would involve the redirection process since locational and locational specific micro factors, not always made possible the locational choice for medium-sized cities elected to install the districts .

The lack of a strategy and urban development policy meant to this space was occupied by political voluntarism noticeably marked by authoritarianism which eliminated the integration of inter as well as effective participation in the process of the various segments of society, especially the business.

The spatial point of view, it appears that the macro definition for locational industrial districts Bahia was guided primarily by political and secondarily relied much more on the analysis of the urban hierarchy than the actual occurrence of industrialization and economic possibilities. As the urban network of Bahia is also characterized by excessive growth of the RMS , the demographic volume, the urban infrastructure and

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income level prevalent in medium-sized cities in the interior does not reveal which will allow industrial districts , making it necessary not only rigorous criterion priorities , but also a concerted effort by the government, as occurred for the implementation of the Petrochemical Complex in RMS . This effort , likewise , should include not only the deployment of infrastructure , but also the promotion , agency and participation in nuclear projects , intended to enable the viability of the districts .

The large districts of RMS - CIA and Copec - not fled the rule of their smaller counterparts inside. The first became , according to local media , a "graveyard of industries ." Megalomaniacal idealization of a famous architect, not specialized in this sector , came generalist . A true " industrial bazaar " . And the second , pretentiously named Polo , an " enclave " in failing to produce the polarizing effects expected of him . In this case it is worth noting the observation Paelinck (1965 , p.192 ) " Firstly the polarized regional development theory is not a theory of location ( ... ) . Anyway this is not an easy remedy to open economic regions hitherto delayed . This leads us to refute the idea banal but current pole savior. " Moreover , by commenting the experts in the field, " Polo " was the victim of two serious misconceptions of locational. Contrary numerous technical advice, for differences between the positions of power, settled far from the sea as traditional businesses of its kind and was implemented on top of the largest underground aquifer freshwater RMS Training of San Sebastian which has required considerable efforts to prevent their contamination by petrochemical industrial waste.

So, in terms of locational industrial policy failed Bahia. It could not confront the financial concentration trends of Brazilian companies, a phenomenon that occurred from the 1990s when the advent of the Collor government . This concentration on the formation of oligopolies proceeded to dictate the policy of industrial location making it waterproof when not with strong bargaining power with the state policies for attracting investment - see the case of Ford in Bahia that virtually extorted the state government in terms of advantages for the deployment of a unit in Northeastern Complex.

This financial concentration was well perceived by Krugman (1991 ) in its NGE which explains the location of these companies based on achieving increasing returns on economies of scale and this circumstance is Brazil " well served " . A study conducted by professors Werner Baer , Department of Economics, University of Illinois - USA and Edmund Amann , University of Manchester - United Kingdom in 2011 and disclosed by Silvio Ribas CORREIO BRAZILIENSE of 25/07/2011. According to researchers who analyzed 19 economic sectors of the country there is a strong concentration in 14 of them, and four major companies ( Vale do Rio Doce , AmBev , Telefonica and Braskem ) hold more than 60 % of the market . The branch is less competition with petrochemicals, with a rate of 91 % ( just the dominant Bahia). Then come the automotive sector ( 85 % ) , wholesale trade ( 80 % ) , mining ( 79 % ) and food and beverages ( 76 % ). This disproportionate power not only

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allows these corporations rise in prices above the standard, as dictated their respective locational options.

Conclusion

It is rewarding and frustrating at the same time write about the business location. First because it satisfies the spirit realize human ingenuity that starting from the empirical data processes, analyzes and transforms into theories explaining the observed phenomena and instrumental for future actions. But it's also frustrating to note is the large gap that separates theory from practice. The economy was founded on the principles of homo economicus full of rationality when the real world works in a high degree of entropy, which varies according to the level of civilizations and cultures.

Despite the psychotic traits of Germans can not forget its atavistic tendency for discipline, obedience and method forged under the auspices of the Lutheran doctrine and the influence of German- Slavic mythology. It was this culture that left Von Thünen , Weber , Christaller and Lösch giants locational theory. And in this culture, as well as in Anglo -Saxon where they came from North , Hoover , Hotteling , Isard , and Krugman among others, technical rationality answered by the degree of development reached their countries like Germany , England and the United States America .

However, when passing the Equator Line seems that the degree of entropy increases. In countries like Brazil , for example, late entry into the capitalist system , the application of the principles of location theory is quite fragile. Being a patrimonial society, with strong traces of regulation , the State is omnipresent figure in heavily interfering in the market economy . And the state's presence brings politics and with this, the introjection of irrationality in the economic field, as its principles are based on patronage and physiological principles of an oligarchy that parasitizes the body of the nation.

There are honorable exceptions indicate that especially in the Southeast, precisely what stands out the indicators that characterize the degree of progress.

The fact is that , in Brazil , the state has the power and ability to direct the location of businesses in its territory , bargaining with subsidies , tax exemptions , offers infrastructure , thereby creating a set of artificial advantages distorting location process. This leads companies by location indicators should settle in the region are setting up in the region Z , writing with this in the long term, like say Garcia Marques , the chronicle of a death foretold .

The Brazilian Northeast is replete with examples of this nature , starting with the named Polo Petrochemical Complex or the Caribbean Metals copper metallurgy one

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installed in the same region , whose locations were mistakes made during the authoritarian governments of the military dictatorship ( 1964/1985 ) . But these attitudes are not discretionary privilege of undemocratic governments. In full democracy, under the command of government claiming to be liberal, were installed in the state companies that configure, according to government propaganda, "poles" including a footwear brand that illogically spread to several cities in the state following the order of mayors and deputies influential. Companies are mostly mild footloose whose installation does not involve substantial fixed investments and consequently does not prevent its rapid disassembly and transfer to other locations. The Vulcabras / Azalea dismounted 12 footwear factories in the state putting in unemployment more than 4000 people (SEE 2012). This after the State Government had built for her and industrial sheds infrastructure the entire area, scorning its location in the Industrial District Imborés (Vitória da Conquista ) the infrastructure already settled and better located ( the BR -116 - Rio Bahia ) for reasons of a political party .

It is thus, answering the question that heads this article, as the facts indicate, that theories of location factors to incorporate in strategic regional development depend on a number of conditions, such as : local culture , the political regime, effective market structure and technical training of professionals in the spatial economy .

From the cultural point of view it is expected the existence of a society where rules in practice, not just in speech, a social contract, whereby the sovereignty prevails in society and the political sovereignty of the collective will. (ROUSSEAU [ 1772 ] 2002). It is evident that such a contract presupposes a democratic political system where the state, without abdicating its role as promoter of development, respecting the legitimate operation of the market. In this plan it is necessary to adopt the Administrative Council for Economic Defense (CADE) of a policy that restricts the concentration and stimulating the economy, the government, the strengthening of a structure of monopolistic competition which opposes oligopolies , least minimizing effects of cartelization and collusion. Finally, it is necessary that the State and companies worry about the human capital, the essential instrumentation stock spatially, consistent and technically available.

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