Industrial Geography: Classification and Location of Industries, the Theories of Weber, Hoover, Lösch, Pred and Smith, World Industrial Regions, Globalisation, Tourism and Knowledge Industries

Alfred Weber's Über den Standort der Industrien (1909; English translation 1929) sought the location that minimises total cost, above all transport cost. He assumed an isolated, uniform country, fixed points of raw materials and market, labour available at fixed points at fixed wages, and transport costs proportional to weight and distance. Materials are ubiquitous (available everywhere, like water) or localised; localised materials are pure (entering the product without loss of weight, such as raw cotton in spinning) or gross (weight-losing, such as coal, iron ore or sugarcane). The material index, MI = weight of localised materials ÷ weight of the finished product, decides the pull: if MI is greater than 1 the plant is drawn towards the materials; if MI is less than 1 — possible when ubiquities add weight, as in brewing and soft drinks — it is drawn towards the market; with pure materials alone the plant can locate anywhere between. With two material sources and one market Weber solved the locational triangle for the least-transport-cost point.

Weber then allowed the least-transport-cost point to be distorted by labour and agglomeration. Around each material source and the market he drew isotims, lines of equal transport cost; adding them gives isodapanes, lines of equal extra total transport cost for moving away from the optimum. The critical isodapane is the one along which the extra transport cost exactly equals the saving in labour cost at a cheap-labour site: if that site lies inside the critical isodapane, the plant moves there; if outside, it stays at the transport optimum. Agglomeration economies work the same way when several firms' critical isodapanes overlap. Worked example: a plant uses 5 tonnes of localised materials and 1 tonne of water to make 2 tonnes of product; MI = 5 ÷ 2 = 2.5 (water, a ubiquity, is ignored), so the plant is material-oriented.

Edgar M. Hoover (Location Theory and the Shoe and Leather Industries, 1937; The Location of Economic Activity, 1948) made Weber's transport costs realistic. Every shipment carries fixed terminal costs (loading, unloading, paperwork) plus line-haul costs that grow with distance, so total freight rates taper — they rise less than proportionally with distance. Tapering rates penalise intermediate locations, which would pay terminal costs twice, and favour locations at the material source or at the market; and break-of-bulk points — ports and transhipment points where goods must be unloaded anyway — become attractive sites for processing. Hoover also brought in economies of scale, differences in production costs and institutional factors such as tariffs and taxes.

August Lösch (The Economics of Location, 1954) rejected least cost as the criterion. Costs are only half the equation; demand varies over space, and a firm should seek the location of maximum profit, where total revenue exceeds total cost by the greatest margin. From the demand cone he derived hexagonal market areas and networks of them (as in central place theory), so his is a market-area or locational-interdependence approach. Allan Pred (Behavior and Location, 1967 and 1969) replaced the omniscient "economic man" with real decision-makers who are satisficers in Herbert Simon's sense of bounded rationality. His behavioural matrix arranges firms by the quantity and quality of information available to them and their ability to use it: those high on both choose near-optimal locations; those low on both may choose locations outside the profitable area and fail; chance and learning move firms around the matrix over time.

David M. Smith (1966; Industrial Location, 1971) joined the least-cost and market-area traditions in a single diagram. A space-cost curve shows how total cost per unit varies across space and a space-revenue curve how revenue varies; where revenue exceeds cost lies a zone bounded by the spatial margins of profitability — an idea he took from E.M. Rawstron (1958). Within the margins any location is profitable, and the optimum is where the gap is widest. This explains why real industries are scattered rather than concentrated at one optimum, how sub-optimal (Pred-type) decisions can still survive, and how government incentives — subsidies in backward areas — lower the space-cost curve and widen the margins to bring industry to places it would otherwise avoid.

The classic world industrial regions are the north-eastern United States and Great Lakes manufacturing belt; western and central Europe (the Ruhr, the Rhine axis, the English Midlands, northern France and the Po valley); the Russian regions of Moscow, the Urals and the Kuznetsk basin; and East Asia — Japan's Pacific belt from Tokyo–Yokohama through Nagoya and Osaka–Kobe to northern Kyushu, and since 1980 the coastal regions of China, above all the Pearl River Delta, the Yangtze River Delta and the Bohai rim, together with South Korea and Taiwan. Old heavy-industry regions have suffered deindustrialisation (the American "Rust Belt"), while growth has shifted to "sunbelts" and to Asia.

Globalisation has transformed manufacturing in less developed countries. Fröbel, Heinrichs and Kreye (1980) named the new international division of labour: multinational firms relocate labour-intensive assembly to low-wage countries while keeping research, design and control at home. Production is now organised in global commodity (value) chains — Gary Gereffi distinguished producer-driven chains (cars, machinery) from buyer-driven chains led by retailers and brands (garments, footwear). The gains have been real — export-led industrialisation in the East Asian economies, China's special economic zones from 1980 (Shenzhen first), Bangladesh's garment industry — and so have the costs: a "race to the bottom" in wages and labour standards (the Rana Plaza collapse in Dhaka in 2013 killed more than 1,100 workers), environmental dumping, and what Dani Rodrik (2016) called premature deindustrialisation, in which manufacturing's share of employment peaks at much lower incomes than it did in the West.

Tourism is among the largest industries in the world. Richard Butler's tourism area life cycle (1980) traces a destination through exploration, involvement, development, consolidation and stagnation, followed by decline or rejuvenation; George Doxey's "irridex" (1975) traces host attitudes from euphoria through apathy and annoyance to antagonism. The shift from mass tourism to ecotourism and the problems of overtourism are current themes. Information and communication technology (ICT) and knowledge-production industries — education and research and development — are the most footloose of all, yet strongly clustered, because they depend on skilled labour, universities and venture capital: Silicon Valley, the Boston region, Bengaluru and Hyderabad, Shenzhen, Taiwan's Hsinchu (the heart of semiconductor manufacturing) and Israel. Spending on R&D exceeds 4 per cent of GDP in Israel and South Korea but remains under 1 per cent in India.