Je. Rauch, DOES HISTORY MATTER ONLY WHEN IT MATTERS LITTLE - THE CASE OF CITY-INDUSTRY LOCATION, The Quarterly journal of economics, 108(3), 1993, pp. 843-867
When will an industry subject to agglomeration economies move from an
old, high-cost site to a new, low-cost site? It is argued that history
, in the form of sunk costs resulting from the operation of many firms
at a site, creates a first-mover disadvantage that can prevent reloca
tion. It is demonstrated that developers of industrial parks can partl
y overcome this inertia through discriminatory pricing of land over ti
me, and empirical evidence is provided that they actually engage in su
ch behavior. It is also shown that other aspects of developer land-sal
e strategy can be a source of information on the nature of interfirm e
xternalities.