Business segmentation and location revisited: Innovation and the Terra incognita of large firms

This paper revisits ideas about the relationships between business segmenta tion and location by articulating the characteristics and roles of large fi rms (LFs). The well known dual model of business segmentation, with its emp hasis on the polar cases of small firms and giant multinationals, portrays a static, exploitative picture of these relationships and does not relate w ell to the complexity of industrial organization or the size distribution o f firms. Explicit recognition of LFs, however, draws attention to the proce sses generating segmentation and to the permeability of segment boundaries in which bargaining and learning are interdependent relationships. A triad model of business,segmentation, based on Porter's ideas of competitive stra tegy, is outlined which reveals the vital role of LFs as innovators. The mo del is illustrated heuristically with respect to the Japanese auto producti on system.