Urban industrial relocation: the theory of edge cities

Urban economists have recently focused on a 'newly recognised' phenomenon: edge cities. In the first part of this paper we review the model of Krugman and Fujita and the model of Henderson and Mitra regarding this urban pheno menon. The introduction of our model represents a possible third way of exp laining the edge city process. Our objective is to examine the conditions u nder which we can observe a relocation of firms from an urban location to a new extra-urban location. Our methodological framework is based on the mod el of monopolistic competition, which examines the economic relationships a mong firms at each industrial location and the relationships among distinct firms at different locations. These intrarelationships and interrelationsh ips are examined according to the concept of complementarity. Complementari ty in our case combines the notions of (1) firm interaction with cumulative and reinforcing effects, and (2) coordination among firms in local industr ial structures. Our interest in this notion stems from the necessity to exp lain the spatial distribution of firms, particularly the reason why and whe re firms choose to locate in clusters. In our model we analyse this aspect of location in clusters from the point of view of the elasticity of substit ution.