Optimum Producer-Service Location

Presented in this paper is a formal economic model that identifies the optimal intraurban location for a producer-service vendor that caters to the technical needs of spatially dispersed clients in the manufacturing sector. Two major components are incorporated into the model. The first of these describes the oft-cited externalization process among industrial firms, where in-house service provision is selectively abandoned in favor of out-sourcing. The second component describes a vendor location process based on profit maximization, where buyers and sellers are optimally located relative to one another. Normative modeling propositions are then compared with current empirical streams in the literature on producer-service location, the role of manufacturing demand, and the process of selective vertical disintegration among industrial firms. The paper is concluded with a brief research agenda for modeling the intraurban locational behavior of specialist firms in the producer services.