TY  - JOUR
AU  - Almazan,Andres
AU  - Motta,Adolfo de
AU  - Titman,Sheridan
TI  - Firm Location and the Creation and Utilization of Human Capital
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10106
PY  - 2003
Y2  - November 2003
UR  - http://www.nber.org/papers/w10106
L1  - http://www.nber.org/papers/w10106.pdf
N1  - Author contact info:
Andres Almazan
Finance Department
McCombs School of Business
University of Texas at Austin
Austin, TX 78712-1179
E-Mail: andres.almazan@mccombs.utexas.edu

Adolfo de Motta
McGill University
Bronfman Building, Rm 581
1001 Sherbrooke Street West
Montreal, Quebec, Canada
E-Mail: adolfo.demotta@mcgill.ca

Sheridan Titman
Finance Department
McCombs School of Business
University of Texas at Austin
Austin, TX 78712-1179
Tel: 512/232-2787
Fax: 512/471-5073
E-Mail: titman@mail.utexas.edu
AB  - This paper presents a theory of location choice that draws on insights  from the incomplete contracts and investment flexibility (real option) literatures. We provide conditions under which human capital is more efficiently created and better utilized within industrial clusters that contain similar firms. Our analysis indicates that location choices are influenced by the extent to which training costs are borne by firms versus employees as well as by the uncertainty about future productivity shocks and the ability of firms to modify the scale of their operations. Extensions of our model consider, among other things, endogenous technological choices by firms in clusters and how behavioral biases (i.e., managerial overconfidence about their firms' prospects) can affect firms' location choices.
ER  -