Location competition

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Location competition defines the competition between states for factors of production ; the main concern here is that the settlement of companies at a location should bring advantages for the region. In addition to a possible increase in tax revenues, new jobs will be created, which will strengthen purchasing power and possibly attract additional companies. In this way, competitiveness also determines the level of investment.


In the striving for more economic growth and prosperity , states are trying to attract foreign direct investments from foreign companies or to attract highly qualified workers. With these production factors in particular, the question of location is very important. Companies do not build up production capacities in a country in which the infrastructure is inadequate.

States therefore endeavor to increase their attractiveness as an investment location or place of work. New companies enrich a region. The local managers therefore try to make their location as attractive as possible than the locations of the competitors. This can be expressed through possible tax incentives, the provision of effective contacts or additional investments. This location competition is now being held worldwide.

It is generally assumed that companies measure the attractiveness of the investment location, for example, by the qualifications of the workforce, the level of wages, the level of taxes , the quality of the infrastructure or any regulations.

Important factors are a functioning infrastructure and stable conditions. Labor and production costs play an important role in this. For example, large areas of the clothing industry that was previously located in Germany were outsourced to Asia or Eastern Europe in order to have garments made there with lower labor costs. Low wages also led to relocation of production sites in other branches of industry, for example in the automotive industry or in technical companies. The wage costs are not the only decisive factor, however; the availability of well-trained staff or local suppliers, cooperation partners or customers also play an important role.

When a company makes a decision for or against a certain location, various points, so-called location qualities, play a role. There are differences between industrial and service companies. For example, the manufacturing industry is dependent on a sufficient supply of energy and raw materials as well as free foreign trade, which is less important for pure service providers. In an international comparison of 45 industrialized and emerging countries examined, Germany took 5th place in 2010, while it was 14th in 1995.

politically socially cultural economically
  • Social morality
  • Values ​​and norms in society
  • Acceptance / liberality of society
  • Acceptance of technology and technology in the population
  • Language differences
  • Differences in mentality
  • Social acceptance of foreign companies
  • Educational and cultural institutions
existing resources
Geography and infrastructure Suppliers and sales markets Labor market environment
  • Geographical location
  • vegetation
  • climate
  • Danger from forces of nature / elemental damage, e.g. volcano, eruptions
  • Availability of raw materials, energy and other natural resources and their costs
  • Transport systems
  • Research facilities, technological and scientific standard
  • Communication systems and facilities
  • Market size / market growth
  • Sales potential
  • Geostrategic importance of the location (“stepping stone” for further sales markets)
  • Number and availability of suppliers
  • Image of the investment country

Critical voices

Critics complain that especially multinational companies, through the targeted selection of locations with low wages, low tax burdens or environmental protection requirements, contribute to the exploitation of workers and suppliers or to the damage to the health of local residents or the destruction of natural areas.

The globalization process was supposed to increase prosperity around the world, but in some industrialized countries the competition between locations actually resulted in losses, for example due to falling net wages or even the loss of jobs. Production areas were outsourced, which meant that some of the trained specialist staff had to be retrained. Youth unemployment rose in particular in the southern European countries. Poor pay and working conditions in developing countries do not lead to prosperity among the population; child labor is promoted instead of abolished. Global competition leaves smaller resident companies with little chance to market their products. Environmental protection is sometimes neglected because locations with much lower environmental regulations attract investors. The risk of global wage dumping is increasing.


  • Henning Klodt, Klaus-Dieter Schmidt, Alfred Boss: Structural change in the global economy and competition between locations. The German economy on the test stand (=  Kiel studies . Volume 228 ). JCB Mohr, Tübingen 1989, ISBN 3-16-345544-1 ( econstor.eu [PDF]).
  • Horst Rodemer, Hartmut Dicke: Globalization, European integration and international location competition . Nomos, Baden-Baden 2000, ISBN 3-7890-6767-9 .

Web links

Individual evidence

  1. a b c Philip Jürgens: Competition between locations decides on investments. In: Welt Online. April 9, 2010, accessed September 10, 2016 .
  2. Federal Ministry for Economic Affairs and Energy, Public Relations Department: Rösler: Germany is a top industrial location. bmwi.de, October 22, 2012, accessed on September 10, 2016 .
  3. Hendrik Hansen: Politics and Economic Competition in Globalization: Critique of the Paradigm Discussion in the International Political Economy . Springer-Verlag, 2009, ISBN 978-3-531-90996-7 ( books.google.de ).
  4. Globalisierung-Fakten.de: Risks of globalization. globalisierung- Fakten.de, accessed on September 10, 2016 .