Department of Economics

Not So Footloose after All: Locational Behavior of Information Technology Establishments

Department of Economics

University of Delaware

Working Paper #2005-15

Not So Footloose after All: Locational Behavior of Information Technology Establishments

in the United States, 1989-1998

William R. Latham


                   Among the benefits that technology can provide is greater connectivity among economic agents.  Commerce now occurs across great geographic distances at nominal transaction costs.  Technology, therefore, seems to have the potential to unshackle economic agents from their suppliers and customers, enabling them to seek out alternative locations without being at a comparative disadvantage to other businesses.  This possibility has spawned the “death of distance” notion that distance no longer matters, that technology has made all locations equal.  Such thinking has been encouraged by phenomena such as the widespread “outsourcing” of many back-office and service functions by U.S. firms and/or the location of many of these functions inIndia and other foreign countries.

In this paper we address the following question, “Is there convincing evidence to support the thesis that, for firms in the information technology industry, distance is dead and they truly are footloose in choosing their locations?” Using a data set that only recently became available and which contains establishment births by county, this paper presents evidence that firms in the information technology industry respond positively to the economies found in metropolitan areas.  This implies that the characteristics of such areas relative to those of non-metropolitan areas (population size, educational attainment of the labor force, and various kinds of agglomeration economies) make them attractive locations for information technology establishments.  Therefore we find that, at least for the information technology industry, distance is not dead.



KEY WORDS: industrial location, distance, footloose, information technology, establishments births, agglomeration economies


The Lerner College is home to a state-of-the-art financial trading facility, the $1.4 million student-led Blue Hen Investment Fund, a student-managed restaurant and hotel, a high-technology development center of a global bank and a start-up experience for students with new business ideas.

Lerner College faculty - like Anu Sivaraman, who is among Social Media Marketing Magazine’s “Top 100 Marketing Professors on Twitter” and’s “Top 50 Marketing Professors on Twitter” - are thought leaders who command attention from influential business audiences, economists and policy makers.

All Lerner College departments offer experience-driven learning and emphasize evidence-based analytics methods to enrich the student experience. Here, finance students visit New York City’s financial districts for a first-hand look at markets trading and to meet with UD alumni.

Charles W. Horn, AS75, and wife Patricia, recently made a $3 million commitment to enhance and expand entrepreneurial studies.

  • Alfred Lerner College of Business & Economics
    303 Alfred Lerner Hall  •  Newark, DE 19716  •  USA  •  ©