Business environment, clustering and industry location

A new paper by Somik V. Lall and Taye Mengistae uses a survey of Indian manufacturing firms to discuss how the local business environment can impact the location of industrial clusters within countries:

…excessive regulation of labor and of other industrial activities reduces the probability of a business locating in a city. Our findings imply that in order to attract industrial activity, smaller or remoter cities need to offer even more attractive policy concessions or reforms in order to offset the effects of their relatively adverse (economic) geography.