Conceptual Model of Location of Small Office Firms

Abstract

A conceptual model of location decisions of small office firms is presented. Most firm location models consider all firms in a region; this process usually enables market segmentation only according to the industry classification of a firm. This approach introduces a high level of heterogeneity into the modeling system, since firms’ attributes vary greatly in multiple dimensions. Moreover, most firm location models assume utility maximization behavior and use random utility models. In this conceptual model, an effort is made to reduce heterogeneity through focusing on the relatively homogeneous population of small office firms. Small office firms are also theorized to be satisficers rather than maximizers or optimizers; consequently, more adequate models for the phenomenon may incorporate rule-based approaches rather than random utility techniques. The conceptual model depicted constitutes a first step toward the validation of the proposition that firm location models should be more sensitive to market segmentations and that different methods of decision-making models need to be applied to firms from different parts of the economy.