By sharing infrastructure, agglomerating companies may reduce their individual costs, while JIT supply flows reduce their inventory capital and storage charges. Comparative advantage recognizes that...

By sharing infrastructure, agglomerating companies may reduce their individual costs, while JIT supply flows reduce their inventory capital and storage charges. Comparative advantage recognizes that different regions or nations have different industrial cost structures. Companies use outsourcing to exploit those differences. Transnational corporations distribute their operations based on comparative advantage: manufacturing in countries where production costs are lowest; performing research, accounting, and other service components where economical or convenient; and maintaining headquarters in locations that minimize taxes. Outsourcing and TNC practices get away from the concept of a single optimal location that was the goal of classical location theories.