Nonmetropolitan Manufacturing in the United States and Product Cycle Theory: A Review of the Literature

Abstract

During the 1950s and 1960s, rural counties in the United States gained manufacturing employment at a significantly higher rate than did metropolitan counties. From a theoretical perspective, this was unexpected and appeared to contradict existing manufacturing location theory. The product cycle theory was proposed as an explanation, and it quickly gained acceptance. The product cycle model as applied in regional analysis predicts that manufacturing plants will locate in urban areas in early stages of product development to take advantage of highly skilled labor, external economies of subcontractors, and close ties to management. As production becomes standardized, manufacturing will shift to rural areas to take advantage of lower labor costs. There now exists a substantial literature, mostly empirical in nature, concerned with the product cycle theory. This article presents a review and evaluation of this literature in hopes of achieving two goals: the first is to provide a coherent summary of the literature for use by economic development planners. The second is to evaluate the strengths and weaknesses of the product cycle theory and to point out unresolved issues.