In a spatial economy where oligopolist firms compete in R&D, it is found that geography affects the innovative behaviour of firms, according to the authors. This R&D linkage between demand and competitiveness promotes firms to strategically delocalize to the larger country. As a result, a spatial equilibrium arises with only total or partial agglomeration, but never with symmetric dispersion.
Geography
Link
http://econpapers.repec.org/scripts/redir.pl?u=http%3A%2F%2Fwww.cepr.org%2Fpubs%2Fdps%2FDP5582.asp;h=repec:cpr:ceprdp:5582