A Portfolio Analysis of Manufacturing within the U.S. Urban System

There has recently been a restructuring of manufacturing activity within the American space-economy. The traditional manufacturing belt of the U.S. has lost employment, while manufacturing growth has occurred in the Sun Belt region. However, neoclassical growth theory only partially explains this spatial economic shift. A dualism of capital intensive and labor-intensive industries in the Sun Belt and multidirectional corporate control among regions suggests that an alternative framework is needed to explain this geographic industrial diversification. This article employs portfolio theory as its framework because many corporations seek to reduce production risk through management of an investment portfolio. A spatial analysis of urban manufacturing areas for the business cycle 1971-1976 suggests that although the industrial heartland is currently in decline, urban areas within this region are part of an efficient geographical portfolio. For firms that choose a risk aversion strategy, the current outflow may become more stable when risk reaches equilibrium.