| This dissertation examines the determinants of Internet retailer location in the U.S. in the age of the Internet, which many believe diminishes the importance of geographic location. Does location matter for Internet retailers? This dissertation attempts to answer the question by developing a simple model of one Internet retailer and two states, where the loophole in sales tax collection and shipping costs play central roles in location choices. By applying a conditional logit model of location choice to original data, this study empirically verifies the relevance of key variables found in the model, and describes the overall location pattern of the Internet retail industry. The logit estimates show that Internet retailers are attracted to states with larger population and higher per capita income. While the coefficients on population are close to one across all regressions, the coefficients on per capita income range from three to six. The coefficients on sales tax rate turn out to be significantly negative in some product categories. It is also evident that Internet retailers are heavily concentrated in California and that bipolar clustering of Internet retailers on the West Coast and East Coast is common. I argue that availability of hi-tech labor and information technology in proximity, strong presence of local retailers in Internet retailing, and the loophole in sales tax collection are some of the contributing factors. Geographic location still matters even in the age of the Internet. |
