SO CLOSE AND YET SO FAR: INFORMATION TECHNOLOGY AND THE SPATIAL DISTRIBUTION OF CUSTOMER SERVICE

This paper develops a framework to analyze the effects of IT on the regional distribution of work for a homogenous set of Fortune 1000 manufacturing firms. I estimate the regional demand for customer-service representatives by firms using firm-level data. The framework is a discretechoice model in which regions play the role of differentiated products. I allow for flexible substitution patterns between regions by using random coefficients. The latent variable of the model, the firm's profits from customer care, is derived from the premises of a queueing (stochastic) process. The estimated demand structure is used to assess the effects of information technology on customer volume, location choices and cost savings. The results confirm the higher cost sensitivity of IT-intensive firms, but also suggest that the ability to exploit cost differentials is highly firm-specific and that the importance of geographically-localized externalities does not vanish.