Adoption and adaptation in the tertiary sector: the changing fortunes of the Guest House Industry, Victoria 1880 - 1975

An important field in economic geography is identification, description and analysis of the processes and pattern of change in the location of industries for the purpose of explaining present and projecting future trends (Krumme, 1969:30). However until recently this topic was generally neglected because, according to Steed (1971C:72), .,location theory has provided some useful insights into the general - location orientation of industries [but] it has proved less valid for the explanation of the process of changes in industry location patterns... The theory of industrial location has traditionally developed on the basis of the economic model of the firm and hence the postulate that the decision maker is rational and has perfect knowledge including certainty as to future conditions. It is assumed that the spatial pattern which emerges from the establishment of plants over time is predicted by the principle that firms act as if they maximized profits for given stated conditions (Townroe, 1969:15). In Weber's model maximum profits are identical to minimum costs; in the interdependence approach and in Losch's theory, they are effectively considered to be the greatest possible sales. When the profit function has been specified, the process of maximization is straight forward and subject to well-defined rules. However investigation of most industries reveals cases of plant location that cannot be explained by obvious economic factors. Empirical studies suggest that personal factors play a dominant role particularly in the case of smaller firms (Tiebout, 1957:80-82). Greenhut attributes the choice of a non-optimal position to the conditions of uncertainty under which business decisions are made in practice. Information is not always available to the organization to permit analysis of the manner in which profits vary over space. Greenhut contends that the selection of a site is therefore dependent to a large extent on the attributes and character of the entrepreneur and suggests that for both individual location decisions and general equilibrium in space ...it is by focusing attention on all these factors that insight into the underlying reality of plant location (spatial economics) is gained (Greenhut, 1956:291). In this view Greenhut was anticipating the increasing popularity of the behavioural approach. Interest is being shown in the way business decisions themselves are actually made. Smith (1971:92) points out that ...the social scientist cannot forever regard the capriciousness of man as an inconvenience, to be assumed away in the theories he constructs..