Corporate plant location under uncertainty: Divergence between the interests of ownership and management

This paper expands current knowledge of location decision-making under uncertainty by analyzing instances where the corporate goal of profit maximization diverges from the managerial decision-maker's goal of maximizing personal profit. With illustrations based on alternative decision-making criteria, the paper demonstrates that a corporate manager acting in his own self interest may select a plant site that does not maximize corporate profits. The trend for US corporations to select suburban locations, despite the cost advantages of older urban areas, is illustrative of this divergence between the objectives of ownership and management.