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PM
21,2 A study of the factors
influencing the operating
location decisions of
190
small firms
Tim Mazzarol
Graduate School of Management, University of Western Australia,
Crawley, Australia, and
Stephen Choo
School of Management, Curtin Business School,
Curtin University of Technology, Perth, Australia
Keywords Small- to medium-sized enterprises, Location, Small firms, Decision making
Abstract Investigates the purchase of industrial real estate by small to medium enterprises.
Using a three-stage methodology, examined the views of a stakeholder panel, then drew a
sample of 450 firms ranging from micro-businesses to large firms and examined the
importance of various factors likely to influence the attractiveness of an industrial site. A focus
group comprising members of an expert panel was then convened to discuss the findings.
Highlights the subjective decision-making associated with the smaller firms in comparison with
the ``buying centre'' objectivity of the larger firms. Owner-managers from micro and small
firms were motivated by such personal issues as the proximity of the industrial site to their
home, rather than access to transport routes or freight terminals. The findings suggest that
government and private sector agencies seeking to develop and market industrial land need to
devote more time to understanding the needs of small firms. Also discusses implications for
future research.

Property Management
Vol. 21 No. 2, 2003
pp. 190-208
# MCB UP Limited
0263-7472
DOI 10.1108/02637470310478918
Introduction
Among the many challenges facing the owner-manager(s) of a small to medium
enterprise (SME) is the selection and acquisition of commercial or industrial
land upon which to site their business. For many firms, this decision can be
critical to future success and can involve substantial legal and financial
complexity. If the land is to be purchased rather than leased the owner-
manager(s) are likely to be committed to securing debt financing from a bank
and thereby significantly increasing the overall level of risk associated with
their enterprise. Poor selection of a business location can have an adverse
impact on the firm's access to markets, suppliers and labour. Further, once the
owner-manager(s) decide to expand the business, they may be faced with
capacity issues or the additional complexity and cost associated with the
selection, acquisition and management of multiple sites.
Research into the factors influencing the purchasing decisions of SMEs in
relation to industrial land has been scant and varied. Given the importance of
SMEs to the economy and the successful development of industrial estates, it is
surprising that relatively little research has been undertaken in this field. This
paper examines the factors influencing the purchase decision of small and large Operating
firms in selecting industrial land. It draws upon the findings of a survey of decisions of
small and large firms in Australia, as well as previous literature relating to small firms
organisational buying behaviour. Its aim is to investigate industrial land
purchase behaviour among SMEs while drawing some comparisons with their
larger counterparts.
191
Literature review
The decisions relating to the selection and acquisition of property for the
location of a business entity can have a substantial impact on the firm's ability
to establish and maintain a competitive advantage (Porter, 2000). The
suitability of a commercial or industrial site is contingent on how well those
responsible for the decision-making process assess the impact that a particular
location will have on the fulfilment of broader corporate objectives. A suitable
location can greatly enhance a company's market competitiveness with
advantages such as:
. increase in production capacity;
. additional profit;
. business expansion;
. better service to customers;
. increase in stockholders' wealth;
. cost reduction; and
. decrease in manufacturing lead time (Jungthirapanich and Benjamin,
1995).
On the other hand, an unsuitable location can bring about adverse effects on
the firm.

Factors influencing the location decision

Research into the purchase decision associated with industrial land has
tended to focus on the determination of the factors influencing location
selection (Brush et al., 1999; Decker and Crompton, 1993; Haigh, 1990;
Hughes, 1994). Much of this research has focused on the decision-making
processes of large firms, however some attention has been given to how
SMEs make such decisions. For example, a study of 87 Australian
SMEs undertaken by Kupke and Pearce (1998) found the two most
important industrial location factors for owner-managers were being close
to the central business district (CBD) and having direct access to main
roads. This finding appears to be similar to those of large firms. In
comparison with SMEs, which tend to be locally based, large firms are
frequently national or international in scale. As a result of their national and
international coverage, the larger firms tend to be ``footloose'' in relation to
PM industrial or commercial land acquisition. A firm is considered ``footloose''
21,2 when:
. . . t has relatively few constraints and is not tied to specific resources and would have a
relatively wide range of choices from which to select a new location (Decker and Crompton,
1993, p. 85).

192 Jungthirapanich and Benjamin (1995) conducted an extensive review of the

literature relating to locating a manufacturing facility in the USA. Their study
found a hierarchy of eight location factors starting with ``market'' as the most
important, to ``community environment'' as the least important. This is
summarised in Table I. Another study (SHP, 1999), of medium to large firms,

Factor Metrics

1. Market Proximity to markets

Local consumers' purchasing power
2. Transportation Land transportation
Water transportation
Air transportation
3. Labour Availability of general employees
Availability of engineering and science employees
Labour unionisation
Work stoppages
4. Site consideration Cost of land
Cost of plant construction
5. Raw materials and services Availability of raw materials
Availability of business services
6. Utilities Energy generating capacity
Energy cost
Fuel availability
Water availability
7. Government concerns Federal aid to local government
Government's debt
Taxes
State supported employment training
8. Community environment Housing availability
Education
Health and medical consideration
Human services
Security
Environmental consideration
Cost of living
Business climate
Table I. Physical climate
Location factor
hierarchy Source: Jungthirapanich and Benjamin (1995, p. 790)
identified six factors influencing location selection. These, in order of Operating
importance, were: decisions of
(1) accessibility to the CBD; small firms
(2) cost of land;
(3) freeway access;
(4) proximity to customers; 193
(5) attractiveness of area; and
(6) nearness to suppliers (SHP, 1999).
Tong (1979) surveyed 242 foreign-owned manufacturing firms and found that
the most important factors affecting their location decisions were:
. transportation services;
. labour attitudes;
. space for expansion;
. nearness to markets; and
. availability of a site.
The least important considerations were:
. cost and availability of capital;
. nearness to home country;
. proximity to export markets; and
. nearness to operations in third countries.
iIn a survey of 21 West German and Japanese firms located in the Charlotte-
Mecklenburg, North Carolina area, Chernotsky (1983) found that availability of
desirable sites, attractiveness to incoming personnel and market access were the
most important considerations. Less emphasis was placed by these firms on
labour, financial incentives, and access to raw materials and semi-finished goods.
Haigh (1990), in a study of 20 foreign affiliates (mainly Japanese, German
and Swiss) in the USA, highlighted the important role played by state and local
economic development agencies in influencing the decision. In their site
selection process, it typically involved three fairly distinct stages:
(1) the selection of a specific geographic region in the USA;
(2) the selection of two or three states within that region; and
(3) the final decision on a specific site in a particular community, usually a
choice among four or more locations in any given state.
Several studies have also found differences between domestic and foreign
companies in their decision process in the selection and acquisition of
commercial property (Daniels, 1970; Little, 1978). For example, Kahley (1986)
found that foreign investors placed more emphasis on wage differences and the
PM availability of ports than did US firms, while US companies were more
21,2 concerned about fuel costs. On other factors, there were little differences found
between the two groups.
Ulgado (1996) in a study of 319 US and foreign manufacturers in the USA found
that the location decision of foreign companies, when compared with domestic
companies, was influenced significantly more by community environment,
194 logistics and trade concerns. US firms placed greater importance on financial
considerations in terms of taxes, capital and incentives than foreign firms did.
Foreign companies appeared to view their site selection decisions as very long-
term commitments (more than five years) compared with US firms. They also
seemed to take relatively longer time than US companies in making a site decision.
In terms of support, foreign companies seemed more disposed than US firms to
utilise the services of state and local economic development agencies; domestic
companies were more likely to rely on consultants.

Patterns of organisational buying behaviour

In addition to understanding the factors influencing location selection among
firms, attention needs to be given to the actual decision-making process. From a
marketing perspective the purchase or leasing of operational facilities by firms
is a process of industrial or organisational buying behaviour that has been
subject to substantial study (Kotler et al., 1998). Depending on the size of the
organisation, the buying behaviour may involve a multi-phase, multi-person,
multi-departmental and multi-objective process (Johnston and Lewin, 1996). In
this sense the distinction between the large firm and the SME can be drawn.
Smaller firms are less likely to have the complexity associated with the
purchasing process of their larger counterparts. Nevertheless it is important to
understand the process of organisational buying, as it is against this
framework that the SME purchase decision can be compared.
iMuch of the conceptual foundation for the study of organisational buying
behaviour was laid by Robinson et al. (1967); Webster and Wind (1972); and Sheth
(1973). Robinson et al. (1967) introduced a ``buy-grid'' framework that included
``buy-class'' and ``buy-phase'' to predict the purchasing agent's relative influence in
the buying process. This process involves a group of people that form an informal,
cross-departmental decision unit known as the ``buying centre''. The buying centre
includes all members of the organisation who are actively and significantly
involved in the purchase decision process (Mattson, 1988). It is not a fixed and
formally identified unit within the buying organisation. It is a set of buying roles
assumed by different people for different purchases. The number of people in the
buying centre depends on the complexity of the purchase.
iThis model of organisational buying is likely to apply equally to SME and
large firms. However, the size of the firm, and the stage of its development, may
impact on the process. For example, the owner-manager who has little experience
of purchasing commercial or industrial land will be a ``new buy'' situation. Smaller
firms are also less likely to possess the resources to undertake intensive
information searches and option evaluations. Many may have limited geographical Operating
and market parameters. decisions of
small firms
The influence of risk
According to Robinson et al. (1967), variation in organisational buying
behaviour appears to be related to the levels of risk associated with a given
purchase situation (or buy-class). Further, purchase risk in most cases is a 195
function of:
. the importance of a particular purchase;
. the complexity associated with the purchase;
. the uncertainty of the purchase outcome; and
. the need to reach a decision quickly (time pressure).
For the SME owner-manager(s), the level of purchase risk is frequently high as
they are personally liable for the financial risks associated with it. Many will
also lack the resources of their larger counterparts should a purchase decision
prove incorrect, and may have placed themselves into substantial personal debt
to acquire the property.
iJohnston and Lewin (1996) examined the research literature associated with
organisational buying behaviour over a 25-year period. Their study found that as
risk associated with an organisational purchase increases, several activities are
likely to occur. First, the buying centre will become larger and more complex. More
people will be involved in the purchase decision throughout the different stages of
the purchase process and these people will be drawn from a greater variety of
departmental and/or organisational interests. Second, participants in the purchase
decision-making process will be more educated and possess greater levels of
experience in their particular area of expertise. Also, as the importance associated
with the purchase decision is high, participants will be motivated to spend greater
effort and deliberate more carefully throughout the process. Third, sellers who
offer proven products and solutions will be favoured. Product quality and after-
sale service will be of the utmost importance. Price, while always important, will be
considered only after product and service criteria have been fully met. Finally,
Johnston and Lewin (1996) also found that the information search will be active
and a wide variety of information sources will be used to guide and support an
important purchase decision. Buying centre participants may rely more heavily on
impersonal, commercial information sources (e.g. brochures, trade publications),
during the earlier stages of the decision process. However, as the procurement
decision progresses, personal, non-commercial information sources (e.g. outside
consultants, other organisations that have already made similar purchases) may
become more important.
It is likely that SME owner-managers will follow a similar pattern to that
described above in their search, evaluation and selection process. However, the
overall scale of this response is likely to differ in proportion to the size of the
firm. Larger SMEs may be able to develop buying centres, albeit for short
PM periods of time, while they confront the challenge of land acquisition. Such
21,2 buying centres are likely to rely more upon external consultants (e.g. relocation
consultants, real estate agents, lawyers, accountants and bank managers) than
would be the case with larger firms.

Influence of the buying centre

196 The buying centre has been the subject of extensive discussion in academic
research. For example, some researchers have evaluated the relative influence
of members of the buying centre (Bellizzi and Belonax, 1982; Kohli, 1989;
Wilson and Woodside, 1994) and the roles performed by these members
(Gorman, 1971; Jackson and Sciglimpaglia, 1974; Monoky, 1995; Tosh et al.,
1989). In contrast, others have paid considerable attention to the processes
undertaken or experienced by buying centre members. Some of the processes
studied include conflict resolution (Lambert et al., 1986), risk reduction (Puto
et al., 1985), adaptation (Hakansson and Ostberg, 1975) and politicking
(Pettigrrew, 1975). Finally, others have examined the structure of the buying
centre (McWilliams et al., 1992; Spekman and Stern, 1979). However, few
authors have explored these areas with specific reference to industrial land.
Therefore there is a need to collate and adapt general models of industry
buying for the purpose of this research study.
The buying centre includes all members of the organisation who play a role
in the decision-making process for a purchase. According to Webster and Wind
(1972), there are at least five roles that can be played by the participants of a
buying centre, with individuals playing multiple roles. The first of these roles is
that of the ``user'', or those members of the organisation who will use the
purchased item. The second role is that of the ``buyer'', and includes those with
formal responsibility and authority to contract the supplier. A third role is that
of ``influencer'', which includes those who influence the decision process either
directly or indirectly by providing information and criteria for evaluating
alternative purchase decisions. The fourth role is that of the ``decider''. This
includes those with authority to choose among alternative buying actions.
Finally there are the ``gatekeepers'', or those who control the flow of information
(and materials) into the buying centre.
Within large firms, the size of the buying centre may be quite large and the
number of individuals that comprise it may also be numerous. In such
circumstances it is not untypical for all these five roles to be performed by
different people. Members of the buying centre in large firms are frequently
motivated by a complex interaction of individual and organisational goals.
According to Decker and Crompton (1993), there are three sets of actors who
may have an impact on business location decision by large ``footloose'' firms:
(1) executives within the company;
(2) relocation consultants; and
(3) government agencies tasked with economic development.
In the USA, large firms frequently use relocation consultants (or names such as Operating
logistics specialist, site selection specialist or real estate consultants) (Decker decisions of
and Crompton, 1993; Foster, 1999). Such intermediaries assist with the small firms
provision of:
. location studies and financial analyses;
. negotiation of contractual details of lease and purchase agreements; 197
. assistance with the logistic and financial aspects of employee and
facility relocation;
. provision of information concerning the economic base and real estate
factors in potential locations; and
. making recommendations for new locations (Tosh et al., 1989).
In a survey of 362 US companies, which included large manufacturers, real
estate brokers and economic developers, Tosh et al. (1989) found eight
members, noted for their prominence, who were likely to be in a buying centre
for industrial site location. These included (in order of their level of influence on
the final decision):
. the president or chief executive officer (CEO);
. operations manager;
. manufacturing manager;
. plant manager(s);
. marketing and sales manager;
. treasurer or finance manager;
. property manager or real estate manager; and
. transportation manager.
For most SMEs, the buying centre is unlikely to possess this number of people
and will reflect the smaller scale of the overall management team. The role of
the owner-manager(s) will be crucial, but they are also likely to involve others
in the decision. The degree to which other people are involved ± both internal
and external to the firm ± is likely to depend on the complexity of the decision
and the level of experience the owner-manager has with the purchase of
industrial or commercial land. Of importance is the distinction between a
``buying centre'' approach of a large firm, and the more personalised approach
of the small business owner-manager.

Methodology
To investigate the nature of industrial land purchase for SMEs, a three-stage
methodology was designed. In stage one, a series of face-to-face interviews
were conducted with 22 respondents from firms noted for their prominence in
dealing with industrial and commercial property sales and land developments
or as potential purchasers of such land developments. Also interviewed were
PM small business owner-managers and managers from larger firms who had
21,2 recently relocated their business. This stakeholder panel was used to assist in
the development of the survey instrument for subsequent use in stage two.
During the second stage a telephone survey was conducted with the owner-
managers of 450 firms of varying size. In the final stage an expert panel (eight
persons) was assembled comprising land developers, builders and landlords
198 who participated in a focus group discussion of the key findings from the first
two stages. All respondents were drawn from the metropolitan area in a single
Australian capital city.

Stage 1: Stakeholder panel discussions

Prior to holding the interviews with the stakeholder panel, a literature review was
undertaken and a discussion guide prepared. The literature review included
academic research papers, conference proceedings (i.e. Pacific-Rim Real Estate
Society Conferences), and a series of industry reports relating to the purchase of
industrial land. Because of the exploratory nature of the research design, the
purpose of holding the interviews with the stakeholder panel was to assist in the
validation of the literature and identify key issues for inclusion in the field survey.
The 22 respondents comprising the stakeholder panel were selected for their
involvement in industrial land purchase from a variety of perspectives and
included:
. five state or local government planners;
. five land developers specialising in industrial land;
. eight companies (small and large) who had been recently engaged in
industrial land acquisition; and
. four real estate agents with experience of industrial land sales.
Each interview was tape recorded and made use of a common interview
schedule.
These discussions supported the notion that the factors influencing the
selection of industrial land consisted of size of block, price, infrastructure, road
access, location and zoning. Most small firms were likely to seek block sizes of
between 2,000 square metres up to 5,000 square metres. Around 80 per cent of
all land purchase in the industrial market comprising the study area were of
this kind. Investors favour larger blocks (e.g. over 5,000 square metres), which
they later leased to large national or international ``footloose'' firms. For the
larger firms, the key factors influencing the selection decision were, in order of
importance:
(1) proximity to freight terminals;
(2) proximity to major transport routes; and
(3) proximity to trade customers.
The importance of ``intermediaries'' (e.g. relocation agents, property developers)
in influencing the purchase decision of the larger firms was also noted. For the
smaller firms, the price of land was considered more important than for the Operating
larger firms, but also of importance was the land's proximity to services for decisions of
employees (e.g. banks, food service outlets). Important location factors small firms
identified were proximity to customers, bulk suppliers, key employees and the
owner-manager's home.

Stage 2: Survey methodology 199

In the second stage of the study a telephone survey was undertaken using a
questionnaire developed from the literature and findings from the stakeholder
panel discussions. The sample of 450 firms was drawn at random from within
eight key industrial estates within the city metropolitan area. The sample was
weighted to provide a similar proportionality to the actual distribution of the
firms in the eight industrial estates. Although a wide variety of industries were
represented in the sample, all could be grouped into four main types. Just over
half (53 per cent) were engaged in wholesale or retail activities, manufacturers
comprised the next largest group (34 per cent), followed by firms in the
construction industry (11 per cent) and the remainder in transport and storage,
and services. Within the retail trade, the majority (90 per cent) were categorized
as ``personal and household goods'' or ``motor vehicle retailing and services''.
Among manufacturers, the most common types were metal fabrication and
wood or paper fabrication.
Using the Australian official classification of SMEs (ABS, 2000), the sample
used in this study comprised:
. 252 (56 per cent) micro businesses (with less than five employees);
. 150 (33.3 per cent) small businesses (with from five to 20 employees);
. 36 (8 per cent) medium size firms (with from 20 to 200 employees); and
. 12 (2.7 per cent) large firms.
Three-quarters of the sample (45 per cent) firms had only been in their current
location for less than five years, and the majority (75 per cent) had been in their
current industry for less than 20 years. Telephone interviews were held with
either the owner-manager or most senior manager (e.g. CEO) within each firm.
A professional telephone research company undertook all calling on an
anonymous basis.

Survey findings
The survey examined respondent views on the importance of factors relating to
their choice of land in an industrial estate. Eleven question items were used to
measure respondent views with responses recorded on a five-point Likert scale
where respondents were asked to rate their level of agreement or disagreement
for each statement on a rating scale where 1 = strongly disagree and
5 = strongly agree.
Analysis of variance (ANOVA) tests were used to determine any differences
that might exist between the mean rating scores provided by each of the four
PM sub-populations (e.g. micro, small, medium and large firms) to the 11 location
21,2 selection influencing factors. The ANOVA tests measured the hypothesis that
all the means for each sub-population would be equal. Table II shows the
results of this test as well as the mean rating scores for each influencing
variable for the various firms in the four sub-populations.
As shown in Table II, statistically significant differences (at the 0.05 level)
200 were found between the firms and the location-factor influencers of proximity
to customers, freight terminals and the owner or manager's home. Smaller
firms placed significantly more importance on proximity to customers and the
manager's home. By contrast, larger firms placed significantly greater
importance on proximity to freight terminals. Post hoc multiple comparison
tests (Bonferroni) found the large firms significantly more likely (at the 0.05
level) than their smaller counterparts to consider proximity to freight terminals
of importance to their location decision. The issue of proximity to the
manager's home was found to be most significantly different between the micro
and large firms.
The firms were also asked if they were considering relocation from their
existing site within the next three years. A total of 108 firms (24 per cent)
indicated that they were either likely or extremely likely to do so. Of these firms
24 per cent of micro and small firms, and 28 per cent of medium size firms
indicated that they were likely to relocate. By comparison, only 8 per cent of
large firms indicated that relocation would take place over the next three years.
Firms were then asked to indicate the main reasons why they were considering
relocation.
Table III shows the results of the question items dealing with the
respondent's decision to relocate. It can be seen that differences between the
micro, small and medium size firms were relatively minor. The most

Micro Small Medium Large

Influencing factors <5 a 6-20 a 21-200 a >200 a
``My firm's current location is n = 252 n = 150 n = 36 n = 12 ANOVA
important because'' (mean) (mean) (mean) (mean) F

We are close to our customers 3.66 3.62 3.12 2.80 3.014*

We are close to our suppliers 3.08 2.90 2.70 2.90 0.880
It has easy access to key highways 3.48 3.45 3.48 3.22 0.142
It has easy access to major freeways 3.19 3.26 3.48 3.30 0.420
It is close to the CBD 3.10 3.25 3.44 3.10 0.879
It is close to key population centres 3.73 3.61 3.48 3.40 0.889
It is close to freight terminals 2.55 2.52 2.78 4.00 4.250*
It is close to where I live 3.54 3.15 3.32 2.30 4.356*
It is close to where key staff live 3.42 3.45 3.40 2.70 1.236
It is close to amenities 3.76 3.85 4.00 3.40 1.119
Table II. It is close to public transport 3.26 3.17 3.08 2.56 0.436
Factors influencing
choice of industrial Notes: a Number of employees; * Difference between the four sub-populations was found
land by firm size significant at 0.05 levels
 Micro Small Medium Large Operating
Influencing factors <5 a 6-20 a 21-200 a >200 a decisions of
``My firm's decision to relocate is n = 61 n = 36 n = 10 n = 1 ANOVA
because'' (mean) (mean) (mean) (mean) F
small firms

We need to get closer to our customers 2.25 2.22 1.80 1.00 0.716
We need to get closer to our suppliers 2.03 2.14 1.90 1.00 0.527
We need to get closer to key transport routes 2.15 2.47 2.30 1.00 0.984
201
Our current site is too small 2.87 3.39 3.60 4.00 1.723
We would like to own our own premises 3.82 4.00 3.20 5.00 1.333
We have been asked to move by landlord 1.68 1.58 1.60 1.00 0.360
We need to be closer to public transport 2.05 2.00 1.80 1.00 0.407
I want to be closer to where I live 2.51 1.89 1.90 2.00 2.325*
We need to be closer to key population areas 2.44 2.20 2.00 1.00 0.860
We are receiving complaints e.g. noise, dust 1.55 1.56 1.60 1.00 0.351
We need to be closer to freight terminals 1.90 2.00 2.30 1.00 0.679
Table III.
Notes: a Number of employees; * Difference between the four sub-populations was found Factors influencing
significant at 0.10 levels decision to relocate

compelling reasons given for wanting to relocate were the desire for freehold
ownership over their firm's operational facilities, and the need to find a larger
site. ANOVA tests of the differences between the sub-populations in how they
responded to these relocation issues found the desire to be closer to where the
respondent lived to be the only significant factor, and this was only at the 0.10
level. Micro firms were more likely to find this a motivating factor than the
small, medium and large firms.
Respondents were also asked to indicate the size of block and the price range
they would look for when selecting industrial land if seeking a new location for
their business. Prices ranged from under AU$45 per square metre
(approximately US$35 per square metre) to over AU$86 per square metre
(approximately US$66 per square metre). Land block sizes ranged from less
than 1,020 square metres to over 1-2 hectares.
Chi-square tests (Pearson) found no significant differences (at the 0.05 level)
between firm sizes for price of land. However, significant findings (at the 0.05
level) were discovered for block size. Not surprisingly the larger the firm the
larger the block sizes they were seeking, although many small firms expressed
interest in securing larger block sizes.
The sample was separated into two sub-populations, the first seeking land
areas less than 2,500 square metres (76 per cent of the sample), and those
seeking larger land areas. The majority of micro businesses (88 per cent) and
small businesses (72 per cent) indicated they were seeking block sizes of less
than 2,500 square metres. Unsurprisingly the reverse was the case for the
medium and larger firms with 62 per cent of the former, and 100 per cent of the
latter seeking block sizes larger than 2,500 square metres. ANOVA tests were
undertaken to examine how firms of various sizes viewed the importance of the
location selection influencing variables as the size of the land purchase risk
PM increased. Given the relationship between size of block purchased and cost, it
21,2 was decided to measure risk as a function of the increase in block size. The
ANOVA tested the hypothesis that the firms would all respond in a similar
manner to the various influencing factors regardless of their size and the size of
the land purchase they were seeking.
As shown in Table IV, the differences between the firms increased as the
202 size of the land area requiring purchase increased. In purchasing of blocks over
2,500 square metres, the medium and large firms were less likely to be
concerned over the importance of being close to customers than small or micro
businesses. By contrast, the medium and larger firms were more likely to place
increased importance on proximity to freight terminals and population centres
as their need for land increased. Of interest was the importance of securing land
close to home for the smaller firms.
The possibility that these findings may have been influenced by industry-
specific factors was examined using chi-square tests. No significant differences
(at the 0.05 level) were found between firms by industry type (e.g.
manufacturing, construction, wholesale/retail or transportation/storage/other),
and size of block sought. ANOVA tests were also used to examine the effect of
industry type on the 11 influencing variables. This found transport and storage
firms less likely than their counterparts to place a high importance on ease of
access to freeways and large population centres. Proximity to public transport
was also found to be of greater importance to wholesale/retail and construction
firms than the other types of business. A chi-square test of the relationship
between firm size and industry type found micro firms to be significantly more
likely (at the 0.05 level) than the other three types to be in the wholesale/retail
sector.

Stage 3: Follow-up expert panel discussions

In the final stage of the study, an expert panel was convened comprising eight
persons. They participated in a focus group, designed to examine the findings
from the survey and provide in-depth expert assessments of their implications.
Focus groups are a means of eliciting consumer preference and can be used for
exploration of an issue prior to or after conducting a field survey (exploratory
focus groups), to gain an in-depth understanding of human behaviour (clinical
focus groups), or to share the perceptions and experiences of group of people
(phenomenological focus group) (Hines, 2000). While predominantly
exploratory in nature, the focus group used in this study was also able to serve
a phenomenological purpose as well.
All the participants were experienced property developers or real estate
agents specialising in industrial land. Representatives from government
agencies with the responsibility of attracting national and international firms
to industrial estates were also involved. A structured discussion guide was
used and the findings of the literature review and first two stages of the study
were presented to the panel at the commencement of the focus group. All
 Micro Small Medium Large ANOVA
<5 a 6-20 a 21-200 a >200 a <2,500 b >2,500 b
Influencing factors (mean) (mean) (mean) (mean) F F

We are close to our customers 3.66 3.62 3.12 2.80 1.249 3.220*
We are close to our suppliers 3.08 2.90 2.70 2.90 0.561 2.063
It has easy access to key highways 3.48 3.45 3.48 3.22 0.470 0.194
It has easy access to major freeways 3.19 3.26 3.48 3.30 0.160 0.710
It is close to the CBD 3.10 3.25 3.44 3.10 0.299 0.247
It is close to key population centres 3.73 3.61 3.48 3.40 0.713 2.802*
It is close to freight terminals 2.55 2.52 2.78 4.00 0.076 4.250*
It is close to where I live 3.54 3.15 3.32 2.30 4.673* 3.195*
It is close to where key staff live 3.42 3.45 3.40 2.70 0.067 1.753
It is close to amenities 3.76 3.85 4.00 3.40 0.129 1.633
It is close to public transport 3.26 3.17 3.08 2.56 0.610 0.606
b
Notes: a Number of employees; Block sizes sought (sqm); * Difference between the four sub-populations was found significant at 0.05 levels

Factors influencing

block size sought

choice of industrial
land by firm size and
Table IV.
Operating

203
small firms
decisions of
PM discussions were audio taped and general notes also taken throughout the
21,2 process.
The discussions reinforced the distinction ± that had been drawn from the
initial stakeholder panel interviews, and highlighted in the survey ± of the
differences that exist between the small, owner-managed firm and the larger
``footloose'' company in relation to industrial land purchase. SME owner-
204 managers purchased land in their respective industrial estates from a largely
personal perspective and were closely involved in the decision-making process.
Proximity to their homes and such factors as access to amenities (e.g. banks,
restaurants, shops) were all considered of greater importance than more
pragmatic issues such as transport routes or logistics management. Most small
firm owner-managers lacked the resources adequately to assess all the
variables likely to impact on their purchase decision. In contrast to the personal
needs orientation of the small business owner-managers, the decision-making
by the medium and larger firms was viewed as more pragmatic and consistent
with the research findings of Jungthirapanich and Benjamin (1995) in the USA.
As one participant expressed it:
The difference between large and small users is that the small firms want to be near to where
they live. On the other side big companies spend lot of time researching the site. For example
Coles Myer [a large Australian retailer-wholesaler] track each truck ± how many traffic lights
that they have to pass through, the wear on their tyres. They apply this to every site they look
at. They look at ease of access. To get from the freeway to the industrial estate, there may be
six sets of traffic lights ± they would look at this. Also important is how much profit margin
do they sacrifice to relocate? Transport is a big issue for the large firms.

According to the panel, most of the larger ``footloose'' firms that they had dealt
with placed high importance on the three key issues of market, transportation
and labour accessibility. However, it was agreed that some large firms had
highly specific requirements that could only be satisfied by particular locations
and made it difficult to generalise. As another participant, who represented a
government industry development agency, explained:
The key issue we face trying to locate organizations is where they can get advantages. This
could be for national companies as well as international firms. One firm for example, the only
reason we could get them is we could locate them on the water. The final site they selected
was right next to the waterfront. The issue is can we find a piece of dirt suitable for these
people to optimise their requirements?

Although it is vital to understand the location decision-making process of both

large and small firms, the panel discussions revealed that the industrial land
market is frequently comprised of a large number of small and micro
businesses owned and operated by the same people who will need to work in
the site. A problem in much of the industrial land development and marketing
industry is the orientation toward the larger firms. Such companies made a
significant impact on an industrial estate when they relocated into them,
however, the frequency with which these larger firms moved was low when
compared with SMEs. As noted in the literature, the large firms (and even
many medium size ones) operate through a dedicated buying centre when
undertaking industrial land purchase. This provides resources, expertise and Operating
the input of several opinions leading up the final decision. By comparison the decisions of
micro or small business owner-manager is usually operating alone or with small firms
minimal support. Personal issues, such as location to the owner's home,
therefore loom large. It was the view of the expert panel that more attention
should be given to the site location needs and purchasing behaviour of small
firms. 205
Discussion of the findings
The findings from the survey suggest that the size of a firm and the size of its
land purchase are likely to have a significant influence on how it evaluates
industrial land. These findings were consistent with those gathered from the
initial discussions with the expert panel in stage one of the study. Large firms
and their owners are not identical with those who manage them. The
organisational buying behaviour of industrial land by large firms is frequently
a multi-phase, multi-person, multi-departmental and multi-objective process.
Central to this complex process is a group of people that form an informal,
cross-departmental decision unit known as the buying centre. Large firms
seeking to acquire industrial land operate in a highly objective fashion and
allocate substantial resources to the investigation and evaluation of the sites
prior to making the final decision. In many cases, these firms are ``footloose''
and will seek only to lease rather than buy land.
SMEs, particularly the micro and small firms, are more likely than their
larger counterparts to seek closer proximity to customers. This is also likely to
be influenced by the nature of the industry that the firm is in, with retailers
seeking greater access to customers, but this difference cannot be fully
explained just in terms of industry type. As many micro and small businesses
have a relatively limited customer base, this is a critical decision factor for
them. Many industrial estates work like shopping malls; they require one or
two large ``anchor'' firms to establish themselves in the estate, around which a
large number of small firms then cluster. These small firms are usually
suppliers to the larger firms.
The importance of the industrial site being close to the respondent's home
was a prominent difference found in the study between the smaller and larger
firms, and highlights the personal nature of the selection process and decision-
making for the small business. The desire of many large firms to lease rather
than buy the land is frequently in contrast to the small firms whose owner-
managers view the land purchase as a personal acquisition. Small business
owner-managers will be interested in the long-term capital gain of the site if
they choose to purchase it, and may place this above such factors as transport
route access and logistics costs.
For government agencies and land developers, these findings have
importance in terms of where they locate their industrial estates, and how these
estates are configured. Many industrial estates are located for ease of access to
logistics and transport routes, and attempts are made to provide physical
PM separation from industrial and residential land areas. While this may seem
21,2 sensible from the perspective of urban planning, it may not prove so attractive
to small business owner-managers seeking industrial land. Business parks and
industrial estates that are too isolated from the dormitory suburbs where the
owner-managers live may be found unappealing. This was reflected in the poor
performance of a new industrial estate established in the northern suburbs
206 of the city examined by this study. The estate was well designed,
attractively presented and had access to major freeway, highway and rail
transport routes. However, small firms proved reluctant to relocate from older,
more congested areas due to the perception that the new estate was too far for
daily travel.
Developers seeking to design or market industrial estates to SMEs may need
to consider the lifestyle aspects of the estates as much as the commercial
aspects. For example, an estate that is located in close proximity to the type of
residential housing sought after by the owner-manager, with schools, shopping
centres and other amenities, may prove more attractive to SMEs than remote
``industrial only'' estates located on the fringes of the metropolitan area.
Further, the pressure many city administrations place on industries needs to be
considered. Town planners often view older industrial estates as an eyesore
that should be relocated into neater special purpose sites on the edge of town,
allowing for the re-development of the estate for housing. As discussed, this
ignores the personal association the industrial or commercial site may have for
the owner-manager of the smaller firm.

Conclusion and implications for future research

This study has sought to provide additional insights into the decision-making
behaviour of small to medium firms in their selection of industrial land. As
shown, there are differences in the way that micro and small businesses
consider the selection and purchase of industrial land. Such differences appear
to be a reflection of the ``ownership'' of the firm, with micro and small
businesses likely to be independently owned and managed when compared
with their larger counterparts. The study is limited by the size of the sample,
range of variables examined in the survey and the fact that it took place in only
one city and country. Despite these limitations the study does highlight
differences between firms of difference sizes (e.g. micro, small, medium and
large) in terms of industrial land purchase behaviour, and suggests that more
attention should be paid to these differences among governments and academic
researchers. Future research should investigate the problems small business
owners have with finding suitable industrial land and making purchase
decisions. A multiple case study method would offer a suitable methodology
for such research (Yin, 1989), enabling in-depth investigation of the decision-
making process experienced by the owner-managers. It could track the
purchasing process from initial problem identification (e.g. need to relocate)
through actual purchase to post-purchase satisfaction/dissatisfaction. Such
findings will have significance for agencies seeking to develop and market Operating
industrial estates. decisions of
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