and policy debate for a long time. At the beginning of the 1990s the rise of the Internet brought a new surge of debate …: it was argued that the Internet would free the economy from the constraints of geography (Cairncross, 1997) bringing …

) resources in process innovation. We draw on a rich data set of Internet investments by 86,879 U.S. establishments to examine … decisions to invest in advanced Internet technology. We find evidence of localization of substitution. In particular, we show …