This paper, using the manufacturing industry of Peninsular Malaysia as a case study, reveals that the common assertion of a positive relationship between labour productivity and urban size may have exceptions, particularly in developing economies. Attempts are made to explain such a discrepancy and to examine the problem of regional development strategies and spatial underdevelopment in a Third World context. It is argued that a more careful approach to the conceptualization of spatial structure and processes is needed if it is to contribute to the formation of a regional development theory from which appropriate regional development strategies can be derived.
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