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AbstractThis paper considers the estimation of the geographical scope of industrial location determinants. While previous studies impose strong assumptions on the weighting scheme of the spatial neighbour matrix, we propose a flexible parametrisation that allows for different (distance‐based) definitions of neighbourhood and different weights to the neighbours. In particular, we estimate how far can reach indirect marginal effects and discuss how to report them. We also show that the use of smooth transition functions provides tools for policy analysis that are not available in the traditional threshold modelling.