The Mexican economy experienced a geographical dispersion of the manufacturing sector localization that favored the northern border region and the states surrounding Mexico City during the period 1980-2003. The result was caused by the previous higher concentration and because of the economic liberalization of the Mexican economy since 1985. A generalized method of moment econometric model was developed to estimate the influence of manufacturing agglomeration, inter-industrial links and distance in the location decisions of the manufacturing firms. The results showed evidence that industrial dispersion has had a negative impact in localization of manufacturing firms, weakening the inter-industrial links and the economies of scale.