Besides individual private production factors, the production environmental conditions of firms’ location places can increase their real production output. Because of the productivity change that caused by production environmental conditions have not been sufficiently examined in the past, this study intends to establish the local industrial cost function with those conditions included in evaluating the total factor productivity change and its affecting effects to the local industries. The empirical results show that the effects of those conditions do exist and vary with distinct industries and local areas. The development characteristics of local areas are usually related with the development strategies of governments, and therefore our findings probably can offer a useful reference to governments in promoting their development competitive power.