Business Establishment Mobility Behavior in Urban Areas: An Application to the City of Hamilton in Ontario, Canada By Hanna Maoh and Pavlos Kanaroglou 9 th Computers in Urban Planning & Urban Management (CUPUM) meeting University College London, London June 29 th – July 1 st, 2005

Outline Introduction Introduction Theoretical Background Theoretical Background Study Area and Firm Micro-Data Study Area and Firm Micro-Data Mobility Model Mobility Model Overview of Results Overview of Results Conclusions and Future Research Conclusions and Future Research Acknowledgments Acknowledgments

Introduction Sustainable planning of cities via Integrated Land use and Transportation Models Sustainable planning of cities via Integrated Land use and Transportation Models Adoption of the agent-based approach Adoption of the agent-based approach Our research is focused on the change in the distribution of business establishments in the city Our research is focused on the change in the distribution of business establishments in the city Apply concepts from firm demography to model the evolution of business establishment population Apply concepts from firm demography to model the evolution of business establishment population

Evolutionary Process of Business Establishment Population Intra-urban migration In-migrationFormation (Birth) Establishment population at time t Establishment population at time t + 1 Out-migrationFailure (death) ++ –– Mobility Process

Modeling Framework Establishment population t Failure submodul e Establishment population t+1 Newly formed & in-migrating establishments t+1 Mobility submodul e Location choice submodul e Growth submodul e Establishment population t Survivals Establishment population t+1 Newly formed & in-migrating establishments t+1 Migrants Assign a business to a site Size of business t+1 Firmographic Processes Processes Output

Theoretical Background Studies that model firm mobility are rare Studies that model firm mobility are rare Existing studies (Bade, 1984; van Wissen, 2000; Dijk and Pellenbarg, 2000; Brouwer et al., 2004) suggest: Existing studies (Bade, 1984; van Wissen, 2000; Dijk and Pellenbarg, 2000; Brouwer et al., 2004) suggest: –Firms have a strong preference to remain in situ and will only move due to location pressure (deficiencies) –Location deficiencies: change in market orientation, space requirements, technological change, location cost and accessibility problems, labour mismatch, etc.

Location theories and factors influencing business mobility Theoretical framework Key concepts (factors) Variables Neo-classical theory Market situation (Location factors) -Market size -Country of location Behavioural theory Information/Abilities (Internal factors) -Firm size -Firm age Institutional theory Networks (External factors) -Firm growth (positive and negative; merger; acquisition; take-over) Source: Adapted from Brouwer et al. (2004)

Around 500,000 people in 2001 Around 12,000 business establishments and 230,000 jobs in 2002

CBD

Firm Micro-Data: Statistics Canada Business Register (BR) Maintains annual information about business establishments in Canada since 1990 Maintains annual information about business establishments in Canada since 1990 Confidential and can only be used to conduct statistical analysis Confidential and can only be used to conduct statistical analysis Attributes: Establishment size, location (postal code and SGC), SIC code and Establishment Number (EN) Attributes: Establishment size, location (postal code and SGC), SIC code and Establishment Number (EN) BR provides the life trajectory of business establishments over space and time BR provides the life trajectory of business establishments over space and time BR can be used to measure firmographic events such as: the formation, migration, location choice, failure, growth and decline of business establishments BR can be used to measure firmographic events such as: the formation, migration, location choice, failure, growth and decline of business establishments

Small and Medium (SME) Size establishments SME with less than 200 employees is the target of our analysis SME with less than 200 employees is the target of our analysis Account for more than 94% of establishments in 1990, 1996 and 2002 Account for more than 94% of establishments in 1990, 1996 and 2002 Extracted population was constrained to self-owned single establishments Extracted population was constrained to self-owned single establishments Establishments that are part of a chain were not included in the model! Establishments that are part of a chain were not included in the model! However, the extracted sample is deemed appropriate However, the extracted sample is deemed appropriate Around 80% of SME are with less than 10 employees, 93% of which are single owned establishments Around 80% of SME are with less than 10 employees, 93% of which are single owned establishments

Mobility Trends 7% and 2% of 1996 SME establishments relocated and out-migrated by 1997, respectively 7% and 2% of 1996 SME establishments relocated and out-migrated by 1997, respectively 12% and 3% of 1996 total establishment population relocated and out- migrated by 2002, respectively 12% and 3% of 1996 total establishment population relocated and out- migrated by 2002, respectively Mean employment size of relocating establishments is 15 and mean relocating distance is 5 kilometres (1996 – 2002) Mean employment size of relocating establishments is 15 and mean relocating distance is 5 kilometres (1996 – 2002) 50% of moves happened at short distance within the same municipality 50% of moves happened at short distance within the same municipality 91% of out-migrating establishments moved within a radius of 100 kilometres around Hamilton between 1996 and % of out-migrating establishments moved within a radius of 100 kilometres around Hamilton between 1996 and % of out-migrants moved to close by location in the Greater Toronto Area 57% of out-migrants moved to close by location in the Greater Toronto Area

Establishment Mobility Model Objective: Determine if an individual establishment will choose to Stay (S) at its current location, Relocate (R) to a different place within the city or will Leave (L) the city between 1996 and 1997 Objective: Determine if an individual establishment will choose to Stay (S) at its current location, Relocate (R) to a different place within the city or will Leave (L) the city between 1996 and 1997 We use a MNL model to predict probabilities P(S), P(R) and P(L) We use a MNL model to predict probabilities P(S), P(R) and P(L) Mobility is modeled by main economic sector Mobility is modeled by main economic sector

Utility Specification for establishment i Establishment internal factors and location factors are used in the specification of the Stay, Relocate and move utilities Establishment internal factors and location factors are used in the specification of the Stay, Relocate and move utilities Internal factors included: Size, Age, Growth rate and dummies for type of industry industry_d Internal factors included: Size, Age, Growth rate and dummies for type of industry industry_d Location factors included: Geography dummies, a measure for agglomeration economies (Agglom), distance between old and new location (D od ) and a measure for location competition (Lcomp) Location factors included: Geography dummies, a measure for agglomeration economies (Agglom), distance between old and new location (D od ) and a measure for location competition (Lcomp)

Overview of Results Mobility is more prominent among very small and very large establishments as depicted by the Size and Size 2 parameters Mobility is more prominent among very small and very large establishments as depicted by the Size and Size 2 parameters The Age parameter suggests that young establishments are more likely to relocate or out- migrate The Age parameter suggests that young establishments are more likely to relocate or out- migrate The need to grow as suggested by the Growth parameter push manufacturing establishments to relocate The need to grow as suggested by the Growth parameter push manufacturing establishments to relocate

Overview of Results The Growth parameter in retail and wholesale models appear as a proxy for performance since growing establishments were less mobile The Growth parameter in retail and wholesale models appear as a proxy for performance since growing establishments were less mobile The location dummies suggest decentralization and suburbanization of establishments in Hamilton The location dummies suggest decentralization and suburbanization of establishments in Hamilton Mobility is more pronounced among the Central Business District (CBD) establishments Mobility is more pronounced among the Central Business District (CBD) establishments

Overview of Results Agglomeration increases the propensity of inertia. This effect is more prominent among retail and service industry establishments Agglomeration increases the propensity of inertia. This effect is more prominent among retail and service industry establishments The increase in local competition (location pressure) will push the establishment to move long distance The increase in local competition (location pressure) will push the establishment to move long distance Mobility vary by the type of industry as discerned from the specified industry dummies Mobility vary by the type of industry as discerned from the specified industry dummies

Conclusions and Future Research Mobility is not common place in the urban context Mobility is not common place in the urban context Firm internal factors and location factors are important determinants of mobility Firm internal factors and location factors are important determinants of mobility The research emphasizes the value in using data from Statistics Canada Business Register to study firmography in the urban context The research emphasizes the value in using data from Statistics Canada Business Register to study firmography in the urban context More work need to be done to investigate the role of organizational structure on mobility More work need to be done to investigate the role of organizational structure on mobility Future research is still needed to thoroughly scrutinize the relation between public policy and establishment mobility behavior in the urban context; Therefore, enhancing the attributes of existing firm micro data is required Future research is still needed to thoroughly scrutinize the relation between public policy and establishment mobility behavior in the urban context; Therefore, enhancing the attributes of existing firm micro data is required

Acknowledgments We would like to thank Statistics Canada for supporting this research through their (2003 – 2004) Statistics Canada PhD Research Stipend program. We would like to thank Statistics Canada for supporting this research through their (2003 – 2004) Statistics Canada PhD Research Stipend program. We are grateful to SSHRC for financial support through a Standard Research Grant and a SSHRC doctoral fellowship We are grateful to SSHRC for financial support through a Standard Research Grant and a SSHRC doctoral fellowship