The agency of the (world) city in determining MNCs location Jennifer Johns+ University of Liverpool Jon Beaverstock+ University of Bristol + both are delighted to report they are Economic Geographers by training!!

Introduction World cities World cities in the division of labour World cities and MNC HQ preferences World city hierarchies World cities and international finance World cities and the ‘war for talent’ The agency of the city –‘Location’ = the city in the ILO paradigm –Strategic sites for production & consumption –Relational urban agglomeration economies

The agency of cities in locational preferences Key protagonists (1)World city theorists (Geographers, Urban Studies) (1)‘Basing points for capital’ (Friedmann, 1986) (2)Strategic sites for command and control (Sassen, 1991) (2) Urban sociologists and economists (1) Economy of cities (Jane Jacobs), plus, Krugman, Storper (2) Human capital and the city (Glaeser et al, 1991) (3) IB specialists (1) Location = urban in the ILO (Dunning, various) (2) World cities and the locational strategy of MNCs (Goerzen, Asmussen and Nielsen, JIBS)

World cities - definitions “… great cities in which quite a disproportionate part of the world’s most important business is conducted” (Peter Hall, 1966). “... world cities... [are]... [t]ightly interconnected with each other through decision-making and finance, they constitute a worldwide system of control over production and market expansion” (John Friedmann and Goetz Wolff, 1982).

World cities - definitions “... a combination of spatial dispersal and global integration has created a new strategic role for major cities... these cities now function... as highly concentrated command points in the organization of the world economy... as key locations for finance and for specialist service firms... as sites of... production of innovations... and... as markets for the products and innovations produced” (Saskia Sassen, 1991).

World cities in a division of labour Knox et al, 2008

Main locations of 198 non-US corporate HQs in 1978 Metropolitan areaNumber of TNC HQs Tokyo30 London28 Osaka13 Paris12 Rhine-Ruhr10.5* Randstad Holland3.5* *HQ in two places Cohen (1981)

Hierarchies of MNC HQs (see Cohen, 1981; Dicken, 2007)

The world city hierarchy Friedmann, 1986

Top ranking city locations for Fortune Global 500 companies, 2006 and RankCityNo. of Global RankCityNo of Global500 companies 1.Tokyo511.Tokyo52 2.Paris272.Paris27 3.Beijing263.New York24 4.New York184.London23 5.London155.Beijing15 6.Seoul116.Seoul9 7.Madrid97.Toronto8 =8.Toronto7=8.Madrid7 =8.Zurich7=8.Zurich7 =8.Osaka7=10.Houston6 =8.Moscow7=10.Osaka6 =8.Munich7=10.Munich6 13.Houston6=10.Atlanta6 =14.Mumbai5=14.Rome5 =14.Atlanta5=14Dusseldorf5 =14Amsterdam5 Source: Authors’ adaptation from CNNMoney.com (2009)

World cities & international finance

The agency of world cities in a world economy Locational preferences for: 1. Internationalization of capital –Location of corporate HQs –International trade (maritime ports) –Banking, finance and business 2. Internationalization of services –International financial centres 3. ICT, transportation and communication –Communication, ICT, internet, infrastructure –Airline travel (airports) e.g. Warf 4. Labour –Global talent and the highly-skilled –Low and no-skilled, illegal 5. Culture 6. Global governance

Saskia Sassen’s (1991) ‘Global city thesis’ The concept of the global city has emerged because of two interrelating factors (1) the globalization of economic activity –Deindustrialization of manufacturing –Internationalization of banking and the producer service sector –‘Management, control and coordination’ in cities (not regions!!) –New International Division of Labour (concentration of decision-making in cities) (2) the organizational structure of banking and the producer service and finance industry –Specialization, concentration, intensity (agglomeration) “…obtain agglomeration economies when they locate close to others that are sellers of key inputs or are necessary for joint production of certain service offerings” (Sassen, 1991)

Locational Strategy of a Global Law Firm: Clifford Chance 1972 Amsterdam 1802 London 1962 Paris 1976 Dubai 1980 Madrid Hong Kong 1981 Singapore 1968 Brussels Moscow 1992 Warsaw 1993 Barcelona Milan Rome Budapest Shanghai 1996 Bangkok 1995 Prague 1997 D’dorf Padua 1990 Frankfurt 1986 New York Coward Chance and Clifford-Turner merger 2000 Luxem- bourg Beijing 1999 Washington 1998 Sao Paolo 1974 Tokyo 2003 San Francisco Palo Alto San Diego Los Angeles Merger with Rogers & Wells and Pünder Munich Berlin Source: Charlton 2003 Offices closed: Chicago Bahrain Jeddah Riyadh Sharjah Leipzig Ho Chi Minh City Hanoi

Clustering of law firms in London, 2001/2 Source: Corporation of London, 2003 See: Cook et al (2007)

Clustering of management consulting firms in London, 2001/2 Source: Corporation of London, 2003 See: Cook et al (2007)

World cities & the ‘war for talent’ Talent as a ‘growth engine’ –Human capital (Jacobs, 1961) –‘Creative class’ (Florida, 2002+) Labour-factor in location –Highly skilled vs. low skilled –Transient vs. settler –Expatriation 18

MNCs: Hymer ‘the international corporation tends to create a world in its own image by creating a division of labour between countries that corresponds to the division of labour between various levels of the corporate hierarchy. It will tend to centralise high-level decision-making occupations in a few key cities (surrounded by regional sub-capitals) in the advanced countries, thereby confining the rest of the world to lower levels of activity and income’ (Hymer, 1972: 59) Oversimplification Lower level functions also contained in cities Dicken: different types of geographical location contain different mixes of corporate units in which the actual proportions vary.

MNCs: GPN Cities and their relative importance are implicit in value chains/production networks –Relational geographies –Nodes in networks –Local economic development (often ‘local’ = ‘city’) –Empirics Sectoral variation –GPN – power, value and embeddedness = importance of cities

21 Human capital as a determinant of city growth and competitiveness (Glaeser et al,1995) City-regions dominate economic policy in the UK

Relational urban agglomeration economies Henry and Dawley, 2011

Source: Taylor 2001 Locational preferences and interlocking networks Minuscule section of the world city network

The agency of cities* in MNC location Key protagonists (1)World city theorists (Geographers, Urban Studies) (1)‘Basing points for capital’ (Friedmann, 1986) (2)‘Strategic sites’ for command and control (Sassen, 1991) (2) Urban sociologists and economists (1) Economy of cities (Jane Jacobs), plus, Krugman, Storper (2) Human capital and the city (Glaeser et al, 1995) (3) IB specialists (1) Location = the urban in the ILO (Dunning) (2) World cities and the locational strategy of MNCs (Goerzen, Asmussen and Nielsen, JIBS) * Spatial forms: CBDs; financial centres; ‘valleys’; ‘clusters’; ‘roundabouts’ etc…