Globalisation: Countries, Cities and Multinationals

Globalisation: Countries, Cities and Multinationals

Philip McCann 1  and Zoltan J. Acs 2

• Explores whether in todays globalised economy is the scale of a firm, a nation , or a city more important? Argues that interenational business, institutional economics, and economic geography sit uneasily. Also believes there is a relationship between importance of scale of country and scale of cities in a country, and scale of city cant be informed without scale of firms within the city.
• Size of nations : Alesina and Spolaore (2005) argues that the size of country depends on a trade-off between the benefits of size versus the costs of heterogeneity. Benefits include efficiency in infrastructure provision, leverage of public service. Preference hetrogenity relates to local variations in culture, language  ethicity etc. This argument -> the greater democratisation -> fragmentation. There is much support for these arguments, however alternate view is that it is more complex as (a) many very small countries are very poor (b) almost all very large countries are very large enabling them to large home market and aglomeration effects (c) This is an institutional view of nations whereas modern geography emphasises issue of link with home market size and size of cities
• Cities and Urbanisation – From 17^th century to early 20^th cities were engines of trade, resource acquisition, and development characterised by increasing industrialisation, globalisation, urbanisation, trade and eco growth. At this time relationship between urban scale and wealth was straight forward. During war – went to colonial networks and decrease in globalisation. After war accelerated again – particularly developing nations. Today the majority of the worlds largest cities are no longer in the most productive economies but the worlds most productive cities are located in the most productive economies. The worlds most “productive cities” are not mega-cities. Weak statistical link between productivity and size. The productivity advantages associated with urban scale appear to be relatively more important for lower income than for rich countries. Yet it is noted that other attributes are equally important – centres of knowledge, creativity and innovation.
• Multinationals, FDI and eco integration – Evidence is now that multinationals play singificant role outside national or colonial structures. Easier for MNC to engage in cross border trade within their own company. Over time drivers such as the internet has -> exponential rise in MNC’s. in 1960 there were 7000, in 2006 there were 78,000.  The role played by the very largest of these MNC’s is unparalleled in history. The importance of these firms to knowledge generation. Geography of these processes are much more regional than global. Location decisions of these firms critical to why some locations are knowledge centres. Proximity to hub airports correlation with productivity. Correspondance between centres of commerce, global finance, and productivity. Aitken (1979)  found that proximity to multinationals increases propensity to export.
• So is scale of economy, cities or firms important – (a) Temporal aspect –c haing over time. From high correlation between size, to colonilsation, to less correlation – mid sized more productive, not mega-cities. (b) global connectivity of cities is more important than scale. In a world of falling trade barriers – transaction costs for low knowledge activities and rising spatial transaction costs for high knowledge activities – connecetivity is critical. Modern tasport and communications -> performance of city regions ost important which in tern depends on connectivity, global engagement and competitive performance of its MNC’s. There is a minimum threshold to have required infrastructure for connnectivity – around 1.5 (m). For MNC's there is increasing importance of regionalism as proximity, trade, FDI, Bilateral Investment treaties (BITs) and Double taxation treaties (DTTs) (http://issrb.ru/content/program/Investments.pdf) . Believes that Krugmans (world bank 2009) emphasis on home market and agglomeration effects applied accross super-regional areas of integration built around global cities more realistic than smallness arguments of Alesina and Spoaore (2005).
• Understanding of relationship between nation-state, city-region, and multinational firm  in which globalisation processes operate is poor and needs greater behavioural analysis