University of Indonesia Geography Department Djakarta, February 8, 2011
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Global Trends in Economic Geography
- the broadening scope of the discipline -
with a firm migration case study
prof.dr. Piet H. PellenbargDean, Faculty of Spatial Sciences
University of Groningen, the NetherlandUniversity of Indonesia Geography Department
Djakarta, February 8, 2011
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The agenda
› Global trends in Economic Geography (the history of its approaches since the 19th
century)
› The broadening scope of the discipline(more and more subjects of study)
› A firm Migration case study(longitudal approach – comparisons in time)
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1. Global trends in Economic Geography› Commercial Geography - the origines of world trade
› The Regional Approach - what is produced where and why
› The Factor Approach - analysing the location search› Neo Classical Economic Geography - finding the best location› Behavioural Economic Geography - bounded rationality› The Marxist/Radical Approach - about poverty and power› The Geography of Enterprise - the multiplant firm› The Institutional Approach - innovation, learning, networks
and embeddedness› The Evolutionary Approach - incidental firm birth,
selection by the environment; the meaning of path dependancetime
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2. The Broadening scope of the discipline› Next to finding the best location….
› Globalisation of economic life - global integration of the economy› Migration and the labour market - about high and low skilled workers› Circuits of capital - FDI and international banking› Energy and resources - geopolitics and raw materials› Environmental aspects - both goal and condition› The geography of consumption - neglected part in econ. geography› Class, culture and gender - the influence of the ‘soft factors’› Politics and governance - governments’ grip on the economy› Demography of firms - firm startups, moves, and closures› Entrepreneurship - driver of firm origin and growth› Innovation - basis for sustained growth› Knowledge spillovers/clustering - the raw materials of innovation› Wellbeing - the ultimate goal
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Globalisation› Globalisation is the main trend connecting many of the new
research themes of economic geography› Drivers of the globalisation process: Technological and Institutional changes :
- Information technology EU, NAFTA, ….- Flexible automation Collapse Commun. Economies- Telecommunication techniques Opening up of China- Mobile communication& GPS Rise of the BRIC countries- Containerisation of transport- Low transport prices 1991
The modern internet: various electronic technologies
combined in 1 platform
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Not only Globalisation but also Localisation!› Contradictory to expectations, distance and
locality did not lose their influence as a result of the globalisation process
› Prof. Philip McCann: the world is curved not flat! Location is a competition factor of increasing importance
› Agglomeration advantages and spatial clustering especially of high level activities are more and more determined by the availability of knowledge
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Globalisation, localisation and mobility› Globalisation: worldwide expansion of
economic activities› Localisation: more spatial differentiation
within countries› Stimulating factor: both people and firms are
becoming more and more mobile
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3. A Firm Migration case Study
› The demography of firms › Patterns of long distance firm migration› Short distance firm migration› The problem of measurement: definition and
data› Selection of research results for the
Netherlands› Research frontiers› Conclusions
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The demography of firms
› Firm demography is the application of demographic models in the analysis of regional economic growth or decline
› Instead of populations of people, populations of firms are analysed
› Economic growth or decline of a city, region, or nation is unraveled into the components of growth: the birth, death and migration of firms
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COMPONENTS OF CHANGE› NEW FIRMS› FIRM CLOSURES› FIRM IMMIGRATIONS› FIRM EMIGRATIONS› GROWTH OF FIRMS› DECLINE OF FIRMS
› OLD FIRMS?› MERGERS?› BREAK-UPS?
GROWTH OF FIRMPOPULATION
MIGRATIONSURPLUS/SHORTAGEGROWTH OF
EMPLOYMENT INEXISTING FIRMS
OVERALL GROWTH
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An example: the analysis of the total employment shift in one of the provinces of the Netherlands (North Brabant) in the period 1992-1996
Relocations within and in/out of the province account for almost one third of the total employment shift.
The balance of new firms and firm closures accounts only for 20% of the total shift
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Firm migration as a part of the total firm mutation balance for the Netherlands as a whole (average numbers over 2001/2003; Source: VVK 2003)
Number of new firms
Number of firm closures
Result: natural growth
Number relocated firms
Of which over long distance
Establishments 91,300 55,000 36,300 64,300 12,900
Employees 125,500 120,800 4,700 231,000 48,100
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The first study on firm migration: ‘Why Industry Moves South’ in the US by McLaughlin & Robock (1949)
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Industrial Migration patterns in the European Community, 1955-1975 Klaassen en Molle (1983)
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Relocation of production plants of branded jeanswear in N-America between 1993 and 2003Verkoren (2008)
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Cross border firm migration in Europe since 1990
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Firm migrationin Chinaanno 2011
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Firm migration in Indonesia?
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What do these maps tell us?› Firms tend to move from core regions to
peripheries (where wages are lower)› This fits the ‘spread effects’ from Myrdal’s
theory of cumulative causation (1950s)› We can see this ‘spread’ all through the
2nd half of the 20th century, both on a continental scale and within individual countries
› These spread effects are very interesting from a regional development perspective!
› Firm movement is important in regional development policy
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Commercial land use (shops, officesIndustrial land use
Residential land use
Agricultural land use
CBD
industry
Residential areas
AgricultureThe classical concentric urban model (Burgess)
Bid rents
Distance to city centre
Short distance movement of firms(economicsuburbani-sation)
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Short distance movement of firms
› In terms of numbers of firms: much more frequent than long distance migration
› In terms of employment: less impressive, because this concerns mainly small firms
› Quite different migration motives: not cheap labour, but space for expansion
› Related theory: the incubator hypothesis by Struyck and Leone (1970s)
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Two different stories of firm migration: Long distance – short distance
Big firms – small firms FDI – SME
theories of Myrdal – Leone and Struyck
continental
regional
urban
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The dimensions of firm migration(size/impact vs. spatial scale)
Local/regional International Global
Integral move
SME moves within countries
Partial move
SME subsidiaries within countries
SME’s cross border moves
TNC’s and SME’s from West to East Europe
Branch plants and Joint ventures
SME’s and TNC’s cross border moves
TNC’s and SME’s from West to East Europe
FDI by TNC’s from Europe or US to Asia
Contracting out
International purchasing of goods and services
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The problem of measurement: what exactly is a firm migration?
› X moves totally from A to B (integral move)› X moves partially from A to B (partial move)› X from A contracts out to Y in B› X and Y from A and B start a new joint venture in
C› X and Y from A and B merge, and locate in A or B› X and Y from A and B merge, and locate in C› X changes to Y and moves from A to B› etcetera
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The problem of data: not many countries have a sound registration of firm migrations› No firm registration at all› Only commercial but no official registers› Only actualisation of firm registrations but no
keeping of migration data› Regional variations of firm migration
registration› Only registration of migrations within, but not
between regions› Only within but not between countries
(= the main problem in Europe!)
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A selection of results of firm migration research in the Netherlands
Amsterdam
The Netherlands
EUROPEGroningen
London
UK
FRANCEGERMANY
BELGIUM
AFRICA
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The Netherlands: Core and Periphery
FR
GR
DR
OV
GL
NH
SH
ZENB
LI
FLCORE AREA: WEST
PERIPHERY: NORTH
INTERMEDIATE ZONE:EAST AND SOUTH
GRONINGEN
THE REST OF EUROPE
AMSTERDAM
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A selection of results of firm migration research in the Netherlands: The oldest records (1950-1962, SISWO; only industrial firms with 10 and more employees) To:From:
North East West South
North 89 15 2 1
East 31 164 6 15
West 117 159 321 114
South 4 21 3 189
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A selection of results of firm migration research in the Netherlands: Firm migration in the Netherlands in the 1950s Long distance Short distance› (>30 kms)Deconcentration to
periphery› big firms› partial migrations› low-skilled employees› dominant migration
factor: the labour market
› (< 30 kms)Suburbanisation of firms› small firms› integral migrations› higher qualified
employees› dominant migration
factors: expansion space and accessibility
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A selection of results of firm migration research in the Netherlands: the Period 1965-1985› No national data available
› Just local and regional studies› Impression from these studies:
› deconcentration to the national periphery fades away› labout market is not a migration factor any more › urban overspill (economic suburbanisation) increases › shortage of space now migration motive nr.1 › wholesale replaces manufacturing as most mobile
sector › after that, business services become the most mobile
sector
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INTERPROVINCIAL FIRM MIGRATION (balance of in- and outgoing migrations)
1990/1991 1994/1995
Source: Kemper and Pellenbarg 1993, 1997
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Interprovincial firm migration1990/1991 (firms)
Interprovincial firm migration1994/1995 (firms)
Firm Migration (jobs) 1999-2006
RPB 2007
(between Nuts regions)
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Progress in firm migration research
› Migration motives› Phases in the migration decision› Relocation and firm performance› Relocation and firm networks› Relocation and satisfaction› Relocation within cities› International comparisons› International relocations› Firm migration in N-America, Asia, …..
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Firm Migration: Push factors1977 1988 1999 2008
Expansion space
Expansion space
Expansion space
Expansion space
Organisational reasons
Organisational reasons
Organisational reasons
Organisational reasons
Bad premises Local traffic situation
Expected future growth
Expected future growth
Termination of rent
Bad premises Unrepresentative building
Unrepresentative building
Unattractive surroudings
Unrepresentative building
Bad premises Bad premises
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Firm Migration: Pull factors
1977 1988 1999 2008
Expansion space available
Central location
Central location
Central location
Organisational reasons
Expansion space available
Representative building
Representative building
Good premises available
Local traffic situation good
Expansion space available
Good premises available
Central location
Low price land and premises
Good premises available
Low price land and premises
Local traffic situation good
Accessible for clients
More parking space
Attractive surroundings
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Progress in firm migration research
› Migration motives› Phases in the migration decision› Relocation and firm performance› Relocation and firm networks› Relocation and satisfaction› Relocation within cities› International comparisons› International relocations› Firm migration in N-America, Asia, …..
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Phases in the relocation decision process (1)
› Not all location factors appear at the same time in the process; some factors influence earlier stages, other factors dominate later stages
› Average duration of relocation process 27 months (Pen, 2002)
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Phases in the relocation decision process (2)› Townroe(1972, 1973) stimulus - problem definition – search – comparison of alternatives – choice and action
› Louw(1996) orientation–selection-negotiation
Phase
Factor type Orientation Selection Negotiation Total
Engineering 15.2 12.3 7.1 11.9
Functional 19.4 18.4 7.1 16.1
Technical 3.1 4.2 2.0 3.4
Financial 12.2 14.2 52.5 22.5
Location 43.9 36.0 12.1 32.3
Other 6.1 14.6 19.2 13.8
Total 100.0 100.0 100.0 100.0
(% of all mentioned factors, per phase)
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Progress in firm migration research
› Migration motives› Phases in the migration decision› Relocation and firm performance› Relocation and firm networks› Relocation and satisfaction› Relocation within cities› International comparisons› International relocations› Firm migration in N-America, Asia, …..
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Relocation and satisfaction (1)
› General rule: two years after relocation, one out of three decision makers says he would make a different choice now
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Relocation and satisfaction (2)› Among the 2001 manufacturing industry
relocations in the Netherlands, ‘regretters’ amounted one to four
› Interestingly, the regret % was higher among those who searched more seriously
73 88 82
27 13 18
100 100 100
Considered alternative locations? (%) YES NO TotalSatisfied on
new location (%) YES NO Total
Source: Schuilenburg 2004
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Relocation and satisfaction (3)
› In theory: more intensive search > better choice result > more satisfaction
› In practice: more intensive search > higher expectations > sooner disappointed
› Results confirm recent insights from decision theorists: more thinking and arguing leads to dissatisfied deciders
› Is expert location advice to relocating firms potentially harmful???
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Relocation and satisfaction (4)> a more elaborate assessment of decision making and satisfaction among 18 relocation cases (Adema 2003)
Decision making:› External advice yes/no› More phases yes/no› Use of standardized
procedures yes/no› Many/few alternatives › More/less weight to objective
factors------------------------------- +› Total score max. 8 pts
Satisfaction:› Generally satisfied yes/no› All demands met yes/no› Specific disappointments yes/no› New location better/worse› Would choose this location
again yes/no------------------------------- +› Total score max. 5 pts
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dd-mm-jj
Satisfaction Rationality
BERNARD ELETRONIC WHOLESALE 5 JOHNSON POLYMER 8
SCHILDERSWACHT PAINTERS 5 EFKA ADDITIVES 6
VAN DE LEUR 4 DECORETTE 6
ESBE AUTOMOBILES 4 ICARE 6
NOORD NEGENTIG 4 TEEWES PRINTERS 2
DECORETTE 4 VAN DE LEUR 2
NORIT NEDERLAND 2 NORIT NEDERLAND 1
JOHNSON POLYMER 2 ESBE AUTOMOBILES 0
BOSSERS AND CNOSSEN 1 BERNARD ELETRONIC WHOLESALE 0
VIADATA AUTOMATISERING 1 SCHILDERSWACHT PAINTERS - 1
EFKA ADDITIVES 0 BOSSERS AND CNOSSEN - 2
ICARE 0 NOORD NEGENTIG - 3
HANS DE HAAN CALCUL. SYSTEMS 0 REMMERS SAFE BV - 3
EFFICIENT CLEANING COMPANY 0 DE BOER CAR DAMAGE - 3
REMMERS SAFE BV 0 EFFICIENT CLEANING COMPANY - 4
TEEWES PRINTERS - 1 CSS COMPUTER SOLUTIONS - 4
DE BOER CAR DAMAGE - 2 VIADATA AUTOMATISERING - 5
CSS COMPUTER SOLUTIONS - 3 HANS de HAAN CALCUL. SYSTEMS - 6
MORE RATIONAL
LESS RATIONAL
(18 firms, 3-360 empl; av. 57)
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Relocation and satisfaction (6)
SATISFACTION RATIONALITYBERNARD ELETRONIC WHOLESALE 5 JOHNSON POLYMER 8
SCHILDERSWACHT PAINTERS 5 EFKA ADDITIVES 6
VAN DE LEUR 4 DECORETTE 6
ESBE AUTOMOBILES 4 ICARE 6
NOORD NEGENTIG 4 TEEWES PRINTERS 2
DECORETTE 4 VAN DE LEUR 2
NORIT NEDERLAND 2 NORIT NEDERLAND 1
JOHNSON POLYMER 2 ESBE AUTOMOBILES 0
BOSSERS AND CNOSSEN 1 BERNARD ELETRONIC WHOLESALE 0
VIADATA AUTOMATISERING 1 SCHILDERSWACHT PAINTERS - 1
EFKA ADDITIVES 0 BOSSERS AND CNOSSEN - 2
ICARE 0 NOORD NEGENTIG - 3
HANS DE HAAN CALCUL. SYSTEMS 0 REMMERS SAFE BV - 3
EFFICIENT CLEANING COMPANY 0 DE BOER CAR DAMAGE - 3
REMMERS SAFE BV 0 EFFICIENT CLEANING COMPANY - 4
TEEWES PRINTERS - 1 CSS COMPUTER SOLUTIONS - 4
DE BOER CAR DAMAGE - 2 VIADATA AUTOMATISERING - 5
CSS COMPUTER SOLUTIONS - 3 HANS de HAAN CALCUL. SYSTEMS - 6
MORE RATIONAL
LESS RATIONAL
Most of the satisfied deciders made rational location decisions; ButHalf of the irrational deciders were rather or even quite happy with their locations
No perfect match between rationality and satisfaction
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Conclusions (1)› We have limited knowledge about the actual spatial
patterns of firm relocation› We especially lack an understanding of differences
between countries› There is to little information on firm migration between
countries› We know rather much about the push and pull factors
that explain the relocations › New relocation studies should focus less on the
external location factors that dominate the orientation and selection phases, and more on factors of the negotiating phase: premises, and government incentives (Pen)
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Conclusions (2)› Location studies that don’t differentiate between phases
oversimplify the process› The variety of phases in the decision making process prevents
easy modeling› Modelling should be as basis for a better match between firms
and their locations› But: there is no perfect match between rationality of the
decision making process and the location satisfaction afterwards
› More research should be targeted to aspects of firm migration like relocation and firm performance, relocation and firm networks, relocation and satisfaction, relocation within cities
› We certainly need more information about firm relocation in Asian countries, such as India, China, Indonesia!
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Thank you for your attention!
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