Why Do Business Services Cluster in Large Settlements?

1. Why Do Business Services Cluster in Large Settlements? Chapter 12.4

2. Hierarchy of Business Services: World Cities • Business services cluster in world cities: they are the center of the flow of information and capital, so DUH! • Modern transportation and communication reinforces the popularity of world cities in the global economy • Industrialization • Large corporations in cities manage factories outside of cities • Production, prices, etc. • Other businesses service these corporations in cities lawyers, bankers, etc.

3. Hierarchy of Business Services: World Cities Consumer Services and Cities • Cities tend to have more wealthy than poor luxury and highly specialized products are likely sold here • Likely in cities because requirement of large thresholds: • Offer the most plays, concerts, operas, night clubs, restaurants, bars, sporting events • Largest libraries, museums, and theaters

4. Public Services and Cities • Centers of international and national political power • NYC is not a national capital, but is an international capital (houses the UN)

5. Four Levels of Business Services • World Cities • Dominant world cities • London, NYC, Tokyo • Major world cities • Chicago, LA, Washington DC, Brussels, Frankfurt, Paris, Zurich, Sao Paulo, Singapore • Secondary world cities: • Houston, Miami, San Francisco, Toronto, Bangkok, Bombay, Hong Kong, Manila, Osaka, Seoul, Taipei, Berlin, Madrid, Milan, Rotterdam, Vienna, Buenos Aires, Caracas, Mexico City, Rio de Janeiro, Johannesburg, Sydney • Command and Control Centers • Specialized Producer-Service Centers • Dependent Centers • Resort, Retirement, and Residential Centers • Manufacturing Centers • Military Centers • Mining Centers

6. LDCs in the Global Economy: Two roles: Offshore Financial Services Back-office Functions • (Business Press Outsourcing) • Processing insurance claims, payroll management • Usually located in the same building as management for supervision purposes • But now because of telecommunication advances spatial proximity isn’t necessary • Reasons to be in LDCs: • Low wages • Ability to speak English • Forced to work late at night because it is business hours in USA • Sleeping/entertainment rooms provided • Taxes are usually low or nonexistent • Bank secrecy laws can help evade disclosure • Putting money offshore prevents people from reaching it • Example: Cayman Islands

7. Economic Base of Settlements • Basic Industries: export primarily to consumers outside the settlement • Important because it brings money into the settlement • New ones attract workers who bring families new supermarkets, restaurants, consumer services • Nonbasic Industries: customers live in the same community • Economic Base: A community’s unique collection of basic industries

8. Specialization of Cities in Different Services • Specializing in Business Services: • General business: large metropolitan areas: NYC, Chicago, LA, San Fran • Computing and data processing services: Boston and San Jose…why? • High-tech industries support services: Austin, Orlando, Raleigh-Durham • Military Activity support services: Albuquerque, Colorado Springs, Norfolk • Management-consulting services: Washington DC • Specializing in Consumer Services: • Entertainment and recreation: Atlantic City, Las Vegas, Reno • Medical services: Rochester, Minnesota • Specialization in Public Services: • State Capitals • Large Universities • Military Bases

9. Distribution of Talent • Talent is not distributed evenly throughout the cities • People cluster in particular cities because of CULTURE • The “coolness” index developed by POV Magazine: • Combined: % of people in their 20s, # of bars and other nighlife places per capita, # of art galleries per capita • Positive relationship between distribution of talent and distribution of diversity in the largest USA cities • High cultural diversity= high % of talented individuals • Important to attract talented individuals: • Responsible for promoting economic innovations • Likely to start new businesses • Infuse local economy with new ideas