Friday, February 27th, 2009
The folks at the Globalization and World City Research Network recently issued their 2008 list of world cities. This is exactly the sort of ranking that is great for getting people arguing. Here is the chart:
Click for higher resolution. Here is how the Midwestern cities I cover in this blog sorted out:
|Kansas City||High Sufficiency|
|St. Louis||High Sufficiency|
Keep in mind the methodology is based on some sort of a network model based on office locations of producer services firms or something. I saw a lot of debate on this list on the internet critiquing the results, but if you are confident in your model and confident in your data, then you can’t just reject the results because you don’t like them.
This is the sort of league table that likes to get people arguing, but as has been noted previously, world cities aren’t all in direct competition. They specialize in various things. And the real key is whether a city is overall successful and produces the kind of life its citizens want. But this is certainly one interesting dimension of the world.
On a related note, I saw a column on Mead Johnson’s IPO and its impending headquarters relocation to Chicago from Evansville . I found this Indiana based column highly revealing. The various Indiana people quoted dismissed this move as about the “ego of the executives” access to “rich and prestigious” people or being close to the CFO’s house rather than any real business imperative.
While there is no denying that the residential preference of executives matters in where companies locate, the line of thinking in this column expresses a dangerous naiveté about the way the world works today. What’s more, it illustrates the way Midwesterners too often think about economic setbacks, namely that they are the result of someone wrongheaded or malicious decisions as opposed to macroeconomic trends and forces. Kudos to the Mayor of Evansville for not falling into this trap.
I previously documented this case in my posting “Corporate Headquarters and the Global City“. To summarize, globalization generates far flung networks of firms, which require new producer and financial services to organize and manage. These are increasingly concentrated in global cities. That is what allowed those cities to grow and prosper, even as their traditional corporate HQ count declined. The growth was coming from new producer services firms.
Today we are seeing that access to those firms is drawing back headquarters to the city, albeit not the traditional headquarters with thousands of employees. Rather, it is a thin executive headquarters of just those people who need close contact with these other firms. Mead Johnson falls into that category. So does SABMiller, which recently said it was moving a small headquarters function to Chicago from Milwaukee.
Since these service firms are concentrated in fields like law, accountancy, and consulting, you would think most cities could supply them since most cities have law firms and such. But the nature of the services is different. It isn’t just a difference in scale, it’s a difference in kind. As I said before, Columbus’ law firms serve that city and Ohio. Chicago’s serve the world for certain types of practice areas.
This brings us back to what I said previously about trying to re-establish the hierarchical subdivision of labor. First I should stress that this is not about abandoning anything anyone is doing today. I’m not saying any city out there can’t compete in the sectors they are pursuing. Rather, it’s about an additional ability to tap into that global service firm network in a way that you couldn’t do before.
Whatever the case, dismissing the impact of globalization as merely about executive ego is not healthy for creating economy strategies to prosper in the new environment. We’ve got to figure out how to play and win with the new rules of the game, not sit on the sidelines and sulk.