Ch 12 Key Issue 4 Why Do Business

Ch. 12 Key Issue 4 Why Do Business Services Cluster in Large Settlements?

Business Services • Offer services that help other businesses • Not all settlements have same # of business services – Clustered in handful of urban settlements – Specialization of certain business services

Business Services in World Cities • New York, London, Tokyo • Law, banking, advertising, corp. headquarters • Result of Industrial Revolution • Transportation converges on world cities; reinforces role in world economy

Business Services in LDCs • Specialize in: – Offshore financial services • Usually islands and microstates • Offer advantages in taxes and privacy from seizure • Cayman islands, Bahamas, Andorra, Monaco – Back office functions (Business Process Outsourcing) • Work traditionally done in the “back room” of an office: Billing, payroll, claims/customer service

Business Services in LDCs • Specialize in (con’t): – Back office functions (Business Process Outsourcing) • High rents pushed these services out of cities • With increased communications, spatial proximity (closeness) is not necessary • Some LDCs are attractive because: Low wages and ability to speak English

Economic Base of Settlements • Basic and Nonbasic industries • Basic industry stimulates nonbasic industries – Basic Industry brings in new, “outside” money to local economy by offering services paid for by companies outside the settlement (exporting) – New basic industry workers bring families to settlement – New nonbasic industry will not bring about more basic industries because nonbasic money is “recycled” within the community • If % of workers in a certain industry is higher than national avergae, that business is a basic industry. (Economic Base)—What would FL’s be?

Specialization of Cities • Can classify cities based on their basic activities • Different distributions can be seen: – Durable goods – Great lakes – Nondurable goods – Southeast (Carolinas) – Old manufacturing cities restructuring their economic bases to business services due to decline in manufacturing jobs (Baltimore, Pittsburgh) • Hence, North and East have fastest growth in business services

Distribution of Talent • Talent is not uniformly distributed across US • Richard Florida: talented people will cluster if city is more diverse rather than for job opportunities/pay (cultural pull vs economic pull) – Distribution of talent matches distribution of diversity (Fig. 12 -29) • Cities want to attract talent to promote economic innovation