Geography Reference
In-Depth Information
of these relationships, the distinction between 'winners' and 'losers', or
rather between those who are either beneficiaries or marginalized by the
emerging order, are becoming more marked. In terms of the issue of where
multinational firms ought to locate their operations, we will see that this is
obviously very complex because it is not simply a matter of locating MNE
facilities in the largest cities or urban regions. Other factors are just as
important for economic growth as is urban scale, and in particular places
which are open centres of knowledge and knowledge exchanges will offer
advantages for many firms. Meanwhile, from our knowledge taxonomy
analyses in Chapter 5, we also know that other locations which in terms
of knowledge flows are more closed will offer different advantages for
other types of multinational firms, depending on their specific objectives.
In particular firms wishing to avoid unintended knowledge outflows will
tend to prefer more closed locations. The optimal location decisions for
MNEs are not simply biased towards large, diverse or open regions, as it
also depends on the how the ownership O and internalization I strategies
of the firm are related to their location L behaviour.
In order to understand these factors and the role played by city-regions
in globalization processes, we start our discussion by considering the
impact of technological change - and in particular the advent of the infor-
mation and communication technology paradigm - on the costs of con-
trolling and coordinating economic and innovative activities in multiple
cross-borders locations, that is spatial transactions costs.
7.2
SPATIAL TRANSACTIONS COSTS AND
TECHNOLOGICAL CHANGE
The costs associated with engaging in and coordinating activities across
space can be termed spatial transactions costs. In order to understand
the ways in which such costs have changed over recent years we need to
split them up into three different types. The first type of spatial transac-
tions costs are those associated with moving products across geographical
space: these are transportation costs. The second type of spatial transac-
tions costs are those associated with moving knowledge and information
across geographical space. Both the first and second types of spatial
transactions costs are explicitly geographical in their construction in that
the costs incurred always depend on the distance covered. The third type
of spatial transactions costs are those associated with crossing national
borders. These costs are institutional costs and the tariffs associated with
a particular border crossing. They are not defined geographically, in the
sense that tariffs do not vary systematically with the distance travelled
