Geography Reference
In-Depth Information
ever greater market areas to be supplied from a small number of loca-
tions. In particular, most of the evidence for falling international and
geographical transactions costs relates to trade in relatively standardized
types of activities and goods, for which the nature and frequency of the
spatial transactions undertaken have not changed fundamentally over
time. This is typically the case in industries producing semi-finished or
finished manufactured products at mature stages within the product cycle,
or service industries characterized by relatively routine activities in which
the nature of the information being transacted is itself rather standardized.
That is not to say that these are necessarily low-skilled jobs, as in many
cases they are actually medium-skilled (Manning 2003), but the important
point is that many of the routines undertaken in such jobs can increasingly
be mediated or facilitated by the use of ICTs, as well as other forms of elec-
tronic mechanization. In such cases, geographical peripherality appears to
be less of a disadvantage than it might have been previously, and the world
appears to be getting flatter. These are exactly the types of standardized
activities which currently dominate the offshoring trends to countries such
as China, India, Vietnam, Philippines and South Africa (COL 2005b), and
comprise much of Leamer's (2007) 'manly man' type of manufacturing
work, as well as many types of tele-services and accounting activities.
In contrast, in sectors where demand lead-times have fallen dramati-
cally, or in industries in which there has been an increasing variety and
complexity of knowledge inputs associated with the customization of
products and services, spatial transactions costs appear to have risen. In
particular, the spatial transactions costs associated with the high knowl-
edge inputs required for high value-added outputs, and particularly those
embodied in human capital, have grown. In these sectors, which corre-
spond to Leamer's (2007) 'geek work', the world therefore appears to be
getting steeper, the result of which is that these types of activities tend to
be increasingly localized. As such, the offshoring or outsourcing of many
of these types of activities is actually less possible nowadays than might
previously have been the case (COL 2005b). Overall, the general pattern
we currently observe is therefore one of increasing globalization of both
high value-added outputs and low value-added inputs, along with an
increasing localization of high value-added inputs (McCann 2005). Given
these changes in spatial transactions costs, a pattern emerges in which
high value-added outputs are only produced in a limited number of loca-
tions and then sold all over the world, while low value-added outputs can
be produced all over the world. This is also consistent with the observa-
tion that R&D and production may not necessarily be in the same place
or even the same country. The real value-added component embodied in
the output good is innovation and R&D, and the location of these will
