Geography Reference
In-Depth Information
Being complementary
Complementarity
is the tendency for companies that produce goods and services for
each other to cluster together, thereby maximizing mutual accessibility. New York City's
Theater District, for example, consists of more than just venues for Broadway shows.
Companies that act as agents for performers, produce sets, sell lighting and sound equip-
ment, make costumes, coordinate ticket sales, and rent out sound stages and rehearsal
studios can also be found on Broadway. You don't have to travel to New York to witness
complementarity, however. It's a basic principle of economic geography. So if you live in
a fair-sized city or town, chances are good you can find one or more examples of asso-
ciated businesses that have clustered together for mutual benefit. For example, if your
town contains a fair-sized hospital, then doctors' offices, insurance representatives, and
medical laboratories are likely to be located close-by.
Cost of land/rent
Companies require land or rental space where they can conduct business. Within any sizeable geo-
graphical area, however, the cost of land or rent varies. Locating a business (or part of a business)
with respect to this variation may have a significant impact on the company's bottom line.
Take, for example, a well-known bank that is headquartered in New York City. When you mail them
your credit card bill, the letter goes to an address in South Dakota. Another well-known New York
City department store receives and processes its credit card payments at an address in the state of Ge-
orgia. To some extent, geographic differences in the cost of labor are at work here. But in these cases,
another and more important location factor is at play: geographic differences in the cost of land and
rent. Simply put, these operations require lots of office space, the price of which is much cheaper in
towns in South Dakota and Georgia than in New York City.
I'm going to temper my discussion of this location factor because it appears again in the
chapter on urban geography (see Chapter 17). Suffice it to say here that supply and demand
largely determines the cost of land/rent; and that intense demand and competitive bidding for
land/rent is greater in big cities than in small ones, leading to higher land costs in major urban
areas. Indeed, land/rent prices tend to “spike” downtown, and then trail off dramatically with
increasing distance from urban cores, as evidenced by Figure 15-8.
