GaWC Research Bulletin 236

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This Research Bulletin has been published in Global Networks, 10 (1), (2010), 12-34.

doi:10.1111/j.1471-0374.2010.00272.x

Please refer to the published version when quoting the paper.


(Z)

World City Networks and Global Commodity Chains: Towards a World-Systemsí Integration

E. Brown, B. Derudder, C. Parnreiter, W. Pelupessy, P.J. Taylor and F. Witlox

 

Abstract

There are two literatures that explicitly describe spaces of flows that constitute contemporary globalization: world city network analysis and global commodity chain analysis. We explore the possibilities of their integration by returning to their common origins in world-systems analysis. Each model is described and critiqued and it is argued that they can be used to address some of each otherís limitations. This is illustrated through world city process additions to understanding the coffee commodity chain and commodity chain additions to understanding Mexico City and Santiagoís positioning in the world city network. This complementarity is just a first step towards complete integration; the conclusion provides necessary next steps in the research agenda.

Keywords : Core-periphery, global commodity chains, globalization, world city network, world-systems analysis


Introduction

The rise of contemporary globalization has generated many new geographies, but spatial patterns and relations have been a neglected theme in the myriad writings on globalization. The purpose of this paper is to address this situation by comparing and contrasting two recent literatures that focus upon different models of transnational spatial relations: in the world city network (WCN) literature researchers model worldwide inter-city relations; in the global commodity chains (GCC) literature researchers model production processes in the global economy. One of the key properties our selected literatures have in common is that they both depict fundamental spatial models of flows: a chain of production nodes connected by commodity flows and a network of city nodes connected by information flows. However, although sharing a common world-systems analysis progeny, these literatures have developed independently with little or no cross-referencing. In this paper we take advantage of their shared origin to show how the two models might be integrated and thereby provide a basic spatial skeleton for understanding the processes behind globalization. Because the two literatures already share many of the same conceptual and discursive starting points rather than competing ones, we avoid the dangers of conceptual eclecticism often involved in attempts to bring together different discourses on the same topic.

World-systems analysis is one of the most prominent trans-disciplinary clusters of social scholarship (Wallerstein, 2004). As well as being explicitly trans-national, this school of thought encompasses the critical spatiality of the modern world-system as core-periphery structuring of world space through ceaseless capital accumulation; it focuses attention on the spatial dynamics of uneven development. The models we deal with in this paper derive from this fecund source of ideas in different ways. Global commodity chain analysis originates from concern to show how value is transferred from periphery to core thus sustaining or deepening uneven development. World city network arguments derive from concern about how global capitalism is concretely commanded and enabled in contemporary globalization.

Bringing two literatures together is a very large task whatever their degree of synergy. Our argument is divided into two substantive parts. In part one we outline the progress made thus far in mapping trans-state processes and providing analytic models for building new global geographies. This is where we present basic outlines of global commodity chain analysis and world city network analysis. Given the aim of subsequent integration, each description focuses largely upon the fundamental ‘space of flows’ of each model eschewing much further elaboration to be found in the literatures. For the world city network analysis this means neglecting city networks generated by other than advanced producer services; for global commodity chain analysis it means neglecting more complex structures (beyond simple chains) to be found in, for instance, global production network research. At this stage of our work it is much more important to identify and consider some of the limitations and weaknesses of each basic model and analysis. Our contention is that each model can contribute to reducing the limitations of the other. In part two we return to the world-systems origins of both models as a route towards their integration. The core-periphery framework is described as providing the spatial structure upon which the world city network and global commodity chain mechanisms operate. In this context we take the first step towards integrating the two models through exploring what each has to offer the other. This is argued both conceptually through connecting their two spaces of flows, and empirically through reviewing evidence from two selected research areas (the commodity chain of coffee and world city formation in Mexico City and Santiago de Chile). In a working conclusion we suggest first steps towards more complete integration of global commodity chains with the world city network.

The two literatures: models and analyses

Both the literatures we employ encompass basic critiques of conventional social science interpretations of their subject matters. We begin each description of the models with these critiques to show how both literatures transcend state-centric thinking and are therefore particularly suited to developing new thinking on globalization. After summary descriptions of each model we consider their limitations and omissions.

World City Network Analysis

In mainstream urban studies the traditional way of researching inter-city relations has been through analyses of ‘national urban systems’. Typically using non-relational data from national censuses, population sizes of cities defined a ‘national urban hierarchy’. Models such as ‘the law of the primate city’ and ‘rank size rule’ were devised to describe this ‘hierarchy’ as if the rest of the world did not exist. The study of cities was nationalized, so that city relations were territorialized, to the severe detriment of properly understanding major cities like London and New York. It was only when such cities became interpreted, through a series of influential writings, first as international financial centers (Cohen, 1981), then as world cities (Friedmann and Wolff, 1982; Friedmann, 1986), and further as global cities (Sassen, 1991), that a ‘world city literature’ arose in which the study of cities, or some at least, broke free of national containers. More recently, we have moved from conceptualizations of world city formation to conceptualizations of world city network formation: cities are studied system-wide in the modern world-system as a world city network (Taylor 2004).

The world city network has been specified as an interlocking network in which relations between cities are constituted by intra-firm flows in the advanced producer service sector of the world-economy ( Taylor, 2001). One of the features of the contemporary world-economy is that ‘services’ are becoming more and more important. Sassen (1991) pointed out that a key part of these services, the advanced producer services (such as inter-jurisdictional law and global advertising) used by multinational corporations, were becoming more and more concentrated in leading cities. There were good ‘cluster’ reasons for such concentration, as the firms operating in these services required information-rich environs to keep ahead in their business. But this first need did not lead to their concentration in just one or just a few ‘mega service centers’, rather a second need led to these services being offered across the world in cities covering all major regions. This second need of producer service firms was the requirement to provide their service where and when their clients needed it; and since the corporations they serviced were becoming global, service firms had no choice but follow suit and go global themselves. The alternative option of farming out their work to partner firms in other cities was never seen as feasible because of the importance of maintaining brand integrity in a field that deals in information and knowledge. Thus major service firms created worldwide office networks across the major cities of the world.

A key purpose of worldwide office networks is to enable transnational business to be conducted. Projects involving several jurisdictions, languages, cultures, and budgets will draw upon knowledge resources from a range of relevant offices. These intra-firm connections, both electronic and human, flow across the world silently linking the tower blocks that dominate so many cityscapes in all regions of the world. It is the aggregation of all the intra-firm flows – of information, knowledge, instruction, strategy, plans, personnel, etc. – that constitute the contemporary world city network. It is in this sense that advanced producer firms are the ‘interlockers’ of world cities. Hence when the network is modelled, it consists of three layers: the network level at the world-economy scale, the nodal level which is composed of the cities where the work of network formation takes places, and the sub-nodal level which is defined by the firms who are the agents of the whole process. In this interpretation the world city network is a web of ‘global service centres’, integral parts of complex networks of capital circulation and accumulation.

There are two main limitations of the world city literature, one is commonly voiced whilst the other is becoming increasingly important. The first is the concentration on a relatively few large metropolitan centers to concomitant neglect of all other cities. The most trenchant critique along these lines is by Robinson (2002: 536), who complains that ‘millions of people and hundreds of cities are dropped off the map of much research in urban studies’. This exclusion is from two ‘maps’: (i) the geographical map of world cities wherein most cities in the ‘South’ are missing; and (ii) the conceptual map of world cities which focuses on a narrow range of global economic processes so that myriad other connections between cities are missing. However, all cities experience contemporary global processes, and globalization can therefore not be construed as affecting just a few privileged cities. Subsequently Robinson (2005: 760) has conceded that the world city literature now covers ‘a much wider range of cities around the globe’ thus lessening the exclusion from the map. This attempt to broaden our understanding of the world city network has seen the postulation of such ideas as ‘globalizing cities’ (Marcuse and van Kempen, 2000) or ‘cities in globalization’ (Taylor et al., 2006).

The second main limitation of the world city literature relates to its rather underdeveloped urban- theoretical underpinnings (see, however, Brenner, 2004). It can be noted that the dominant arguments in this literature developed from efforts to try and make sense of contemporary economic processes: the two seminal contributions are by Friedmann (1986) figuring out implications of the ‘new international division of labour’, and by Sassen (1991) trying to understand ‘the composition of globalization’. Neither Friedmann (1986) nor Sassen (1991) begins with, or develops, a theory of cities per se. What cities are, and how they relate to one another, are questions that are left unexamined except as a vague hierarchical premise. It is the latter that leads to the privileging of the few. Taylor has recently argued that this situation can be rectified through a confrontation of the idea of a world city network with the ideas of Jane Jacobs (1969, 1984, 2000) who treats cities as key economic entities. For Jacobs, vibrant cities expand economic life in ways that diversify economic processes within the city (she calls them ‘the little movements’) that in turn lead to complex relations with other cities (she calls these the ‘big wheels’ of commerce). Such a new conceptual context also recognizes Robinson’s (2005: 757) emphasis on the inherent complexity of cities. Following this line of argument, the use of advanced producer services to define the world city network is not that they encompass most or even a sizeable proportion of the myriad complex flows between cities, rather it is that, as cutting-edge industries, they are critical indicators of vibrancy in the Jacobs sense (Taylor, 2006). Today, where there are concentrations of advanced producer services, there is manifest expansion of economic life.

Underlying both limitations and critiques of the world cities literature is the idea that these studies have largely failed to transcend their prime scale of interest, the global. World city studies need to address leading cities in the global economy to be sure, but there is no need to be ghettoized into one-scale analysis. Quite simply, the world city network is built upon ramifications of operations across different scales through macro-regional and national to local (Parnreiter, 2003). Although recent attempts to analyse the city network in greater geographical detail (Brown et al. 2002; Parnreiter, 2002; Derudder et al., 2003; Rossi and Taylor, 2005) have extended our understanding beyond a limited number of leading cities, they fail to explain the connection to other scales. That is, these analyses are the end-result of ever-larger data sets that depart from the logic of considering only the nodes at the global scale, but they are weak at revealing the way in which urban networks at national and regional scales are connected to the wider world city network (but see Hall and Pain 2006).

Global Commodity Chains

In mainstream economics the usual way of analysing large-scale commodity flows has been through international trade theories. In general, these theories assert that, in an international economy, economic development emerges from whatever absolute, comparative or competitive advantages a country may have. Without recourse to a refined analysis, it can be noted that the basic assumptions underpinning these classical trade theories are fatally flawed by their state-centric spatiality. The underlying supposition that national states are the spatial actors controlling the global economy is indefensible, while the spatiality of trade is of course far more complex than only ‘one step’-trade between producers in one country and consumers in another (Díaz, 2003: 47-63). For instance, both intra-firm and intra-industry trade constitute an important – and increasing – share of world trade. Furthermore, in the contemporary global economy, production and trade patterns are mostly guided by the strategic behaviour of firms, while (fixed) factor endowments of countries have become less important in explaining commodity flows. Both industrial organization trends of outsourcing based on new technologies and economic policies of liberalization have made national states clearly insufficient as units of analysis. The overarching analytical disjuncture is that, in spite of the empirical evidence for the importance of trans-state economic flows (as presented in Dicken, 2003), classical theories of economic development have generally been organized around an inter-national rather than trans-national framework. It was only when production and trade became interpreted, via the world-systems writings of Hopkins and Wallerstein in the 1980s, as a series of cross-border firm-based transactions, that a trans-national literature on trade emerged.

Wallerstein and his colleagues introduced the concept of ‘commodity chains’ as ‘a network of labour and production processes whose end result is a finished commodity’ (Hopkins and Wallerstein, 1986: 159). The emphasis was on the material inputs en route to final consumption, the realization of capital. However, it was only with the advent of the work by Gereffi and Korzeniewicz (1994) that we can speak of a relatively coherent paradigm1 of ‘global commodity chains’ focusing on value creation, its distribution and control within transnational networks, which extend in a chain of nodes from raw material exploitation, primary processing, through different stages of trade, services and manufacturing processes to final consumption and waste disposal. Taken as a whole, a global commodity chain may link up different organizational models of production, trade and service providing processes, and can even include the generation of externalities and inter-market spill-overs (Gereffi and Kaplinsky, 2001; Pelupessy, 2001). The global commodity chain approach is basically an analytical political economy tool, where attention is focused upon the systems of value creation employed by firms and other agents. The connections between these units are conceived of as a chain linking sequences of imperfect markets, reflecting the market power asymmetries that lead to unequal value distributions. The dynamics of any specific chain are determined by the input-output structure of the nodes or chain segments, their geographical location, institutional and socio-political framework and their governance or control structure. The latter gives the commodity chain its hierarchical and unequal character, since ‘[a] chain without governance would just be a string of market relations’ (Humphrey and Schmitz, 2001: 20).

There are three main ways in which the global commodity chain approach provides an effective analytical tool for understanding the governance structure of specific chains and their significance. First, there is the capacity of participants in the chain to appropriate rents and the barriers to entry of the different nodes. These have a dynamic character, and may be eroded by potential competition (Kaplinsky and Morris, 2001). Second, there is the behaviour of lead firms involved in the governance structure. This may refer to direct co-ordination of activities on a global scale, the identification and appropriation of dynamic rents, the assignment of specific roles to chain agents, as well as indirect rule setting for the chain. Third, there are the different types of chains defined by the upstream or downstream location of lead firms(s), the kind of dominant or core production factor which they control and others.

Rather than conceptualizing the global economy through a series of economic containers, the global commodity chain approach allows us to focus on system-wide networks of labour and production processes. As a consequence, this approach is better geared to reveal the spatial ordering of social relations that are being continually reproduced through everyday practices of production, distribution and consumption in a globalized economy. Nevertheless, because the focus of the approach is upon the spaces of flows involved in the production of particular commodities, commodity chain research has been less successful in specifying how chains contribute towards the complex dynamics of the broader economic system in which they are located (Bair, 2003). Moreover, global commodity chain research also lacks a comprehensive treatment of the spatiality of commodity chains (Leslie and Reimer, 1999). Despite the theoretical insight that a global commodity chain connects inputs from different parts of the world, pulls them together in specific sites and provides output to different locations, the study of the actual geographies of these commodity chains has remained relatively underdeveloped. Although a number of writings have focused on the role of global commodity chains in regional development and the potentials of localities (e.g. Schmitz, 2000, and some contributions in the volume edited by Hughes and Reimer, 2004), an overarching spatial conceptualization remains an unfulfilled task. That is, there is a critical need to trace commodity chains spatially, as place-bound linkages between different localities.

Some would go further in this critique. Coe et al. (2004) and Smith et al. (2002) argue that, despite the global focus of the commodity chain approach, it still remains preoccupied with the nation state as geographical scale of analysis. They back this up through reference to Gereffi’s (1999) paper on the prospects for ‘industrial upgrading’ which he defines as “improving the position of firms or nations in international trade networks” (1999: 39). The result, Coe et al. (2004) and Smith et al. (2002) argue, is that global commodity chain analysis “has surprisingly little to say about regional and subnational processes, because of the focus on the international dimensions of commodity chains and global divisions of labour” (Smith et al., 2002: 49).

Another more specific limitation in global commodity chain research is that the empirical scope of analysis has been somewhat limited, with the majority of studies focusing on a small number of primary commodities and industrial sectors. Services, in particular, despite an early call for exploring the “service sector nexus” (Rabach and Kim, 1994), have not been analyzed particularly effectively in commodity chain research, either in industries where the service constitutes a commodity in its own right or where it is used to facilitate the production of other more tangible commodities. It is, perhaps above all, the lack of attention that has been paid to understanding the crucial role of producer services in setting up and sustaining global networks of production that has been the most crucial omission (Daniels and Bryson, 2002).

World-systems integration

The main contention of this paper is that the route to integrating world city network with global commodity chains is through emphasizing their common world-systems origins. But before we proceed it must be noted that their relations to the development of world-systems analysis are quite different. For instance, whereas in early Political Economy of the World-System Series volumes, No, XVI on commodity chains could reproduce pioneer papers by Wallerstein and Hopkins, the founders of the world-systems approach (Gereffi and Korzeniewicz 1994), these authors are absent from No. XIV on “Cities in the World-System” (Karaba 1991). In fact there has been a debate about the neglect of cities in world-systems analysis (Smith 2003). Wallerstein’s (1984) only paper on ‘cities’ is actually about urbanization; a process that he has subsequently renamed ‘de-ruralification. Thus, despite early important studies within this school of thought (e.g. Chase-Dunn 1984; Timberlake 1985; King 1990) cities have not been central to world-systems research in the way that commodity chains have. This means that although core-periphery distinctions are central to global commodity chain analysis, allusions to links between the world city network and core-periphery are limited to their apparent (if not commonsensical) coincidence. The real linkages remain obscure and are passed over in silence. For instance, in the seminal paper that was one of the world cities literature’s original texts, Friedmann (1986) explicitly invokes world-systems analysis in his hierarchical classification of cities through including a division between cities in ‘core countries’ and cities in ‘semi-peripheral countries’. But the world-systems analysis Friedmann calls upon remains at this basic conceptual level; there is nothing on how cities are implicated in the creation of core-periphery structures through commodity chains. Cities are described as ‘control and command centres’ through their housing of multinational corporate headquarters, but how this translates into the operation of, and control over, commodity chains is not broached. Saey (1996: 122) is the most severe critic in this respect arguing that the apparent spatial correlation between world city-formation and core processes is in and by itself insufficient to speak of a systematic relation between both structures. As a consequence, it can be noted that the title of Knox and Taylor ’s World Cities in a World-System (1995) reflects an ambition rather than a reality.

However, as pointed out in the previous section, Taylor (2004, 2006) has recently brought back world-systems thinking into the study of world cities by using Jane Jacobs’ categories of economically dynamic and stagnant cities, albeit again without reference to commodity chains themselves. It is Parnreiter (2003, et al 2005) who has addressed the problematic absence of conceptual linkages between both approaches in an analysis of world city formation in Mexico City and Santiago de Chile and this work that is discussed later in this section.

Core-Periphery Structure

In contrast to our argument here, Dicken et al (2001: 99-100) have explicitly complained about the ‘world-systems ancestry’ of commodity chain analysis with its core-periphery framework, and Leslie and Reimer (1999: 404) have objected to the ‘highly dualistic language’ that leads to a ‘surface level’ geography. Many core-periphery models that abound in the social sciences can be justly criticized for their simplistic dualism but this is not the case with world-systems analysis. Hence the criticisms above are based upon a misunderstanding of the subtleties of the core and periphery concepts in world-systems analysis. Rather than ‘surface’ outcomes, core-periphery in world-systems analysis is a deep structure from which both global commodity chain formation and world city network formation derive and whose mechanisms shape both types of spaces of flows. The key point about core and periphery in world-systems analysis is that they are not unchanging geographical categories, rather they are the spatial structures underpinning a very dynamic world-economy.

At the simplest level, core and periphery can be seen as bundles of systemic mechanisms that create contrary outcomes. Core processes are associated with historically high wage, high tech, high profit inputs and outcomes (e.g. the work of lead firms in managing commodity chains is an example of a core mechanism), peripheral processes are associated with the opposite. Geographically, these processes have tended to concentrate and segregate (reflecting the evolution of market power, entry barriers and forms of chain governance). This produces places where core processes dominate and where peripheral processes dominate. For short-hand purposes these may be designated as ‘core’ and ‘periphery’ but they must never be seen as purely one or the other: so-called ‘core countries’ encompass numerous, if minority, peripheral processes; and the opposite is so for ‘peripheral countries’. Thus Wallerstein’s (1979, 2004) conceptualization, far from producing a simple ‘dual world’, suggests a most complex geography of interweaving contrary processes based upon a quite sophisticated social model. Importantly, in some places the contrary processes are approximately balanced – the concentration/segregation has not transpired – and with no dominant processes, the outcome is referred to as semi-periphery.

The important point here is that the core-periphery model is central to both global commodity chain and world city network analysis. As regards global commodity chain analysis, a major reason for using the model is to trace chains across the core-periphery boundary to expose the inequities of the geographies of how value is added and profit taken within the chain. In the case of world city network analysis delineating core/semi-periphery/periphery by state jurisdictions has been replaced by city-based delimitations. For instance, the core is defined as locales where core processes dominate: the cities and city-regions of the three ‘globalization arenas’ – northern America, Pacific Asia and Western Europe and peripheralization can be equated with Jacobs (1984) description of the pernicious effects of dynamic cities on vulnerable locales beyond their city-region in an extension of Frank’s (1969) dependency thesis. Obviously this revision of core-periphery model takes the interweaving of the two processes to a more complicated geography than the usual definitions employing states as the constituents of the spatial categories (e.g. Arrighi and Drangel, 1986; Terlouw, 1992). This interpretation replaces the weak use of world-systems terminology in Friedmann (1986) where ‘core ‘ cities are designated because they are located in ‘core countries’.

What are the implications of this for integrating global commodity flows with the world city network? First, basically all global commodity flows in the world-economy include core-formation processes, and that is why the chain cannot be initiated and sustained without world cities, wherever they may be located. These processes are needed to exercise control over commodity chains. Commodity flow branches bring value in from cities at all nodes and this leads to further consequent flows of profits to cities. Second, all cities are integrated into commodity chains, and that is how they are connected to the world city network, even if their own input into the chain is only of peripheral character. Thus, it is only from being within such spaces of flows that cities can be sustained within the world-economy. Global commodity chains and the world city network are therefore integral to the spatiality that is the core-periphery structure of the capitalist world-economy.

World City Network Process in Global Commodity Chains

A world city can be seen as a critical node within commodity chains, precisely for its insertion of advanced services into the production process2. Thus, every world city is a service node in and for a myriad of chains, thereby obtaining its overall centrality. Our argument is that it is service intermediaries, the so-called producer services, located in world cities that maintain the connections between the networks of world cities and commodity chains. The innovation here is the assertion that service intermediaries, which provide the connectivity within urban networks, are also of particular significance for the efficient functioning of global commodity chains because they offer key inputs. From a bank’s initial lending of capital to initiate production, to the use of an advertising agency’s services to facilitate final consumption, the provision of producer services through cities is essential in linking dispersed production and consumption sites and, therefore, to the successful operation of commodity chains. We illustrate this for the coffee global commodity chain.

The coffee commodity chain constitutes a traditional primary commodity with long established systems of supply and demand across the globe, and is also currently an arena of rapid change including major price movements, significant readjustments in the distribution of income amongst the various participants within the chain (as the industry has been still further globalized) and major transformations in both how the final product is marketed and where (Talbot, 2004: Daviron and Ponte, 2005). A number of studies have attempted to apply a commodity chain (or value chain) analysis to the sector (Pelupessy, 1999; Fitter and Kaplinsky, 2001; Talbot, 2004; Daviron and Ponte, 2005). Their findings illustrate the economic polarization in the sector. On the one hand, despite the massive role that supermarkets play within the retail of coffee, the roasting companies have managed to maintain strong control of the coffee commodity chain. This has been achieved particularly through massive investment in advertising, bonus systems to maintain brand loyalty, blending and other non-price competition instruments (Pelupessy and Díaz, 2006). On the other hand, austerity reforms via structural adjustment have robbed small growers of access to credit and state-sponsored marketing and extension services. As such, now “producers sell only atomistically into commodity markets. These atomistic producers lack the capacity to combine forces” (Fitter and Kaplinsky, 2001). It is this more than anything that lies behind the crisis facing coffee producing areas today.

Nevertheless, for all the strengths of commodity chain analysis, there is little or no recognition of the critical role of finance in the various stages of the production cycle (how it is obtained, managed and safe-guarded at different points along the chain) and the changing relationship between the major players in the sector and the financial markets in the liberalized world of the past couple of decades (particularly in the expanded complexity and reach of trading in futures). There is also no explicit place for advertising agencies except as inputs to either roasting or trading activities. To an extent, this is because of the way in which commodity chain analysis has tended to treat services as separate chains within which knowledge is the commodity traded (Clancy, 1998; Rabach and Kim, 1994). However to do so in the case of producer services has the effect of isolating the analysis of individual commodity chains such as coffee from the necessary service providers who enable the development and reproduction of the chain. Furthermore, it is worth reiterating that these are producer services and, as such, their knowledge commodity is not an end product in itself. Producer service knowledge commodities feed into other commodity chains that do lead to a final realization of capital.

The four major roasting companies are major global corporations and their myriad engagements within globalization are exceedingly complex. This global complexity is managed through headquarter and other governance levels as part of the command and control functions of world cities. These are the ‘decision’ cities through which advanced producer services are contracted (Rossi et al., 2007). These services are carried out in ‘service’ cities where the professional, creative and financial work takes place. It is this work that, to a large extent, makes possible the operation of the coffee commodity chains. A company like Nestlé will support its coffee commodity chains using: banking/financial corporations, both local and global, in order to fund expansions; both insurance and law firms will be engaged for all projects that entail any risk; accountants and management consultants will be used to audit accounts and enhance profit margins to grow shareholder dividend; advertising agencies are crucial to marketing both nationally and globally. Thus, every stage in the commodity chain will involve professional, creative or financial inputs from cities; often chains will run through local cities (near production nodes), at other times through major cities distant from production nodes (for example the use of major advertising agencies in New York or major insurance corporations in London ). Clearly, in order to function in an increasingly complex and globalizing world economy, commodity chains have to disseminate through city networks.

Global Commodity Chain Process in World City Network Formation

Through modelling commodity chains we can draw attention to inter-city relations beyond the leading world cities, since these commodity chains reveal how many smaller settlements are connected to the world city network through the various flows of capital, labour, goods, services, etc. Global commodity chains do explicitly include the stages of primary production, which are located in rural areas and related to city-based transformation and trade processes (Jacobs 1969). Such an examination may thus help to develop a more spatially refined analysis of the world city network, depicting also the specific roles of those cities seemingly at the margins of the world city network. In order to do this, the data on the location strategies of individual companies may be extended with information on the geography of their clients (thus grasping backward and forward linkages). To this end, we need data on the geographic location of the clients of advanced producer firms (see Rossi et al. (2007)). In particular, we need analysis of service provision through cities as a process that directly contributes to commodity chains; Parnreiter et al. (2005) have carried out just such a study of a specific financial process in Mexico City and Santiago.

This research departs from identifying the “missing link” between two findings: Mexico and Chile are increasingly integrated in a variety of global commodity chains, and globally organized advanced producer services are highly centralized in Mexico City and in Santiago. It remained an assumption, however, that advanced producer services in both cities are essential in articulating production in the two countries with the world market. If world city-ness is to be understood as a process (i.e. providing advanced services for making global production feasible), then the multifaceted links between firms whose economic activities are geared towards the world market and service providers in a specific city have to be revealed.

Parnreiter et al. (2005) set out to explore one of those links through a study of the involvement of (local and global) financial institutions in issuing of bonds and shares of leading corporations in Mexico and Chile, starting from the assumption that the provision of this kind of financial service represents an important input for the functioning of a commodity chain. The study shows that between 1982 and 2004 most of the bond and share issues of the 50 top ranked Mexican and Chilean enterprises were handled by global financial institutions such as Citibank/Citigroup, JP Morgan/Chase Manhattan, Bank of New York, Banco Santander or ING Bank. More importantly, however, it was shown that the big corporations in Mexico and in Chile prefer those global financial institutions that maintain offices in Mexico City and/or Santiago de Chile. Demand for financial service intermediaries is, therefore, concentrated in firms operating both at a global and a local scale. As a result, the locational strategies of banks and other financial institutions can best summarized through the ’glocalization’ concept (Swyngedouw, 1997) or, in the words of UBS: “We operate in two locations: Everywhere, and right next to you”. Two New York banks with local offices are particularly important: Citibank/Citigroup services four of the Top 10 firms in Mexico and two of the Top 10 in Chile, while JP Morgan/Chase Manhattan provides financial services to three of the Top 10 firms in Mexico and to four of the Top 10 in Chile.

Parnreiter et al. (2005) attribute this preference for ‘glocal’ financial institutions to several factors. First, leading companies in Mexico and Chile seek out banks with sufficient global experience in order to place bond and share issues at major financial markets (in this case New York, Luxembourg, Frankfurt). Second, it is reasonable to assume that the Mexican branch of a transnational company chooses a bank already involved in stock market transactions of the headquarter in, say, the United States. Third, the importance of a local office lies in so-called “soft” factors, such as the initiation of business deals, an in-depth analysis of the company that sets out to issue bonds or shares, preparation of the “pitch material” (information on financial position, investment strategies, profile of costumers, production description, etc.).

It is in this way that commodity chains instituted by leading corporations in Mexico and Chile are contributing towards Mexico City and Santiago ’s positioning in the world city network. For instance, Citibank/Citigroup generate high value work in both cities through providing key inputs for several global commodity chains: by enabling investment for the Mexican oil company PEMEX or the Chilean copper company Codelco through bonds and shares at stock markets; by selling financial services to major retailers (e.g. Wallmart Mexico, Controlada Comercial Mexicana) creating new commodity chains. Citibank/Citigroup acts therefore as an inter-locker in the world city network in their facilitation of myriad commodity chains. By playing a crucial role in both networks, ‘glocalized’ financial institutions provide the indispensable connection between the world city network and global commodity chains: all global commodity chains ‘run’ through world cities, and all cities are integrated into commodity chains.

Conclusion: what might an integrated research agenda look like?

Our ultimate goal is to produce a synthesis of world city network analysis and global commodity chain analysis and this paper is intended as a first step towards that objective. We have argued that both analytic frameworks have things to learn from each other and this can be a springboard to possible, eventual integration.

The first task is to create dense empirical evidence on how producer service firms in world cities interact with firms in commodity chains. The challenge consists in really documenting these flows of information, capital, etc. in at least two ways. Forward-linkages of producer service firms and the (service) backward-linkages of firms in commodity chains must be mapped in order to grasp (a) the geographical reach of operations which emanate in world cities but which in many cases will go beyond the world city network; and (b) the spatial stretching of global commodity chains towards specific world cities inputting producer services. In addition, the characteristics of the flows between producer service firms in world cities and firms in commodity chains have to be to assessed as regarding the core-ness of the processes involved (e.g. as value creation, possibility to and the grade of monopolization).

Second, this new knowledge has to be fed back into the conceptualization of the two types of spaces of flows in order to overcome the limitations of each model. As regards world city network formation, to identify the manifold linkages between world and non-world cities across different scales will help to understand how global cities relate to globalizing cities. Another expected result is a refined analysis of world city network formation itself. Mapping the geographical scales of service provision in a specific city, and detailing information on the core-ness (or not) of these inputs will lead to a comprehensive understanding of how big this city’s wheels are (to use Jacobs words) in making global production feasible. As to global commodity chains, the full integration of services into their analysis and the related goal to treat the spatiality of the chain comprehensively are not ends in themselves. Rather, both efforts might lead to a more detailed understanding of where(from) control over production is exercised and how and where value is created and appropriated.

The cross-fertilization of the two models suggested represents the first step to their integration. If the integration proposed proceeds and eventually succeeds, world cities and global commodity chains will no longer be treated separately. The creation and (unequal) distribution of value along commodity chains is organized in and governed from world cities, while – vice versa – the capacity to create the means of control of value creation and distribution and the power to deploy them is the underlying force in world city formation. This reciprocal relationship is because core-processes are necessary for and hence inherent to both the organization of commodity chains and the formation of world cities.

 


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NOTES

1. However, subsequently, and perhaps unsurprisingly, the main application of the global commodity chain concept has been in the study of the complexity of contemporary economic production, while the underlying core-(semi-) periphery structure of the world system and the excessive functionalism of the theory were either questioned or omitted from the framework of analysis altogether. The efforts of Gereffi and others are, therefore, not only an attempt to operationalize world-systems analysis for the empirical study of cross-border firm based actions, but also to loosen some of its restrictive assumptions (Henderson et al. 2002: 440).

2. In addition to this extant complexity, the markets are themselves highly dynamic, creating new threats and opportunities that the roasting companies have to respond to with the help of their global service providers. Moreover, it is the commercial milieu of the cities of the world city network itself where the consumption styles of urban consumers are created and recreated. The shifts in consumers’ preferences towards non-material or symbolic attributes of goods are introduced and developed in urban areas, and frequently these are related to growing income levels. This suggests that there are more points of contact between commodity chain and world city network approaches: by recognizing the increasing consumer orientation of especially buyer-driven global chains, cities play an essential role in shaping consumers preferences, fashions and habits, which ascertain the flows of information along the chains; this again brings into the analysis consideration of the role of advertising and other producer services in creating and adapting new markets for coffee. Considerable internal changes to the governance of the coffee chain have been occasioned by new entrants into the retail market such as Starbucks and their competitors. These new firms have themselves made considerable use of professional and creative services. It is in major cities that these cutting edge marketing initiatives transforming traditional commodity chains are being developed and diffused. Thus, the neat circular argument for services beginning in cities at all stages of the chain and capital in the chain being realized through new retailing innovations in cities.

 

 


Edited and posted on the web on 1st October 2007


Note: This Research Bulletin has been published in Global Networks, 10 (1), (2010), 12-34