The Globalization of the Advertising Industry: A Case Study of Knowledge Workers in Worldwide Economic Restructuring
Funded by: Alfred P. Sloan Foundation (2006-2007)
Peter Taylor, Jon Beaverstock and James Faulconbridge
We interpret globalization as contemporary economic restructuring, historically distinctive because of its worldwide scope. All economic restructurings produce winners and losers; today's changes have global ramifications with jobs transnationally mobile at levels never previously experienced. First much production, and latterly many services, have been moved or outsourced ‘overseas' from rich countries to take advantage of cheaper labor costs. But this is only part of the story. All economic restructuring creates new work and in the case of globalization one of the key expansions has been in workers that receive, use, and deploy knowledges that are required to operate efficiently and successfully at transnational scales of business. Concentrated in large metropolitan areas, this new ‘knowledge work' focuses on two functions: ‘control and command' to run global operations (executive, strategic, management tasks), and ‘advanced producer services' to facilitate global operations (financial, professional, and creative specialist work).
Advertising is a key advanced producer service in contemporary globalization. The industry has been fuelled by ever-increasing consumer expenditure that relies on advertising to develop, sustain, and spread markets for products. It is through the success of advertising campaigns that capital is realised globally. This ‘global consumer world' is a projection of a consumerism that was largely pioneered in US society in the first half of the last century – many of the features that today we identify as globalization (e.g. ‘global brands') were originally experienced transnationally as ‘Americanization' in the mid-twentieth century. The modern advertising industry was both a creator of, and created by, this original US mass consumerism and advertising continues to be the archetypal American advanced producer service in contemporary globalization. Thus, this is an industry where we would expect the USA to be the major ‘winner' – more knowledge-based jobs rather than a decline in employment - in the current round of economic restructuring. Specifically, US cities, the creative environment they offer and the innovation that results, should see competitive advantages reaped from the cutting edge advertising work and workers present, as a result of the influence of globalization.
The advertising industry is distinctive in its organisational structure. As it has grown, major transnational corporations have emerged through the usual processes of mergers and acquisitions (by 2001 the top 5 firms shared 75% of global advertising billings (Advertising Age Annual Report, 2002)). However, this growth process causes problems for advertising practice as acquisitions and mergers often bring the accounts of rival clients together into one advertising firm. Clearly advertisers cannot service clients that are in competition, but neither does it make commercial sense to choose between clients and lose a lucrative contract. Thus all global advertising firms operate in practice under the umbrella of ‘holding companies/groups' (e.g. Omnicom) that constitute a collection of ‘advertising agencies' (e.g. BBDO Worldwide) with ‘firewalls' between them so that clients in competition can be serviced within the same group but by different agencies. This organizational form corresponds to the division of knowledge work identified above: the holding companies do the strategic managerial work, and the advertising agencies provide the creative design producer services. With such an overt division of labor, the advertising industry provides an ideal case study to explore the relations between the two knowledge-work functions, and to compare the consequences for jobs in advanced economies such as the USA of different labor market processes under conditions of contemporary globalization.
Research questions and design
Our general purpose is to examine the amount of work done in selected offices that is non-local, i.e. relates to places beyond a city's hinterland. The non-local will be divided into national and transnational – the former represents work that has been done by leading advertising companies since nationalizing of the scope of the business in the middle of the last century; the latter represents work done resulting from contemporary globalization of the business. The focus will be on identifying jobs that are necessarily carried out in a given city; we use the term ‘sticky' to describe this process since these are jobs that cannot be easily relocated.
Since our interest is directed at global work, we will focus on offices in three US cities: New York, Detroit, and Los Angeles. This choice is justified as follows. New York remains the ‘global advertising centre' of the world (our recent research shows New York outstrips its rival London more in this service than any other through its concentration of agencies, and is totally unchallenged for holding company headquarters). Detroit and Los Angeles are chosen because they are the sites of US-led global industries that rely on huge advertising budgets – automobiles and films respectively. Advertising is one of the service sectors where Los Angeles clearly leads Chicago, and Detroit is a genuine surprise in our previous research wherein the city outranks in advertising billings more important cities that easily outrank it in other services (such as San Francisco, Washington, Atlanta, Boston, Dallas and Houston).
Question 1. How have New York, Los Angeles and Detroit fared in terms of advertising billings and jobs in the recent past and how do they compare to other leading US cities?
Question 2. What is the quantity and proportion of work (jobs) that strategic/ management knowledge workers perform that is non-local and can be attributed to globalization?
Question 3. What is the nature of this work, and specifically, how far down the management hierarchy do ‘sticky' jobs exist before they becomes ‘unsticky' and therefore subject to possible job transfer?
Question 4. What are the various criteria for making jobs sticky in these strategic/ management roles?
Question 5. What are the recent (1990s onwards) past trends in non-local work identified in Q2 and is there any evidence that offices that are traditionally referred to as ‘post-boxes' (offices that have no role in knowledge-intensive labor processes but simply deal with the logistics of distributing an advert in their host country) have taken on more strategic roles as knowledge-intensive advertising jobs become more mobile and unsticky?
Question 6. What are the future prospects (possible trends) of non-local work identified in Q2, and specifically, will the pattern of change in the sticky-unsticky boundary identified in Q5 be subject to change?
Questions 7-11. Repeat the above five questions for the creative advertising producer service jobs in agencies (account management, planning and creative/ design work) and examine whether they have exhibited a greater or lesser degree of stickiness.
Question 12. What are the similarities and differences between strategic/ management and advertising producer service work (jobs) in terms of global scope?
Question 13. What are the similarities and differences between strategic/ management and creative/ design work (jobs) in terms of the stickiness and where labor movement might occur?
Question 14. What are the similarities and differences between strategic/ management and advertising producer service work and jobs in terms of trends and future prospects for global decentralization?
Question 15. What is the relationshipbetween the quantitative trends from question 1 and the findings from the remaining questions? (Which trends are discernible in the statistics and which are not?)
The research design will employ complementary use of quantitative and qualitative methodologies. The former will use two sources of data: AdAge Annual Reports from 1990 for information on billings, and Census of Employment data for employment change 1990 and 2000.. This will particularly involve question 1 (which provides for the statistical context of the research) and question 15 that explores how the quantitative analyses relate to the qualitative material (see below). Using SPSS statistical software we will analyse the available data to answer these questions through a focussed analysis of the global distribution of agency billings, holding company profits, and city jobs since 1990/91. This will involve updating previous research and customising it (creating new measures) specifically targeted at fulfilling this research's aims. This part of the study will provide important background context of the advertising industry across the world as well insights into the role of the three chosen cities.
The second methodology will draw on our extensive experience of conducting in-depth interviews with key stakeholders in producer service firms to draw out the implications of globalization for advertising jobs in the case study cities. In particular, interviews will allow understanding to be developed of the processes that have reconfigured and are reconfiguring the nature and role of knowledge workers in advertising agencies in each city over the past twenty years, and those currently ongoing. The evolving role of these offices in the global strategies of advertising agencies and groups will be probed - as well as the relationality between US and other ‘world cities' that exists because of the knowledge work centred there - in order to explore how the global organizational networks of advertising agencies are structured, something that ultimately defines the type of jobs that remain in (rather than being outsourced from) the cities studied. To collect such data a research design will be used that culminates in the completion of 30 interviews, made up of 24 interviews with creative producer service workers in advertising agencies (eight interviews in each city with representatives of four agencies) and six interviews with strategic managerial workers in the holding companies (two interviews with representatives of the three leading holding companies in New York). This division reflects the relative abundance of creative producer service workers to strategic management workers in the advertising industry. Existing contacts, many of which are with senior executives in advertising agencies, will be reactivated to gain access for this work.