GaWC Research Bulletin 342

GaWC logo
  
 
  Gateways into GaWC

This Research Bulletin has been published in Urban Studies, 48 (13), (2011), 2749-2769.

doi:10.1177/0042098010391294

Please refer to the published version when quoting the paper.


(Z)

The Location and Global Network Structure of Maritime Advanced Producer Services

W. Jacobs*, H.R.A. Koster** and P.V. Hall***

Abstract

Within research on world cities much attention has been paid to the role of advanced producer services (APS) and their role within both global urban hierarchies and network formation between cities. What is largely ignored, conceptually and empirically, is that these APS provide services to firms operating in a range of different sectors. Does sector-specific specialization of advanced producer services influence the economic geography of corporate networks between cities? If so, what factors might explain this geographical pattern? This paper investigates these theoretical questions by empirically focusing on those advanced producer services related to the port and maritime sector. Our empirical results show that the location of AMPS is correlated with maritime localization economies, expressed in the presence of ship owners and port related industry as well as APS in general, but not by throughput flows of ports. Based upon the findings we address some recommendations for policymakers.

Key words: global network, world city, port city, advanced producer services, maritime transport


Introduction

Within the literature on world cities and urban networks, considerable empirical attention has been focused on the intra-firm networks of advanced producer services that connect different cities with each other, so enabling production of goods and services on a global scale (Sassen, 2002; Taylor, 2004). The different types of advanced producer services (APS), e.g. finance, insurance, consultancy, are treated as a distinctive sector that serves global production functions and that tends to agglomerate within ‘world cities’ or ‘global cities’. However what is largely ignored, both conceptually and empirically, is the fact these types of firms provide advanced services to other firms that operate within entirely different sectors (cf. Jacobs et al 2010). So, while Sassen (2010) reaffirms that these APS provide ‘organizational commodities’ to the support the command and control functions of their global operating clients whatever the sector in which those clients operate, the possibility that such interactions can lead to sector-specific specialization amongst APS may be under-appreciated. This is problematic to the extent that the ‘sector’ in which global flows of finance and information are organized is somehow regarded as monolithic and hence separate from the resource, manufacturing or consumer services sectors of the ‘real’ economy that it serves. In short, the underlying depiction of the advanced services sector as relatively independent from the economic sectors it serves bears closer examination.

In contrast to the focus on globally sourced and provided advanced services is an alternative, but not necessarily incompatible, perspective which focuses on the interaction between the consumers and providers of services and other production inputs in local economies. From urban economic theory it can be argued that the provision of advanced services through interaction with clients within particular sector-specific ensembles or clusters (cf. Porter, 1990) or across different sectors (Jacobs, 1969) can result in specialization and development of specific services. Frenken et al (2007) refer in this context to a ‘related variety’ between different industries in a region. Such sector-specific specialization of advanced producer services (APS) raises the possibility that a different location pattern than that predicted by current world city analysis might result as such services might agglomerate in the proximity of the industry to which they provide the services-in-question. This alternative perspective may be compatible with that of global city theory to the extent that sector-specific APS are found to locate in those places which contain the command and control functions of the sector(s) they serve.

The central question of this paper then becomes to what degree does sector-specific specialization influence the location pattern of advanced producer services and the spatial configuration of inter-city networks? We propose:

H1: Sector specificity of advanced producer services influences the location pattern and the spatial configuration of urban networks.
Exploring this hypothesis raises difficult methodological questions about the conceptualization, definition and measurement of the advanced services sector; how narrowly or broadly should the boundaries of the advanced services sector – and specialized portions within it - be drawn? In this study we will contribute to the debate by adding such sector specificity by focusing on those APS involved in the maritime transport sector (Jacobs et al, 2010). The maritime transport sector is an intriguing site for this research because of ongoing debates about the relationship between port activity and the economies of port cities (Grobar 2008; Hall 2009). Although the maritime transport sector is by definition highly mobile, its core activities (transhipment, stevedoring, warehousing, logistics) and the global flows of commodities it facilitate concentrate within seaport nodes located in major metropolitan regions. Maritime APS (hereafter AMPS) do not necessarily share the same need for seaport infrastructure as transportation firms, but location near nodes of transportation activity might be necessary and beneficial to sustain business relations and monitor market demands. Furthermore, to the extent that global command and control functions of the global shipping and port related industry agglomerate in specific places, AMPS may locate in proximity to these localization economies. The empirical question then becomes to what extent these specialized maritime advanced producer services agglomerate nearby major transport nodes such as seaports, and/or in proximity to global shipping and port related localization economies? We propose:
H2.1: Maritime advanced producer services agglomerate nearby seaports and transhipment nodes of commodity flows.

H2.2: Maritime advanced producer services agglomerate in proximity to localization economies of the global shipping and port related industries.

On the other hand, it might be the case that while specialized advanced maritime producer services (AMPS) emerged and historically evolved in the direct spatial proximity of seaports, their direct spatial proximity ceased to be important over time. The spatial and functional-economic relationships between cities and ports have changed fundamentally during the second-half of the twentieth century (see Bird, 1963; Hoyle, 1989; Hall, 2007). Spatially, the increased intensity of port-industrial activity, in combination with urban growth, lack of available land for further expansion, and environmental constraints have led to the relocation of port facilities away from city centers. In economic terms ports have become less and less dependent on the urban labor market due to increased automation and operational rationalization. Cities have also become less dependent on ‘their’ ports for local economic growth, but often struggle - like many industrial centers in the developed world - to upgrade and diversify their economies. There is however recognition that port-city relationships still exist through more sophisticated - albeit less visible - forms within the tertiary sector (O’Connor 1989; Slack 1989; Ducruet & Lee, 2006) in the form of specialized advanced producer services. Some port cities have managed to economically diversify into thriving service based economies even though their initial advantage of deepwater access ceased to be important for growth (Fujita & Mori, 1996). Indeed, the world/global city literature emphasizes the agglomeration effects of advanced service providers. The question then becomes whether specialized maritime advanced service providers (AMPS) favour a location in proximity of other advanced services in world cities. We propose:

H3: Specialized maritime advanced service providers agglomerate nearby other advanced service providers.

Note that H2 and H3 are not alternative hypotheses; it is possible that AMPS locate in proximity to both seaports or maritime localization economies, and other advanced services. For this reason we maintain each as a separate hypothesis in the analysis. The structure of this paper is as follows. In the second section we deal with the issue of sector-specificity of advanced producer services in world city networks. We ask to what extent sector-specific specialization to the maritime transport sector affect their location pattern and network pattern. In the third and the fourth section we address our methodology and results. The conclusion considers the implications of the analysis for urban economic development.

Sector specificity in world city networks: maritime transport sector

Within world city research two different units of analysis are used. Some studies focus on the location pattern and network configuration of the largest multinationals on the planet, irrespective of the industry they represent (cf. Alderson & Beckfield, 2004; Wall 2009). The other approach focuses on the corporate networks of the largest advanced producer services in line with Sassen’s (2002) work on global cities, often making use of the database constructed by the ‘Globalisation and World City’ (GaWC) research network (Taylor 2004). The services that are considered as advanced and that are included in the analysis vary, but mostly they include finance, insurance, accountancy, law and advertisement. It is argued that it is the very nature of their business, namely to provide and control knowledge and capital intensive inputs for global producers, which makes these services the very ‘heart and soul’ of the capitalist world economy and that their geographical concentration at certain locations constitute ‘world cityness’ (Taylor 2004; Sassen, 2002; Friedmann 1986).

However, what is largely ignored in most studies on world cities (but see: Lambregts, 2008), is that these advanced services are provided to other firms that are often in entirely different sectors. This omission can be explained by the fact that most empirical studies focus on the geography of intra-firm networks at the expense of inter-firm relationships (Jacobs et al 2010; Lüthi et al 2010). The lack of attention to inter-firm relationships in the analysis of advanced service provision obscures two fundamental and related issues. First, by focusing on global hierarchical relationships in the organization of finance and data flows, the potential for sector-specific specialization of advanced producer services and hence the potential localization of these services away from the iconic world cities is obscured. Advanced services may be sector-specific as they are provided to other industries with a specific and distinguished demand for such services. For example, risk management of a fleet of oil tankers is something different than that of a fleet of lease cars. Not every advanced service provider holds the same sector-specific expertise and not every advanced service provider is competing in the same markets or for the same clients. Hence, taking into account a certain sector-specificity may provide a more accurate geographical picture of actual competing advanced producer services than is provided by conventional world city research.

Second, related to the issue of sector-specificity is geographical proximity. In urban and regional economics it is argued that firms benefit from being co-located or clustered in space since this allows the capture of positive economic externalities. Localization economies refer to external economies that are available to all local firms within the same sector or industry, whereas urbanization economies refers to externalities available to all local firms irrespective of sector and which arise as a result of urban size, population density and the location of certain facilities from the public sector such as universities or government administration. A special, dynamic, form of urbanization economies highlighted by Jane Jacobs (1969) refers to external economies available to all local firms in a city or region stemming from a variety or diversity of sectors. Continuous market and non-market (cf Storper 1997) interaction between firms from different sectors within geographical proximity can over time lead to specialization and a ‘related variety’ (Frenken et al 2007). From this argument it follows that specialized advanced producer services may be co-located in close proximity to the industry to which they provide these services, as well as in places with diverse and vibrant urbanization economies.

In this study we focus on the maritime transport sector for a number of reasons. First, the maritime transport sector is a major facilitator of the process of economic globalization (Levinson, 2006) as it links distant production clusters and consumer markets. Second, there has been neglect of physical flows within World City Network research (Derudder, 2006), which has tend to focus on intra-firm networks, air-links (Witlox & Derudder, 2005) and internet connections (Choi et al, 2007) instead. Within the maritime transport sector there is demand for advanced services: to finance ships and port facilities, to insure ships and its cargo, to have a legal representation in case of an incident, to have software solutions in supply chain management, to inspect ships and to provide technical expertise on damages. The geography of those specialized and sector-specific advanced producer services have not received much attention (but see Jacobs et al 2010; Hall et al 2010).

What factors might explain the location and network configuration of AMPS? Based upon on exploratory interviews with senior managers of AMPS firms (including maritime law firms, surveyors, insurance brokers, P&I insurance companies and correspondents, Lloyd’s agents, banks as well with ship owners), we can distinguish a number of factors. Maritime APS functions have differential requirements for geographical proximity to seaports and commodity flows, global shipping and port related industry, and to other APS. For some AMPS direct proximity to seaports and physical goods movement is important: in order to inspect or classify ships when in port, to inspect damage of ship or cargo, to legally represent the ship or cargo owners in case of damage etc. Although these activities imply higher educated professions, their activity tends to be routine and in real-time demand.

On the other hand we have the possibility of geographical proximity to other APS in which direct proximity to seaports and commodity flows is less relevant. An example is the cluster surrounding Lloyd’s market and the Baltic exchange in the City of London where the representatives of ship and cargo owners buy and share risk products from underwriters, fixed premium insurance companies and P&I clubs. These are highly capital intensive products in which proximity to financial services and specialized human capital becomes crucial. Agglomeration based upon this mechanism tends to apply to the global corporate decision-making offices of the APS firms. Here we can expect a considerable overlap with the conventional world city hierarchies (Taylor 2004; Taylor et al 2009). As the director of a major London-based marine insurance company expressed in an interview when asked about the importance of proximity to advanced services:
“This is the most important issue. In London, we have the Lloyd’s and Companies market close-by, the London broking community is very important to our business, there are of course a lot of capital providers like banks in the City and we are close to maritime lawyers, surveyors and other experts. London is currently a very expensive location to have office, but all this proximity to expert services more than compensates for the additional costs”
A third form of geographical proximity is with the customers of AMPS, the ship owners and other port related industries. A high concentration of ship owners at a particular location might attract offices of maritime advanced services, which is for exemplified by the relatively large concentration of London-based AMPS in the Piraeus-Athens urban region. Likewise, large ship owners might be inclined to open offices nearby centres of AMPS to facilitate the finance and insurance of their fleet. As expressed in an interview by a senior manager of a London-based marine insurance club:
“The high number of Greek ship owners in the UK P&I Club has indeed been a reason to set up an office in Piraeus. Basically, they demanded that. But we have historically been also doing a lot of Greek business from London. Greek ship owners have historically been strongly represented in London, exactly because of the services here. It’s a bit of a chicken and an egg story”

Institutional and historical factors may also influence the location and constellation of networks of maritime advanced services. The dominant position of London for example can be traced back to the heyday of the British Empire and the port of London in the late nineteenth century (see also Jacobs et al 2010). Although the empire disintegrated and the port declined, the city remained the international center of maritime advanced producer services up till this date. This history also helps explain the strong positions of former British crown colonies of Singapore and Hong Kong and their strong business relationships with London (Jacobs et al 2010). The relatively strong position of Scandinavian cities within maritime advanced services (e.g. Det Norkse Veritas) can also be attributed to a long history of seafaring in which these cities developed business expertise in terms of insurance and surveying early in the nineteenth century (see Johnstad, 2000). Such path dependent institutional evolution is also responsible for the fact that BIMCO contracts (Baltic and International Maritime Council) between ship owners, cargo owners and third parties are based upon English maritime law, with arbitration and hearings more likely to take place in either London or New York (under American maritime law). This provides these places with a considerable ‘jurisdictional advantage’ (Feldman & Martin, 2005) over all other places to attract and develop expertise.

Finally we need to consider other variables that might explain the location pattern and network formation and which are more related to conventional urbanization economies. The fact that a location is a capital city might influence the presence of AMPS as they seek proximity to maritime related public administration. Other urbanization externalities such as the presence of universities needed to be considered as well as some basic variables such as urban size or ‘pure’ geographical features. We proceed by first measuring the network of maritime advanced producer services, after which we model which factors best explain its structure.

Mapping the location pattern and network formation of advanced maritime producer services

Database Construction and Specification of the Network

Network analysis of nodes and links show us patterns of connectedness that can reveal how the global network of maritime advanced producer services is shaped. Network analysis is widely used in the social and behavioural sciences and is often done on a micro scale. For example, individuals are regarded nodes and their social relations constitute links. In this sense the world city network is rather unusual since the network is analyzed on a world scale. Moreover, the world city network has three levels (Taylor 2001). The first level is the world economy, where the network operates. The second level consists of cities (nodes) where the production of services takes place. The sub-nodal level is constituted by the advanced producer firms who produce the services. Although cities do have decision makers who can influence world city formation (Beaverstock et al. 2002), the prime actors are the firms on the sub-nodal level. Firms have the opportunity to relocate, to establish new relations and make the decisions.

To measure the relations between firms participating in the world network, several methodologies are used. Wall et al. (2008) established the world network between countries on basis of foreign direct investments of firms. Taylor (2001) argued that only the location and hierarchical structure of a firm is needed in order to study world city network formation. He hypothesised that a larger firm will have more intensive relations. The main advantage of the latter method is that only data on the locations and hierarchical structure of the firms are needed.

Our data originates from the World Shipping Register, a database containing information on 4999 advanced maritime producer services (AMPS) firms distributed over three subsectors: consultants and surveyors, P&I, insurance and law and maritime organisations (branch associations and international institutes). Using websites and annual reports, we determined for each firm where the global, regional and country headquarters are located. Based on this data we use the methodology of Taylor (2001) to study the network formation between cities based upon advanced maritime producer services1.

When Taylor et al. (2002) measured the world city network they selected 100 firms from different advanced producer service sub-sectors2 that pursue a ‘global locational strategy’, i.e. firms that have offices in more than 15 cities and at least one office in each prime ‘globalistion arena’ (North America, Western Europe and Pacific Asia). In our measurement of the world maritime network of advanced producer services we do not exclude small firms. The shipping industry is itself highly international, linking distant centres of supply and demand through the transport of goods. This international nature of shipping implies that advanced producer services also need to have an international orientation when providing legal, financial and insurance products. However, advanced producer services for the maritime transport sector constitute a specialized niche, often confined to a certain region. For example, legal conflicts about cargo damage at a certain port may fall within a particular national or state jurisdiction. Hence, we do not want to make a priori assumptions about what are ‘globalisation arenas’ and what defines peripheral areas.

As already discussed we use information on firms to measure the network between cities that host maritime advanced producer services firms. So, we estimate city connectivity based on office networks3. The starting point of the network analysis is a matrix with the so-called service values of firm j in city i. With respect to this service value the assumption is made that the bigger or more important the establishment is, the higher the service value v will be. Then the elemental interlock lk rbetween two cities, a and b for firm j is:



The aggregate city interlock link are the summed relations between a and b of all firms located in city a and b. This is defined as:



We divide this city interlock link by the highest city interlock (in our case Hong Kong-London) to arrive at the relative city interlock link.

From this we can determine the situational status of a city within the network. Derudder and Taylor (2005) call this the Global Network Connectivity (GNC) of city. For every firm present in a city we multiply the value of the service value with the value in all other cities where the firm is present. Formally:



To make this measure better interpretable we divide each GNC by the maximum GNC, in our case London.

The basis of these calculations is the service value () of the establishments of firms. Different methodologies are used when determining the service values. In Taylor et al. (2002) ranges from 0 to 5. Zero is scored when there is no presence of firm ajvaj in city. 5 is scored when headquarters of firm is located in city. Scores in between are assigned when offices have more functions within the firm network (e.g. regional headquarters). Lüthi et al. (2010) use service values between 0 and 3 when analysing the intra-firm network of Munich while Verhetsel and Sel (2009) use range between 0 and 7 in order to identify world maritime cities. We will largely adopt the methodology of Taylor et al., with some adjustments. When there is no office present in city of firm zero is assigned. When there is a normal subsidiary of a certain firm present, a score of 1 is given. Headquarters of firms with 15 or more establishments will get a score of 5. Regional headquarters of such firms will score 3 points. Headquarters of a firm between 8 and 15 establishments will get a score of 4, between 4 and 7 establishments a score of 3 and headquarters of a firm with two or three establishments will score 2.

Taylor et al. (2002) point out that such data creation is far from perfect because the information on the websites and in the annual reports often do not demonstrate a clear picture of the hierarchical structure of a firm. Hence, subjective errors may be introduced into the data during the coding process since two persons can define different service values for the same subsidiary. However, Taylor et al. argue that these problems will not lead to too much uncertainty in the data since the method of scoring is very simple and the data is carried out from a large number of firms, meaning that some particular differences will not influence the outcomes significantly.

Eventually we have a database with 4999 AMPS firms which are located in 2569 cities. The number of establishments is 10,782, of which 702 firms have more than one establishment and are therefore particularly interesting with respect to our network analysis. These firms produce 234,199 links.

Results of the Locations of Maritime Advanced Producer Services

In figure 1 we present the spatial representation of the locations of the establishments of maritime advanced producer firms. It is not surprising that London ranks first with 385 AMPS firms. Singapore follows with 199 establishments. In the top ten there are a number of cities that are not part of the rankings of different world city studies. Examples are Piraeus (148 establishments), Rotterdam (128 establishments), Hamburg (104 establishments), Houston (96 establishments) and Panama City (95 establishments). All these cities are port cities and accommodate port related industries. For example, many Greek ship-owners base their commercial operations in Piraeus. In Rotterdam and Houston a huge number of port-related industries are located, such as large oil-refining and chemical firms. Tokyo is only ranked 12th and is certainly not one of the most important global maritime cities. However, it is joined by a number of capital cities that do not host a seaport but nevertheless do contain a substantial number of establishments of AMPS. Examples are Madrid, Paris and Moscow which rank respectively 15th, 16th, and 19th.

Looking more closely at the spatial distribution of the maritime advanced producer services we observe that there are major concentrations in Western-Europe and along the coastline of the Mediterranean Sea, as well as along the Eastern coast of the United States. Africa and South-America are underrepresented with respect to the number of establishments of AMPS.

Figure 1: The locations of AMPS.

Results of the Network Analysis of Maritime Advanced Producer Services

To get a better picture of the constitution of the network we also map the links between cities and the GNC of cities. In figure 2 we can see the results of the network analysis. We only show the links which are more than 5% of the strength of the most important link, Hong Kong – London. Furthermore, we represent only cities which have a GNC of at least 1% of that of London.

Connectivity of a city is determined by the number of establishments, the size of the firm that is located in a certain city and the importance of an establishment, which is denoted by the service value. Hosting a large number of establishments does not automatically imply high GNC. For example Piraeus, Hamburg and Panama City are no longer in the top ten and are replaced by Paris, Madrid and Sydney. These are cities where a number of large law firms with maritime specialities have located important subsidiaries which contribute to higher global network connectivity. Looking at the shape of the world network of maritime advanced producer services we note that it replicates long-established patterns of corporate unevenness (cf Hymer 1972). The major links are between cities that are located in developed countries, while Africa and South-America are relatively unimportant in the network of maritime advanced producer firms.

Focusing in on which connections are important, we see the link between London and Hong Kong is the strongest, followed closely by London and Singapore. Firms which have headquarters in London often have subsidiaries in Hong Kong or Singapore. This observation is also in accordance with the research of Taylor et al. (2002) who found that for many global firms Hong Kong is the place to locate subsidiaries.

Figure 2: The network of AMPS.

This analysis provides some first results which are in line with the findings of Jacobs et al (2010). First, we observe that cities that host many AMPS firms are in a number of cases not part of the traditional top ten of world cities. Second, looking at the constellation of the network, the most important relations are between London, Hong Kong and Singapore. Third, it can be observed that London is very dominant, in terms of connectivity, and number of establishments. With respect to H1, we conclude that sector specificity exerts a noticeable influence both on the locational pattern of establishments and on intra-firm network formation when compared with conventional world city research which only looks at the largest APS-firms regardless of sectoral specialization. However we need to go further to explain what factors influence the location and connectivity of specialized advanced producer services.

Factors explaining location pattern and network constitution of specialized advanced maritime service providers

In the section we investigate which factors might explain why some cities host more AMPS firms than others. Furthermore, we explore the impact of these factors on GNC.

Model Description

In the absence of panel data, our analysis proceeds with cross-sectional count data on the number of AMPS and general APS, and their respective GNC. Oftentimes, count data is treated as continuous, because then the use of Ordinary Least Squares methods is feasible. However, this may lead to biased and inefficient estimates (Long 1997). The Poisson regression technique is widely used for count data; it is suitable when the dependent variable is a non-negative integer with a Poisson-distribution. However, an important assumption of Poisson regression is equi-dispersion (Cameron and Trivedi 1998). In our sample it appears that all the dependent variables have a significantly higher variance than the mean, in other words, there is over-dispersion. A regression-technique that is more appropriate then, is the negative binomial regression method which allows for over-dispersion. We also determined that we do not have a problem of excess zeros (Long 1997), and hence there is no need for a zero-inflated Negative Binomial regression.

Since it is nearly impossible to collect complete data for all the cities in which maritime advanced producer services are located, we end up with a database of 459 cities representing a balanced sample of both port cities and cities which do not have a seaport. Table 1 contains the descriptive statistics of our sample; details on data sources are provided in Appendix A.

Table 1: Descriptive Statistics

The dependent variables are the location and network connectivity of specialized maritime and general advanced producer services (ESTABLISHMENTS AMPS, GNC AMPS, ESTABLISHMENTS APS, GNC APS). The independent variables are organized into three categories respectively corresponding to H2.1, H2.2 and H3: port-specific variables (CONTAINERS, COASTAL CITY, ISLAND), localization variables (SHIP-OWNERS, PORT-INDUSTRIES), and urbanization variables (POPULATION, GDP per CAPITA, GOVERNANCE, CAPITAL and UNIVERSITIES). While port-specific variables are closely related to the localization variables, they describe physical movement characteristics rather than economic relationships.

For all these independent variables we test whether they influence the location of AMPS and the GNC of AMPS (cf. model 1 for establishments; model 5 for GNC). In order to check whether the influence of the independent variables on AMPS differ substantially from general APS, we also run models with establishments and GNC of APS as dependent variables (cf. models 2 and 6). Since it has been shown in the previous section that some locations that do host a lot of AMPS but do not have a seaport (e.g. Paris, Madrid), we reduce our sample to those 275 cities that actually have a seaport (model 3 and 7).

In order to test hypothesis 2.1 (namely, that unlike general APS, AMPS agglomerate near seaports) conclusively we removed all the port-related variables in the models for APS and looked at whether the results differ significantly for both establishments (model 4) and GNC (model 8). Finally, we investigate whether the presence of general APS is important for AMPS (model 9 for all 459 cities and model 10 for the reduced sample of 274 port cities) and GNC (model 11 and 12) of AMPS in order to test hypothesis 3.

We also ran all these models with total throughput measured in Million Metric Tons instead of using container data. This changes the sample slightly since there are a number of ports from which we have only container data and no throughput tonnage data. However, the results of these regressions are very similar to those presented in tables 2-4.

Results

What immediately becomes clear from models (1) and (2) is that the urbanization variables (CAPITAL, UNIVERSITIES, GDP per CAPITA, POPULATION) are far more important for APS than for AMPS. Being a capital for instance lead to 73.4% more establishments of APS; for AMPS this factor results in a more modest 47.2% increase in the number of establishments. The factors CONTAINERS, SHIP OWNERS and PORT RELATED INDUSTRIES have a somewhat larger effect on the number of establishments of AMPS than on APS, although the differences are small. Possibly, ship-owners and port industries are not only demanding specialised AMPS, but also general APS, which makes it attractive for APS to locate near ship-owners and port-related industries. Because the sample of AMPS cities also include cities that do not have a seaport, we also run the same model (3), but now for only those 274 cities that in fact have a seaport. We observe that the importance of container throughput increases substantially. Surprisingly, the importance of port-related industries and ship-owners is not affected much. In addition we observe in model 3 that the importance of being a capital city or having a top university decreases. Possibly, the maritime services which locate in seaports are less knowledge intensive routine activities, while maritime services which locate in main urban centres are more command and control oriented (Hall et al. 2010).

Table 2: Results of Negative Binomial estimations of the number of maritime and general APS

In model (4) the port and transport related factors have been removed. In comparison with model (2), we observe an increase of the coefficients of all factors except for GOVERNANCE. This points to the presence of an omitted variable bias in model (4) [and also in model (8)] resulting from the exclusion of the variables SHIP OWNERS and PORT-RELATED INDUSTRY which significantly influence both the location and GNC of APS as became clear in models (2) and (6). On the other hand, we observe that all the signs of coefficients remain the same.

Table 3: Results of Negative Binomial estimations of the global network connectivity of maritime and general APS

When we take GNC as the dependent variable, we see the results are largely in accordance with the results of models (1)-(4) where the number of establishments was the dependent variable. However, there are some noteworthy differences. The coastal city variable has a larger (negative) effect, especially on the connectedness by APS while ISLAND has a positive significant impact on the network connectivity. This might be because many island locations, such as for example Hamilton, Bermuda or Limassol, Cyprus, have favourable tax-regimes for international shipping. From our data it is surprising that the presence of SHIPOWNERS and PORT RELATED INDUSTRIES are more important for the GNC of APS than it is for AMPS. For instance: a 1% increase in the number of ship owners will lead to respectively an increase in GNC of AMPS of 0.072% and GNC of APS of 0.194%. Furthermore we observe that GDP per Capita does not influence GNC significantly. Being a capital is even more important for the connectivity of APS than for the locations of APS. For AMPS being a capital is a less influential determinant of connectivity.

Table 4: Results of Negative Binomial estimations

A number of important issues become clear from the models (9)-(12). We observe that AMPS tend to agglomerate near APS: an increase of 1% in APS establishments leads to an increase 0.13% of AMPS. However, the influence of APS on AMPS decreases when we look at the reduced sample of those cities that actually have a seaport (model 10). This is again evidence that the reason of the location of AMPS in cities that not have a seaport is due to urbanization externalities and proximity to APS in general. Furthermore, across all models, maritime localization economies (SHIPOWNERS and PORT RELATED INDUSTRIES) remain significantly correlated with AMPS, but most port-specific variables (CONTAINERS, COASTAL CITY, ISLAND) are not. It is only in port cities that container throughput is correlated with AMPS (models 10 and 12). It is also striking that the effects of universities is much smaller in these models, probably because some AMPS need specialised localised knowledge, which is probably provided by APS in general.

When we exclude this variable, UNIVERSITIES account in part for this effect, so the coefficients of previous models are probably somewhat overstated.
To summarize we confront these results with the hypotheses 2.1, 2.2 and 3 raised in the introduction. We conclude from our findings that spatial proximity towards transport flows is of less importance (reject H2.1) for the locations of AMPS than is the spatial proximity to customers (accept H2.2), such as ship-owners and port-industrial firms. The location of AMPS establishments follows the logic of localization economies in the sense they tend to be more located near firms that purchase their services. While we observed that urbanization externalities are much more important for APS in general than for AMPS, we also observed that the presence of port-related industry and ship owners are of significant importance for APS in general as well. This result suggests that APS, and not only AMPS, provide services to these sectors. We also demonstrated that specialised maritime services tend to agglomerate near other services (accept H3). However, we point out that proximity to customers seems to be more important than proximity to these advanced service providers.

Conclusions

Recent contributions within world city network research have raised the question of the effect of sector-specific specialization of advanced producer services on urban hierarchies and the geography of global networks between cities. This question is related with a more fundamental lacuna in world city network research, namely the limited confrontation of the empirical research with urban economic theory. In this study we have looked at the location and network connectivity of those advanced producer services that are specialized in providing services to the maritime transport industry. In addition we explored what factors influence both the location and connectivity of these specialized advanced services compared with advanced producer services in general.

From our data it became clear that the specialization of advanced producer services in the specific industry of maritime transport does affect the global urban hierarchy and network constellation when compared with the findings of conventional world city research. Cities such as Hamburg, Rotterdam and Piraeus with large seaports or a maritime industrial profile rank much higher. On the other hand we have observed that the global urban network of AMPS is dominated by London, Singapore and Hong Kong. While both Southeast Asian cities do host major seaports and handle large volumes of container traffic, they also act as the region’s leading gateway for advanced services in general. Although London might be the leading city for advanced maritime services because of path dependent reasons, it also tops the general world city ranking. Likewise, the sector-specificity of advanced producer services does not explain why certain cities that do not even have a seaport top our rankings in terms of establishments and connectivity as they do in the general world city ranking.

This raised the question about what factors explain the location and urban network configuration of specialized advanced maritime producer services. Our analysis showed that the location of AMPS is largely determined by the presence of their clients, the ship owners and port-related industry, and not by the port throughput flows. This explains why port cities such as Piraeus and Rotterdam rank high and why others such as Shenzhen or Qingdao do not. Moreover, the presence of APS in general has a significant positive influence on the location of AMPS which partly account for the high rankings of locations that do not have a seaport. The similarities between APS and AMPS in terms of GNC are due to the fact that GNC includes the service values of firm establishments which in itself are a measure of corporate hierarchy.

These results are of importance to policymakers in port cities. Although pure investments in port expansion and related infrastructure might lead to increased cargo flows through the port, there is no evidence that this will lead to more added value to the regional economy in terms of specialized advanced services. Moreover, increased cargo flows to the extent that they undermine urban amenity (Hall 2007) may have a negative effect on the attraction of advanced services in general, which in turn are of significant importance for the presence of specialized advanced maritime services. Further investments in hardware infrastructure in seaports to accommodate future growth in commodity flows will therefore not necessarily lead to more advanced service provision in nearby urban centres, with the risk of these centres increasingly becoming locked-in. Instead, strategic policy in port cities should focus on attracting the head offices of ship owners and port-related industry in conjunction with advanced maritime producer services.

Beyond the maritime sector, our findings on the sector-specialization of APS in a variety of spaces of control suggest that urban economic development policies need to pay close attention to the actual connections between APS and other sectors in particular places. Except in a handful of most dominant global cities which can afford to direct policies towards APS activities in general as an end in themselves, urban economic developers might instead pay more attention to the relationships between specific APS activities and the goods- and services-exporting sectors already in place.

REFERENCES

Alderson, A. S. and J. Beckfield (2004), ‘Power and position in the world city system’, American Journal of Sociology, 109, 811–51.

Beaverstock, J.V., Doel, M.A., Hubbard, P.J., Taylor, P.J. (2002). Attending tot the world: competition, cooperation and connectivity in the World city network. Global Networks 2 (2), pp. 111-132.

Becker, S.O., Ekholm, K., Jäckle, R., Muendler, M.A. (2005). Location choice and employment decisions: a comparison of German and Swedish multinationals. Kiel: Institute for World Economics.

Bird, J. (1963), The major seaports of the United Kingdom, London: Hutchinson.

Brown, E., Derudder, B., Parnreiter, C., Pelupessy, W., Taylor, P. and F. Witlox (2010), World City networks and global commodity chains: towards a world’ systems integration, Global Networks 10 (1), 12-34.

Cameron, A.C., P.K. Trivedi (1998), ‘Regression analysis of count data’, Cambridge University Press.

Choi, J.H., G.A. Barnett, B.S. Chon (2006), ‘Comparing world city networks: a network analysis of Internet backbone and air transport intercity linkages’, Global Networks, 6(1), 81-99

Derudder, B. and F. Witlox (2005) ‘An appraisal of the use of airline data in assessing the World City Network: A research note on data’, Urban Studies, 42(13), 2371-2388.

Derudder, B. (2006), On conceptual confusion in empirical analyses of a transnational network, Urban Studies, 43 (11), 2027-2046.

Ducruet, C. and S.W. Lee (2006) ‘Frontline soldiers of globalization: port-city evolution and regional competition’, GeoJournal, 67(2), 107-122.

Ducruet, C., Koster, H.R.A., Beek, D.J. van der (2010). Commodity variety and seaport performance, Regional Studies, page number to be assigned.

Feldmann, M. and R. Martin (2005), Constructing jurisdictional advantage, Research Policy (34), 1235-1249.

Fujita, M. and Mori, T. (1996) ‘The role of ports in the making of major cities: self-agglomeration and hub-effect’, Journal of Development Economics, 49(1), 93-120.

Glaeser, E.L., Kallal, H.D., Scheinkman, J.A. & A. Shleifer (1992), Growth in Cities, The Journal Political Economy, 100, pp. 1126-1152.

Grobar, L. M. (2008) ‘The economic status of areas surrounding major US container ports: evidence and policy issues’, Growth and Change, 39 (3), 497–516

Hall, P. V. (2007), Seaport, urban sustainability and paradigm shift, Journal of Urban Technology, 12, 87–101.

Hall, P. V. (2009), Container ports, local benefits and transportation worker earnings, Geojournal 74: 67-83.

Hall, P. V., Jacobs, W. and H. Koster (2010, forthcoming), Port, gateway, chain or some other basis for agglomeration. Exploring the geography of advanced maritime services, In: Integrating Seaports and Trade Corridors, Hall, PV, McCalla, RJ, Comtois, C and Slack, B. (eds) Aldershot: Ashgate.

Henderson, J., Dicken, P., Coe, N. & H. Yeung (2002), Global Production Networks and the Analysis of Economic Development, Review of International Political Economy 9, pp.436-464

Hoyle, B.S. (1989), The Port-City Interface: Trends, Problems and Examples, Geoforum, 20, pp. 429-435.

Hymer, S. (1972). The Multinational Corporation and the Law of Uneven Development. In: Bhagwati, J.N. (ed.). Economics and World Order. New York.

Jacobs, J. (1969), The Economy of Cities, New York: Vintage

Jacobs, W., Ducruet, C., Langen, P.W. de (2010). Integrating world cities into production networks: the case of port cities. Global Networks 10 (1): 92-113.

Johnstad, T. (2000), Mutual Maritime Insurance Clubs- Co-operation and Competition, Annals of Public and Cooperative Economics, 71, pp. 525-555.

Frenken, K., Oort van, F.G., T. Verburg (2007), Related Variety, Unrelated Variety and Regional Economic Growth, Regional Studies, 41, pp.685-697.

Friedmann, J. (1986) ‘The world city hypothesis’, Development and Change, 17(1), 69-83.

Kaufman, D., Kraay, A., Mastruzzi, M., (2006). Governance matters V: Aggregate and individual governance indicators for 1996-2005. World Bank Policy Research Working Paper 4012.

Kutner M. H., Nachtsheim C. J., Neter J., Li W. (2005) Applied Linear Regression Models. McGraw-Hill, New York.

Lambregts, B. (2008), Geographies of knowledge formation in mega-city regions: some evidence from the Dutch Randstad, Regional Studies, 42:8, 1173-1186.

Levinson, M. (2006), The Box. How the shipping container made the world smaller and the world economy bigger, Princeton: Princeton University Press

Long, J. S (1997). Regression Models for Categorical and Limited Dependent Variables. Thousand Oaks, CA: Sage.

Lüthi, S., Thierstein, A., Goebel, V. (2010). Intra-firm and extra-firm linkages of the knowledge economy: the case of the Mega-City Region of Munich. Global Networks (10), 1, 114-137.

O’Connor, K. (1989) ‘Australian ports, metropolitan areas and trade-related services’, The Australian Geographer, 20(2), 167-172.

Porter, M. (1990), The Competitive advantage of nations, New York: Free Press.

Sassen, S. (2002). Cities in a world economy. In: Fainstein, S.S. Campbell, S. (eds.). Readings in urban theory. Blackwell Publishers, Oxford.

Sassen, S. (2010), Global inter-city networks and commodity chains: any intersections?, Global Networks 10, 1: 150-63.

Short, J.R., Y. Kim, M. Kuss and H. Wells (1996), The dirty little secret of world city research, International Journal of Regional and Urban Research 20: 697-717.

Slack, B. (1989) ‘Port services, ports and the urban hierarchy’, Tijdschrift voor Economische en Sociale Geografie, 80(4), 236-243.

Storper, M. (1997), The Regional World: territorial development in a global economy. The Guildford Press, New York.

Taylor, P.J. (2001). Specification of the World City Network. Geographical Analysis, 33 (2), 181-194.

Taylor, P.J. (2004). World City Network: A Global Urban Analysis. London: Routledge.

Taylor, P.J., Catalano, G., Walker, D.R.F. (2002). Measurement of the World City Network. Urban Studies, 39 (13) (2002), pp. 2367-2376.

Taylor, P. J., P. Ni, B. Derudder, M. Hoyler, J. Huang, F. Lu, K. Pain, F. Witlox, X. Yang, D. Bassens and W. Shen (2009), ‘Measuring the world city network: new developments and results’, GaWC Research Bulletin, 300.

Verhetsel, A., Sel, S. (2009). World Maritime Cities: from which cities do maritime decision-makers operate? Transport Policy, doi:10.1016/j.tranpol.2009.08.002

Wall, R.S., Burger, M., Knaap, G.A. van der (2008). National competitiveness as a determinant of the geography of global corporate networks. Forthcoming in Environment and Planning A.

Wall, R.S. (2009). Netscape: Cities and Global Corporate Networks. Rotterdam: ERIM PhD Series 169.


APPENDIX 1. DATA SOURCES

  • Data with the locations of maritime advanced producer services (AMPS):
    This data is from the World Shipping Register (http://www.e-ships.net). It is updated en corrected by checking the company’s websites. Furthermore, it includes firms of the sectors consultants and surveyors, maritime organisations and P&I, insurance and law.

  • Data with the locations of port related industry:
    This data is from the World Shipping Register (http://www.e-ships.net). This dataset contains of firms of the following sectors: bunkerers, marine equipment, pilotage, port agents, shipbrokers, towage and salvage and ship builders and repairers. Double values have been deleted.

  • Data with the locations of ship owners:
    This data is from the World Shipping Register (http://www.e-ships.net). This dataset has been updated and corrected by removing duplicate and unrealistic observations.

  • Data with locations of advanced producer services (APS):
    Wall’s (2009) database includes information on the most important links between advanced service providers. From this we construct an accurate database with the locations of both headquarters and subsidiaries. It contains information of 1647 establishments of 1267 firms. 243 firms have more than one establishment.

  • Data with port total throughputs and container handling:
    Data on port throughput and the number of containers handled are from Eurostat and the American Association of Port Authorities.

  • Data with the Population of cities:
    These data are from a city population database, http://www.citypopulation.de.

  • Data on Governance indicators:
    Kaufman et al. (2006) present six indicators that measure the institutional quality of a country. They also provide evidence on the reliability of expert assessments of governance that are part of the aggregate indicators. Because the indicators such as political stability, voice and accountability and control of corruption are highly correlated, for each country the average governance-index is computed.

  • Data on Top Universities:
    A number of studies show that highly skilled labour attracts multinationals (e.g. Becker et al. 2005). Maritime advanced producer services also need highly skilled employees. Therefore we look at the location of 200 top universities as a proxy for the presence of a high-skilled urban labour.


NOTES

* Wouter Jacobs, Urban and Regional Research Center Utrecht, Utrecht University, the Netherlands, e-mail: w.jacobs@geo.uu.nl
** Hans R.A. Koster, Department of Spatial Economics, VU University Amsterdam, the Netherlands, e-mail: hkoster@feweb.vu.nl
*** Peter V. Hall, Urban Studies Program, Simon Fraser University, Vancouver, Canada, e-mail: pvhall@sfu.ca

1. Note that our approach is different than that of Verhetsel & Sel (2009). They base the hierarchy of world maritime cities on the location of headquarters and offices of container carriers and global terminal operating companies. We look at the advanced producer services specialized in the maritime transport sector.

2. Respectively accountancy firms, advertising firms, banking & finance firms, insurance firms, law firms and management consultancy firms.

3. For a more elaborate discussion of the constitution of this interlocking network model see Taylor (2001).


Edited and posted on the web on 29th April 2010


Note: This Research Bulletin has been published in Urban Studies, 48 (13), (2011), 2749-2769