Question

How and why do big cities attract big companies?

After reading "New Geography of Jobs" Forces of Attraction, it is very interesting as to why big cities like New York, Boston, San Francisco attract so many big companies to set their bases there. I share the confusion with the author, most companies in big cities have to pay higher wages to their employees because the expenditures for living is higher. It's not like you're going to get any information about your competitors if you set right beside them. Maybe there is a magical reason as to why these places attract big companies.

Answer 1

Investors are attracted to a big city if there are opportunities to make money. They will assess the attractiveness of a city's opportunities by estimating their likely return or profit, and will be drawn to cities which offer them the best combination of sale,risk and return.

Cities are complex economies, so a huge number of factors impact this return. As a result, investors consider a wide range of city characteristics and behaviours when assessing the attractiveness of a city.

Economic fundamentals

• Growth rate of businesses and jobs
• Resilience of the economy to shocks
• Quality and affordability of infrastructure
• Skill-level of the workforce, and quality of education and research
• Trading relationships within and beyond the UK
• Sector make-up of the economy
• Quality of place - making, city environment, and liveability

City governance

• City vision
• Strategic plan to realise vision
• Attittude and consistency of leadership
• Quality of city management
• Information and data provision

Practicalities of investment

• Scale of the city, population size,and the number of jobs and businesses
• Amount and type of land/ assets available
• Planning system, and other regulations
• Taxation and incentives
• construction costs
• Access to finance