New Urban Management: Attracting Value Flows to Branded Hubs

Attracting Value Flows to Branded Hubs

A. Anttiroiko

• Publisher: Palgrave Pivot
• Year: 2015
• Print ISBN: 9781349709427, 9781137532626
• eBook ISBN: 9781137532640
• Topic: Business
• Subtopic: Business Strategy
• Index: Business

New Urban Management discusses how the logic of economic flows poses a challenge to local governments throughout the world. The book argues that the increased fluidity in economic life must have its reflection in local economic development policy.

1

Introduction

Abstract: Discussion in this chapter aims to clarify a special aspect of globalisation, the increased fluidity in economic life, which urges local governments to reconsider the premises of their economic development policy. One new direction in this respect is emerging ‘flow paradigm’, which provides conceptual tools to understand the current economic reality and its dynamics. Ability to attract global flows depends less and less on hard factors of production and more and more on collective symbolic capital. Hence, the relevance of city branding in global competition between cities. Such observations boil down to the idea of new urban management that focusses on attracting flows of values, such as capital, technological know-how, innovative firms, creative people and tourism consumption, to branded hubs in order to guarantee their wealth and economic resilience.

Keywords: city branding; economic restructuring; globalisation; local economic development; space of flows; urban development

Anttiroiko, Ari-Veikko. New Urban Management: Attracting Value Flows to Branded Hubs. Basingstoke: Palgrave Macmillan, 2015. DOI: 10.1057/9781137532640.0003.

This book discusses economic flows and their management from the point of view of urban governments. Such a view of urban management is a reflection of global imperative. A major goal of the high-performing cities seems to be to increase their attractiveness in order to benefit from the increased fluidity, mobility and connectedness associated with the major trend of our age – globalisation. Such an economy revolves around the global flows of different kinds of values, including both ‘frictional’ flows, such as people and goods, and largely ‘frictionless’ flows, such as money and ideas. Yet, the context of such development is much more nuanced than one might assume on the basis of the view of monolithic globalisation. Actually, the consequences of globalisation will be better understood if they are built through diverse lenses that reveal varying logics that affect the global reality, in their own way. In the interest of brevity, let us mention here four interrelated trends with far-reaching ramifications for understanding the dynamics of global flows that are distinct from the general idea of globalisation of the economy, the latter associated primarily with trade and financial flows: digitalisation as an efficient medium and platform of global flows of digital content (Zysman et al., 2011; Castells, 1996); servitisation (or servicising) as an innovative business model that through integrated product-service offerings contributes to decomposition of manufacturing and unbundling of services and consequently accelerates international trade in services (Vandermerwe & Rada, 1988; Cuadrado-Roura et al., 2002); creativisation as the emerging mode of development behind innovativeness and creative economic renewal and as a driver that increases knowledge-intensive flows (Florida, 2003; Bobirca & Draghici, 2011; Manyika et al., 2014); and symbolisation as the ontological core of the immaterialisation of the economy (Lash & Urry, 1994; Rossi & Vanolo, 2012). They all revolve around a profound global service transformation that characterises the development logic of the global age through the generative interplay of digitalisation and networking (Zysman, 2006; Zysman et al., 2011). Examples of such development logic include networked digital devices with a range of ready-to-use applications, digital music distribution systems and office equipment provided as a product-service system (PSS) solution, which are outcomes of creative processes that generate and combine various resources within a global production and innovation ecosystem and distribute solutions to customers in the increasingly borderless markets.

The challenges posed by global transformation affect the conditions of local and regional economic development. The world is urbanising while cities are globalising (Clark, 2003), which paves way for metropolitan revolution (Katz & Bradley, 2013). The major challenge to cities seems to be to capture maximum value of their exchanges with their environment and to move up both the value chain and the global urban hierarchy. Globalisation has changed such a value creation setting in the way that for the foreign investor, the value added by different processes or activities at every stage of production has become more or less global. This is because specific functions of a value chain – production, finance, marketing, accounting, etc. – can be shifted to low-cost, high-productivity or innovative destinations. This differs drastically from the times when most of such activities took place within one geographic jurisdiction or region (Western Economic Diversification Canada, 2011).

In the big picture, in post-industrial cities in the ‘First World’ countries, which industrialised earlier than the rest of the world, attention has naturally diverted away from cost-competitiveness to knowledge, talent, innovativeness and high value-adding services. The global economic scene is changing quickly, however. For instance, leading Chinese cities, most notably Beijing, Shanghai and Shenzhen, are quickly climbing up the global urban hierarchy. Many cities may lose their position within a decade or two, as happened to Osaka in Japan or more dramatically to Detroit in the USA. Some cities or city-states that were not on the global agenda at all some 30 years ago, may be world leaders in many fields today, as is the case of Dubai. Along with such benchmark cases, overall economic situations also change and affect the general attractiveness and competitiveness of cities and regions. Thus, through their success, many previous low-cost destinations especially in Asia have become more and more expensive, even if most of them still have a long way to go to reach the level of high-cost post-industrial economies in the West. On the other hand, restructuring and declining processes in the developed countries are slowly changing some previous high-cost cities and regions into medium-cost or even low-cost destinations. In short, the world of cities is dynamic, and the pace of change is accelerating.

What can post-industrial cities do in the current historical situation? Straightforward reliance on cost-competitiveness is an unlikely option. Rather, concerning economic development, the previously discussed trends divert attention to the creation and utilisation of collective symbolic capital, in which attention is paid holistically to the quality of the factors of production and overall attractiveness and connectedness of urban communities. We just have to consider cases like Bilbao and its Guggenheim museum, Silicon Valley as the magnet of high-tech entrepreneurship, Greater Boston’s reputation as one of the global knowledge hubs and New York as the global financial centre. In all such cases, broadly defined ‘symbolic capital’ has a critical role to play in attracting the attention of various target markets, which, depending on the case, can be tourists, venture capitalists, students or artists. In such a process, productive capability may remain to be a backbone of the local economy, but it is equally important to consider the consumption side of the development, in which amenities and creative milieus are of vital importance. Actually, when considering especially the highly ranked cities and city-states such as Singapore, Hong Kong, Seoul, Paris, Rome, Milan, Frankfurt, Glasgow, Amsterdam, Los Angeles and San Francisco, the global urban landscape seems to be characterised by the omnipresence of branded cities and numerous smaller-scale themed attractions. The scene of human development is surprisingly ‘spiky’ in the sense that successful well-branded cities generate and transfer a proportionately excessive share of the global wealth (cf. Florida, 2005). In short, we have entered the age of branded hubs.

Current global developments urge cities to take a branding-oriented approach to local economic development. Such an approach pays attention to the symbolic mediation of the local and global. The comprehension of ‘local’ is anchored in local identity and in the context of local economic development in local economic identity, which serves as a cornerstone of the knowledge base for economically oriented city branding. A positive city brand serves the value creation in urban communities, contributing indirectly to local prosperity, jobs and better development opportunities for the future (Anttiroiko, 2014a). An example of new kind of branded city-state is Dubai, a themed attraction economy par excellence. It shows what bold theming with sufficient financial backup (oil wealth) and autocratic regime can bring about: a transformation from a desert outpost to an affluent, multicultural metropolis, and all that in about 40 years, which in historical perspective is a mere twinkling of an eye. It is a manifestation of the economy of fascination, in which wealth is created increasingly through demand-focussed entertainment, shopping and artificial enclaves (Schmid, 2009). Dubai’s story is illuminating also because it reveals many controversial aspects of such development, including the roles of authoritarianism, megalomania, over-commercialisation, rapid demographic changes, segregation, violation of human rights and exploitation of immigrant workers (see Botz-Bornstein, 2012). Such cases, nevertheless, highlight the quintessence of the kind of collective endeavour and strategic positioning we are interested in in this book.

Cities have been at the outset nodal points of the world economy (Knox & Taylor, 1995; Cox, 1997; Sassen, 2001). Yet, as an instance of globalisation, the formation of interconnected urban nodes has accelerated, which, according to Manuel Castells (1989), has become possible due to the emergence of new information and communication technologies (ICTs). They efficiently facilitate information processing, communication, transactions and mobility; thus, being perfect tools for the networks of instrumental exchanges that devote themselves to manage flows of money and information. An increase in the volume and the speed of financial and other flows has created a new social ontological sphere, the space of flows, a term coined by Castells (1989) in the late 1980s. This concept depicts the idea that current trends in the economy have created a new kind of space, a frictionless realm, in which signifiers of value are transferred and exchanged with money as their archetype.

Our discussion about urban hubs and their ability to deal with global flows is initially derived from Castells’ idea of space of flows, even if our discussion modifies the agenda due to the interest in the management of urban economic development. Castells (1989, 351) points to two important trends: first, production in the informational economy becomes organised in the space of flows, whereas social production continues to be locally determined, and second, local governments must develop a central role in organising the social control of places over the functional logic of the space of flows. Castells’ conceptualisation of the local-global dialectics is fine as such, but the way the space of flows is conceptualised warrants further sophistication. The need for reconceptualisation comes simply from the fact that flows have been understood in macrosociology and political economy too vaguely, including Castells’ works. They are usually referred to only passing without theoretical grounding and sufficient empirical specification. Besides, practically all conventional economic analyses of flows even in economics – including circular flow models, analyses of international trade, foreign direct investments and global financial flows – are as such insufficient for the purposes of analysing collective symbolic capital vis-à-vis global flows of values.

Along with increased fluidity and mobility in economic life, there has been in the recent decade a clear increase in the interest in global networking in business and governance. Now it seems that this discourse is developing toward sophisticated flow paradigm or economic ‘flowology’ with an aim at gaining better understanding of the new economic reality and its dynamics. Such a paradigm is manifest in various emerging concepts, theories and approaches, which seek answers to the question of the nature of this new reality, including new mobilities paradigm (Urry, 2000) and the politics of flows (Hubbard, 2001; Doel & Hubbard, 2002; Halbert & Rutherford, 2010). There are also urban analyses that go beyond individual flows to wider set of flows (Gertler, 2001; Williams & Baláz, 2009) and urban-regional analysis of economic flows of cities, regions or city-states (Laakso et al., 2013; Yeoh & Chang, 2001). Furthermore, there also are attempts to provide comprehensive analyses of our world in terms of flows (e.g. Van Hamme & Grasland, 2011; 2012) or a holistic picture of the world economy by analysing the global material and immaterial flows, as in McKinsey Global Institute’s ‘Global flows in a digital age’ (Manyika et al., 2014) and in the report ‘DHL Global Connectedness Index 2014’ (Ghemawat & Altman, 2014). Such analyses tell about a need to understand the fluidity, mobility and connectedness of our world and the fundamental aspects of the morphology of the new economic reality. Why? One reason is simply the fact that the higher degree of connectedness of a nation has a positive correlation with the GDP growth, as suggested by economic theory of comparative advantage and the same holds largely with cities as well (Manyika et al., 2014, 6, 21–23; Florida, 2005).

An interesting feature of the development of flow paradigm is the continuous methodological sophistication in terms of data, methods and interpretative frameworks, which makes it plausible to make a distinction methodology-wise between the earlier analyses of the internationalisation of the pre-1980s world and the development of approaches with increased sophistication of the analyses of globalisation from the 1990s onwards. This reflects interestingly the transition from the internationally oriented search for low-cost production sites to the global era of knowledge-intensive flows organised within complex production and innovation ecology (Manyika et al., 2014, 17). Descriptive statistical analysis of specific cross-border flows have a fairly long history, which had their methodological culmination in interregional flow analyses within regional sciences in the 1950s and 1960s (Isard, 1962). In the 1980s, the shift from domestic economy to international economy gained ground, culminating in the globalisation discourse of the 1990s. The manifestation of this new period can be seen in a methodological sense in research on global cities, first within a political economy framework (Friedmann, 1986; Sassen, 2001) and later by the projects of GaWC research network with a strive for understanding global value flows through the world city networks. Research within GaWC started with the collection and analysis of data on corporate service office networks and later continued with the exploration of the spatial configurations of hyperlink networks at the interface of web mining and social network analysis. The most recent phase of this development seems to bring the true flow analysis into the picture, which benefits from Big Data analytics and multidimensional interpretative frameworks (Manyika et al., 2014; Ghemawat & Altman, 2014). As described by Manyika and others (2014) in the preface of their analysis of global flows in a digital age, ‘[w]e know a great deal about individual flows such as goods trade and cross-border financial flows. Yet little research has been done thus far that seeks to paint a comprehensive picture of the web of cross-border interactions of the different types of global flows that increasingly characterizes our world.’ Indeed, the term ‘flow’ is mentioned only in passing and can hardly ever be found in keywords or indexes in the literature on urban management or urban economic geography. Flows have remained in the margin of urban analysis so far, giving impetus to start this exploratory journey in order to shed light on the nature of urban flow analysis and its relevance for local economic development policy.

This book discusses cities’ symbolic battle over global value flows. We may call such a city ‘hub’, which is a dissipative structure or spatially embedded intersection of value flows. In this context, symbolic dimension refers to the non-material value of any aspect of a city that increases its gravitational pull, which when developed systematically is called city branding. When these two points are combined, cities can be seen as branded hubs. Lastly, value flows are anything that are transmitted across border and have economic value from the point of view of the development of urban community, such value being usually something like investments, information, technological know-how, talented workers or tourism consumption. Such a flow thinking gives an impetus to new urban management, which urges municipal managers and developers to take a closer look at flows that are of great economic value through local investment, production, distribution and consumption functions. Such an analysis translates into a strategic industrial policy window, which relates to an economic development brand of a city (see Baker, 2012; Anttiroiko, 2014a).

The structure of this book starts from the local economy, continues with flow analysis and then takes a view of urban management at the intersection of these two interrelated aspects of local-global dialectic. The next section, Chapter 2, conceptualises localities as the intersection of flows or as, as we may call them, dissipative structures. This is the first theoretically grounded approach to flows presented in this book, picturing a city as a hub made of flows of energy and matter, as theorised in complexity theory. This chapter provides also a brief discussion about local economic processes and local economic development, which form the application context for flow thinking. Chapter 3 discusses demographic, political, social and cultural views of flows, relying especially on analyses of distinguished sociologists like Manuel Castells, Scott Lash, John Urry and Arjun Appadurai. Chapter 4 continues by providing a concise introduction to economic frameworks for flow analysis, focussing on mainstream economics, regional analysis and economic geography. The next section, Chapter 5, applies the concepts presented in previous chapters to a generic flow analysis by highlighting three aspects included in Attractors-Flows-Dynamics model: attraction factors, types of economic flows and the dynamics of different types of flows, which are divided into two main groups: entrepreneurial flows that relate to production factors, business processes and entrepreneurship (firms’ relocation, foreign direct investments and innovation) and flows of people (creative people, students, cultural tourists and conference visitors). Chapter 6 discusses the implications of flow thinking and analytics to urban management, highlighting the role of economic gravitation pull in the fluid global economy, the basic requirements of urban attraction management and the special role of urban symbolism in this process. The last chapter summarises the key findings and discusses briefly brand-oriented attraction management.

2

Process View of Local Economy

Abstract: The promotion of local economic development takes place in an increasingly fluid economic environment. This is why local governments benefit from better self-understanding of their nature as hubs of flows or ‘dissipative structures’, which opens up a view of a city’s interaction with the outside world. This chapter builds a picture of local economy within such a framework. Discussion starts from approaches to flows and continues with flow-based views of urban community and economy. It conceptualises local economic processes and builds ideal models of growing and declining city, which i...

Table of contents

• Cover
• Title
• 1  Introduction
• 2  Process View of Local Economy
• 3  Flows of People, Cultures and Symbols
• 4  Economic Frameworks for Flow Analysis
• 5  Flow Analysis in Urban Management
• 6  Attraction Management of Branded Hubs
• 7  Concluding Remarks
• Bibliography
• Index