What kinds of economic activities are locationally flexible?

In the learning economy, cities are the principal sites of innovation and production of knowledge-intensive goods and services.22 Given the interactive and social nature of innovation, city-regions provide the ideal space in which social learning processes can unfold, for several reasons.

The concentration of economic actors in large cities offers multiple opportunities for contact, interaction, and information exchange. The presence of specialized providers of services and goods in the city supports these interactions.23 Furthermore, while the simple geographical concentration of economic actors facilitates productive interaction, spatial concentration in larger urban regions provides another ingredient essential to the innovation process.

In many sectors of the economy, innovation depends on the sharing of both explicit (codified) knowledge as well as tacit knowledge. The latter form of knowledge is not readily transmitted between actors unless they share a code of communication and a set of norms and expectations governing the practices of individual firms.24 Recent empirical work on the geography of innovation confirms that these commonalities are most likely to arise when the parties concerned are located in the same region.

Regional institutions play a key role in producing and reproducing these shared codes and norms (the essence of a unique regional culture), whether in California's Silicon Valley, in the industrial districts of Europe and Asia, or in Canada's centres of knowledge-intensive production.25 Moreover, these commonly shared codes of communication and norms of behaviour constitute an important, regionally specific, intangible asset that helps build and maintain collaborative social learning relationships by reducing uncertainty, fostering trust, and enhancing the sharing of tacit knowledge among local economic actors. This idea is captured by the term "social capital,"26 which conveys the same idea of intangible assets that support productive social interaction. Thus, city-regions are places where social capital is most easily generated. As a result, they have become places where socially organized learning processes take root and flourish - what some have called "learning regions."27

Another advantage of city-regions is their ability to produce, attract, and retain those workers who play the lead role in knowledge-intensive production and innovation - who provide the ideas, know-how, creativity, and imagination. Because production in many growing sectors of the economy is increasingly oriented to non-tangible assets, the locational constraints of earlier eras - for example, the access to good natural harbours or proximity to raw materials and cheap land and energy sources - no longer exert the same pull.

Instead, what matters most now are those attributes and characteristics of particular places that make them attractive to potentially mobile talent. The most recent research on this question indicates that the generation, attraction, and retention of potentially footloose talent - the most crucial resource in the knowledge-based or learning economy - depends on considerations such as the attractiveness and condition of the natural environment and built form, the quality of schools, safety from crime, the richness of cultural amenities, recreational opportunities, and the "buzz" of the local arts and music scene.28

Local diversity is also extremely important, in at least two senses. First, it means the diversity of labour market opportunities for subsequent career advancement (and related to this, the potential that one's spouse or partner will also be able to find appropriate work in the same local labour market). Second, it implies the openness of local economic and social systems to diverse, talented newcomers. Indeed, measures of local openness, tolerance, and social diversity appear to dominate all other considerations in recent analytical studies of the geography of growth in knowledge-intensive, creativity-intensive activity in U.S. metropolitan areas.29

Taken together, these processes explain why, despite the advent of globally organized economic activity and the increasingly widespread use of information and communications technologies (ICTs), innovation, knowledge-intensive production, and other forms of creative activity have become more, not less, geographically concentrated in city-regions. Much of the long-anticipated decentralization of economic activity resulting from the widespread use of ICTs has failed to materialize, for good reason.30 In short, large city-regions have become the key nodes in the production and flow of ideas - that is, learning.

This analysis therefore suggests that the potential for wholesale decentralization of knowledge-intensive economic activity to smaller urban centres and outlying parts of the Central Zone will be limited at best. Such places do not offer the kind of critical mass, depth, and diversity of opportunities, services, amenities, and other aspects of urban character that are of growing importance to knowledge-intensive activities.

The most locationally flexible economic activities will likely continue to be those activities that have already been the most footloose over the past 20 to 30 years - that is, manufacturing activities in sectors such as automotive parts, metal manufacturing, and standardized electronic products.

22. E. Glaeser, "Are cities dying?," Journal of Economic Perspectives 1998, 12, pp. 139-60.
23. M.E. Porter, "Locations, clusters, and company strategy," in G.L. Clark et al., eds., The Oxford Handbook of Economic Geography, pp. 253-74.
24. M.S. Gertler, "Tacit knowledge and the economic geography of context," Journal of Economic Geography 2003, 3.
25. A. Saxenian, Regional Advantage: Culture and Competition in Silicon Valley and Route 128, Harvard University Press ,1994; P. Cooke and K. Morgan, The Associational Economy, Oxford University Press, 1998; D.A. Wolfe and A. Holbrook, eds., Innovation and Territory: Regional Innovation Systems in Canada, School of Policy Studies and McGill-Queen's University Press, 2000.
26. R. Putnam, Making Democracy Work, Princeton University Press 1993.
27. R. Florida, "Toward the learning region," Futures 1995, 27, pp. 527-36; K. Morgan, "The learning region: institutions, innovation and regional renewal," Regional Studies 1997, 31, pp. 491-503; OECD, Cities and Regions in the New Learning Economy, Organisation for Economic Cooperation and Development, 2000.
28. R. Florida, "The economic geography of talent," working paper, Heinz School of Public Policy and Management, Carnegie Mellon University, 2000; E. Glaeser, "The new economics of urban and regional growth," in G.L. Clark et al., eds., The Oxford Handbook of Economic Geography, pp. 83-98; E. Glaeser, J. Kolko, and A. Saiz, "Consumer City," Journal of Economic Geography 2001, 1, pp. 27-50.
29. R. Florida, The Rise of the Creative Class, Basic Books, 2002.
30. E.E. Leamer and M. Storper, "The economic geography of the Internet age," Journal of International Business Studies 2001, 32(4), pp. 641-65; K. Morgan, "The exaggerated death of geography: Localized learning, innovation and uneven development," paper presented at the Future of Innovation Studies Conference, Eindhoven Centre for Innovation Studies, Eindhoven University of Technology, The Netherlands, September 20-23, 2001; M. Storper and A.J. Venables, "Buzz: the economic force of the city," paper presented at the DRUID Summer Conference on Industrial Dynamics of the New and Old Economy, Copenhagen/Elsinore, June 6-8, 2002; The Economist, "Press the flesh, not the keyboard: face-to-face communications," August 24, 2000, pp. 50-51; M.S. Gertler, "Tacit knowledge and the economic geography of context," Journal of Economic Geography, 2003, 3.