Decentralisation Forces

However, agglomeration economies are subject to diseconomies such as cost, inconvenience and congestion. The relocation of economic activities might result in the development of nearby smaller clusters which are still situated within a reasonable distance from the well-established centre (Llewelyn Davies Planning, 1996). Four factors might affect this dynamic and unstable balance between concentrating and dispersing factors, namely: technology, investment in infrastructure, product-profit cycle and reorganisation of economic structure, and other changes as a result of public intervention.

Technology

Firstly, technology plays an influential role in all aspects of human settlement and brought about the possibility of change. In the era of the knowledge economy, two kinds of technology are critical. On the one hand, advanced information and computer technology (including software design) have largely increased the efficiency of dealing with repetitive data processing and the flexibility of locational patterns for these kinds of routine functions. Since the late 1980s, the pervasiveness of ICT has brought about dramatic changes to all aspects of human life. More and more work could be conducted remotely wherever accessibility to long-distance telecommunication is available and affordable.

On the other hand, progressive transport technology has shrunk the space-time boundaries and expanded the reachable range. It also introduces new possibilities, as well as threats to the existing spatial-economic patterns. From a historical point of view, the first railway age (railroadization¹⁴) resulted in profound developmental effects with the rise and decay of cities. The motorway age arrived with the growth of car ownership and the expansion of the motorway network, which significantly led to urban sprawl with the rise of new types of economic activities growing outside traditional cities and further deterioration of the railway networks. The second railway age took off with the aim of lifting the increasing pressure of congestion on existing transport systems which had inhibited the efficient connectivity between major cities and economic growth. Thus, the first new dedicated HST line was inaugurated in Japan in 1964 and a series of HST developments in Western Europe began in the 1970s. These multi-site operations have been increasingly implemented and now routine functions could operate in metropolitan peripheries or accessible

14 A quote from Schumpeter (1982 [1939], 1964) vividly captures the significant impact of railroadization. “...

Expenditure on, and the opening of, a new line has some immediate effects on business in general, on competing means of transport, and on the relative position of centres of production. It requires more time to bring into use the opportunities of production newly created by the railroad and to annihilate others. And it takes still longer for population to shift, new cities to develop, other cities to decay, and, generally, the new face of the country to take shape that is adapted to the environment as altered by the railroadization” (Schumpeter, 1964, p. 432; 1982 [1939] p.

168Book1).

102 provincial cities (Llewelyn Davies Planning, 1996). However, the growth of HST development was challenged by the rise of low-cost airlines in the 1990s and also conditioned by different national policies.

Due to the rapid development of ICT, the locational factor seems less dominant. There has even been a prediction of ―the death of distance‖ (Cairncross, 1995, 1997, 2001) i.e. places do not matter anymore due to the wide spread of ICT and the consequent potential of locating anywhere.

However, there have been considerable counter-arguments and evidence to indicate that ICT could not replace face-to-face contact. Törnqvist (1983) notes that the revolutionary development of telecommunication engineering could not replace personal contact for creativity and points out, based on existing evidence, the need for consultations and direct personal contact has taken off along with the increase in long-haul transportation and telecommunications. Similarly, Graham and Marvin (1996) suggest that face-to-face business contact has been increasing at approximately identical speed to telecommunications traffic over a century ago since the dissemination of the electric telegraph and the invention of the telephone. The evidence reinforces the argument in section 3.4.2.1, backing two indispensable ingredients required for the creation of tacit knowledge.

Hall argues that ―telecommuting supplements rather than supersedes face-to-face interaction‖ (P.

Hall, 2003). In the Polynet study, overwhelmingly, interviewees from APS firms stress the point that ―information highways will never replace physical highways‖ (P. Hall & Pain, 2006, p.107).

In the book Cyburbia, this view is supported.

―Just as friendships cannot be forged on online social networks alone, neither […] can the flow of information information around an electronic loop ever replace real intelligence, strategy or leadership. Information can be transferred into digital bits and passed around at dizzying speeds. Knowledge isn’t so portable. It takes a little little longer to be worked up and can only be ferried around by someone who knows what they are talking about‖

about‖ (Harkin, 2009, p. 251-252).

F2F contacts could be ensured through either close proximity (walking distance) or travel within a reasonable distance by transport. The relationship is the major decisive factor. The Polynet study (2006) reveals the degree of proximity for APS to other actors varies with different sectors, size, scope of firm, but some common principles were identified. For regional players, the client relationship is the key, so closeness to clients is more important than F2F between regional offices.

For international players which are located in first level and major centres, relationships between firms are reported to be more formal and less personal. Closeness to other sectors by co-location in First City Global APS clusters is as important as proximity to clients. These relationships are reflected in spatial-economic patterns and the need for mobility. It is reported that there is vital

―mobility for front-office, client-facing staff, both within the regions and at an international scale‖

(Hall and Pain, 2006, p.110).

103 However, without investment and commercialisation, both e- and physical communication technologies can only be an item of technological breakthrough rather than be the backbone and carriers for spatial-economic development. As reviewed in section 3.2, the reoccurrence of long waves has been claimed to be the cause of technological inventions and, simultaneously, follow-up innovations. Therefore, both need to be embodied and developed in the form of communication infrastructure catering for the demand of people and economic activities.

Investment in Infrastructure

Secondly, as mentioned above, continual investment in both e- and hard- communication infrastructure is essential to materialise the potential to which technology could give rise.

E-infrastructure could enhance telecommunication globally while a better balance of agglomeration economies could be spatially distributed in a wider city regional territory with the improvement of transport connectivity between multiple economic centres (both large and small).

The development of new innovations and economic activities could be curtailed if transport systems are not efficient. This point is manifestly concluded in the Polynet study.

―…failure to continue to invest in transport infrastructure could prove the big stumbling block for future APS regional growth, as inefficiencies are a barrier to the most important form of regional knowledge flow:

highly-skilled staff travelling into, out of and without the regions for face-to-face contact‖ (Hall and Pain, 2006:

p.110) .

Similarly, through the study of financial services in the City of London, Cook et al. (2007) accentuate transport as an extremely important concern of business, as inefficient transport infrastructure is beginning to discourage commuting and business travel (Cook et al., 2007, p.1342). Improvement in transport is a necessary condition for a new type of economic development in places created by new transport opportunities. Nevertheless, transport itself is not a sufficient condition to ensure positive developmental effects, as pointed out in section 2.4 which explores debateable wider effects of transport and the relationship between transport investment and regional development.

Product-Profit Cycle and Reorganisation of Economic Structure

Thirdly, the product-profit cycle theory (Markusen, 1985; Vernon, 1966) explains the relocation of economic activities through a product-evolving process in relation to growth rate, profitability, degree of concentration and location. The diminishing of growth rate and profit margin gives rise

104 to the relocation of standardised production processes to low-cost locations outside the original agglomerated core, but still generally within the same region. In the maturity phase, due to a saturated market and increasing competition, the solution for firms is to compete either by cost-cutting or by collusive agreement to share the market. The decentralisation of production occurs further afield, often to developing countries or depressed older industrial regions with surplus cheap labour. However, this product-profit cycle of production does not stress the spatial impact of the reorganisation of the production system. Storper and Walker (1989) argue external location factors or simple technical changes are overemphasised in the neoclassical and product-profit cycle discourses, which do not explain industrial decentralisation. Instead, they maintain that both relocation and changes result from technological change and the reorganisation of a production system rather than using locational changes as ―a spatial means of effecting factor substitution‖ (Storper & Walker, 1989, p. 84).

Other Changes Caused by Public Intervention

Fourthly, other changes brought about by public intervention can affect relocation, including the benign tax and regulatory environment, quality of life and other measurements (Llewelyn Davies Planning, 1996). More than one CBD exists in many large city cores or nearby zones. In London the rise of a new CBD in Canary Wharf suggests the effects of diseconomies and a conservative policy in the City of London gave impetus to redevelop the post-industrialised docklands (Daniels

& Bobe, 1993). In addition, the conservation policy of constraining development in historical city centres has also resulted in the rise of another development node. In Paris, owing to the cap on building height and the demand for office space in the capital, the strategic CBD of La Défense in the Hauts-de-Seine département, to the west of Paris, has developed since the end of the 1950s to not only compete with Paris municipalities but also evolve into functional unity. Similarly, but located in the same municipality , the conservation policy in the historical core of the city of Amsterdam brought about a new CBD development on the south fringe of the city named Zuidas Amsterdam. Likewise, some financial companies in the City of London have indicated the rigorous regulation was becoming burdensome and indeed unmanageable (Cook et al., 2007:1342).