Urban spatial restructuring in shanghai the location of firms

URBAN SPATIAL RESTRUCTURING IN SHANGHAI: THE LOCATION OF FIRMS QIN BO NATIONAL UNIVERSITY OF SINGAPORE 2007 URBAN SPATIAL RESTRUCTURING IN SHANGHAI: THE LOCATION OF FIRMS QIN BO (M.Sc., Peking University; B.Eng., Wuhan University) A DISSERTATION SUBMITTED FOR THE DEGREE OF DOCTOR OF PHILOSOPHY DEPARTMENT OF REAL ESTATE SCHOOL OF DESIGN AND ENVIRONMENT NATIONAL UNIVERSITY OF SINGAPORE 2007 Acknowledgements First of all, I would like to express my sincere gratitude to my supervisor, Associate Professor Han Sun Sheng, for his time and efforts in guiding me along the way, for his enlightening supervision, valuable advices and constructive comments, and for his great patience and encouragement. Being his student has been a precious and memorable experience in my life. I also wish to thank Associate Professors Tu Yong, Fu Yuming, and Zhu Jieming for freely sharing with me their knowledge and expertise on the issues related to the study. I would also like to thank National University of Singapore and Department of Real Estate (School of Design and Environment) for providing me with the scholarship and for giving me opportunities to tutor undergraduate classes. I would like to extend my appreciation to the Asia Research Institute (NUS) for providing me with financial support for the fieldwork in China. I am indebted to many friends and colleagues, who worked in Beijing and Shanghai, for their help in arranging for data collection, field reconnaissance, and interviews. Particularly, I thank Professor Feng Changchun, Professor Zhou Yixing, Professor Ning Yuemin, Professor Peng Zhenwei, Dr. Wang Yong, Mr. Wu Xiang, Mr. Wang Xinfeng, Ms. Chen Yixing, Mr. Wang Huan, Mr. Wang Wei, Mr. Zhao Jun, Mr. Shi Feng, Ms. Wu Li and Dr. Li Jian. I also owe many thanks to my colleagues and friends in Singapore for providing critical feedbacks on the early drafts and sharing with their ideas and knowledge, especially Mr. Wu Jianfeng, Mr. Sun Liang, Mr. Li Ze, Mr. You Wenpei, Ms. Zhou Qin, and Ms. Liu Xuan. Also I would like to thank the three examiners for their valuable comments on the thesis. Finally, I am grateful to my wife, Shi Yan Yan, and my parents for their unconditional support, constant understanding and true love, without which this study would be impossible. TABLE OF CONTENTS TABLE OF CONTENTS i SUMMARY iv LIST OF TABLES . viii LIST OF FIGURES .x CHAPTER ONE Introduction 1.1 Statement of Problem 1.1.1 Background of Research .1 1.1.2 Research Questions .3 1.2 Objectives of Research .7 1.3 Significance of the Research .9 1.3.1 Theoretical Significance .9 1.3.2 Practical Significance 13 1.4 Organization of Dissertation .15 CHAPTER TWO .20 Intra-city Location of firms: A Literature Review . 2.1 Introduction .20 2.2 Understanding Urban Internal Spatial Structure .22 2.2.1 Evolution of Concentration/dispersal in Cities .22 2.2.2 Causes of Concentration/dispersal 32 2.2.3 The Impacts of Globalization on Urban Internal Structure .37 2.3 Understanding Firm Locational Behavior 41 2.3.1 The Neoclassical Approach of Firm Location-choice .42 2.3.2 The Institutional Approach of Firm Location-choice .47 2.4 Spatial Restructuring and Firm Location in Chinese Cities 51 2.5 Summary .56 CHAPTER THREE .58 Research Design . 3.1 Conceptual Framework .58 3.2 Choice of Study Area 62 3.3 Data Collection .65 3.4 Methods of Analysis .72 3.4.1 The GIS Operation 72 i 3.4.2 Measurements of Spatial Pattern 73 3.4.3 Multivariate Linear Regressions .78 3.4.4 Case Studies 79 CHPATER FOUR 80 Firms in Transitional Shanghai 4.1 Introduction .80 4.2 Marketization in Shanghai: Institutional Context .80 4.2.1 Power Decentralization .80 4.2.2 Marketization Reform .83 4.3 Tertiarization in Shanghai: Sectoral Context 86 4.3.1 Economic Restructuring in Shanghai 86 4.3.2 Development of Services in Shanghai 90 4.4 Globalization in Shanghai: Ownership Context .92 4.4.1 FDI and International Trade 93 4.4.2 Pattern of TNCs in Economic Sectors 95 4.5 Suburbanization in Shanghai: Spatial Context .99 4.5.1 Urban Expansion .99 4.5.2 Suburbanization in Shanghai 106 4.6 Summary .113 CHAPTER FIVE .115 Location Pattern of Firms in Shanghai 5.1 Introduction .115 5.2 The Structure of Firms in Shanghai 115 5.2.1 The Sub-sectoral Structure of Firms . 115 5.2.2 The Ownership Structure of Firms 118 5.3 Location Pattern of all the Firms in Shanghai 122 5.3.1 Spatial Distribution of Firm Density .122 5.3.2 The Density Gradient of Firms and Population 125 5.4 Location Pattern of the Firms by Sectors 129 5.4.1 Spatial Distribution Pattern of Firm Density by Sectors 129 5.4.2 The Concentration Pattern of the Firms by Sub-sectors .132 5.4.3 Regularities of the Concentration/dispersal 134 5.5 Location Pattern of Firms by Ownerships 139 5.5.1 Spatial Distribution Pattern of Firm Density by Ownerships .139 5.5.2 The Degree of Dissimilarity and Regularities 143 5.6 Summary .146 CHAPTER SIX 149 Location determinants of Firms . 6.1 Introduction .149 6.2 The Empirical Model 149 6.3 Model Specifications and Testing Hypotheses .153 ii 6.3.1 Geographic Heterogeneity Variables .156 6.3.2 Agglomeration Economies Variables 159 6.4 Empirical Findings .162 6.4.1 Manufacturing Firms .163 6.4.2 Producer Service Firms 167 6.4.3 Personal Service Firms 172 6.5 Discussion 175 6.5.1 Geographical Heterogeneity Variables 175 6.5.2 Agglomeration Economies Variables 179 6.5.3 First Nature Force versus Second Nature Force 182 6.5.4 Summary .183 CHAPTER SEVEN .185 Location Decision-making Process of Firms . 7.1 Introduction .185 7.2 Analytical Framework .182 7.3 Cases Introduction 187 7.3.1 Wacker Group in Shanghai .187 7.3.2 Shanghai Shen’an Textile Company .193 7.3.3 Jones Lang LaSalle in Shanghai .197 7.3.4 Eton Exhibition Company .201 7.3.5 Metro Group in Shanghai 204 7.4 Cases Interpretation 209 7.4.1 The Main Actors .209 7.4.2 Bargaining Positions between the Actors .215 7.5 Summary .217 CHAPTER EIGHT . 219 Conclusion 8.1 Summary of Main Findings . 219 8.1.1 Varied Concentration/dispersal Pattern of Firms across Sectors and Ownerships . 220 8.1.2 Different Geographic Heterogeneity and Agglomeration Economies Determinants in Firm’s Location Decision-making 221 8.1.3 Interaction Process between Firms, Developers and Local Governments in Firm’s Location Decision-making 222 8.2 Conclusions 223 8.3 Contributions 225 8.3.1 Contributions to the Existing Knowledge 225 8.3.2 Policy Implications 227 8.4 Recommendations for Future Research . 228 BIBLIOGRAPHY . 230 iii SUMMARY Firms are critical agents in the spatial restructuring of cities. In China, the economic reform started in 1978 has brought in profound changes to firms by transforming the state sector enterprises and by encouraging the growth of the non-state sector businesses. These changes have been accompanied by broader institutional changes and economic restructuring in the cities, especially in the large ones. The increasing autonomy and responsibilities gained by the larger cities as well as the emerging market-oriented firms give rise to a new context of urban spatial restructuring. A new challenge to researchers is to find out how socioeconomic dynamics are reflected in the location of firms, and whether China’s economic transition has generated a unique outcome in urban development. This research attempts to shed light on the internal spatial restructuring in Chinese cities by a close and systematic investigation of the location of firms in Shanghai. The research questions addressed are: 1) how are the processes of concentration/dispersal reflected in the spatial distribution patterns of the firms in different sectors and by different ownerships in Shanghai? 2) What are the determinants of the spatial outcomes and to what degree these determinants affect the location of firms? 3) How firms interplay with the relevant institutional actors in location decision-making? Data are collected from Shanghai Administration of Industry and Commerce, government statistics and records, filed reconnaissance, and interviews. iv Both GIS mapping and statistical methods (i.e. Moran’s Index, density gradient, index of dissimilarity) are employed to assess the spatial distribution patterns of the firms in different sectors and by different ownership types. The empirical results show that the spatial distribution of firms in Shanghai conforms to the distance-decay pattern, which is also more centralized than that of the population. Furthermore, manufacturing firms are more dispersed than producer service firms are, and producer service firms are more dispersed than personal service firms are. Firms in different ownership types display the distance-decay pattern also, and the overseas firms in manufacturing, producer services and personal services are all more centralized than the corresponding domestic firms are. The findings suggest that, although manufacturing and population have been decentralized, service activities are still highly concentrated in central Shanghai. The concentration is further strengthened by the location of overseas firms. An empirical model derived from neo-classical theories of firm location is employed to examine the location determinants for different groups of the firms (i.e. domestic manufacturing, overseas manufacturing, domestic producer services, overseas producer services, domestic personal services, and overseas personal services). The results suggest that the firms are variedly influenced by geographic heterogeneity factors (i.e. central business district, highway, airport, new town, development zones) and agglomeration economies factors (i.e. population agglomerations, manufacturing agglomerations, producer service agglomerations, and personal service agglomerations). The differences in location determinants and their effects partly v explain the varied concentration-dispersal patterns of firms across sectors and ownership types. By five case studies of firms’ (re)location, the interaction processes of firms and relevant institutional actors behind the location pattern of the firms are investigated. The location decision-making of firms includes a dynamic bargaining process among the firm, the developer and the local governments. For the firms making location decision, besides the factors of profit-maximization, corporate strategy is also an influential factor in their location-choice, as the firms with ambitious strategy tend to value more on a prestigious location; for the developers who are suppliers of space for the firms, the market condition, the quality and location advantage of their properties define their bargaining power; for the local governments that possess land resource and administrative power, priorities are given to manufacturing firms and larger firms as these firms can increase the economic output of a local jurisdiction immediately. Local governments also participate in state-owned enterprises’ location decision-making directly. The different strategies and interests of firms, developers and local governments, their relative bargaining power, as well as the constraints they impose on each other characterize the location decision-making process of firms. 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How do firms interplay with the relevant 6 CHAPTER ONE institutional actors in location decision-making? 1.2 Objectives of Research The central objective of this study is to unfold and explain the location pattern/process of firms in Shanghai, thus providing evidences in judging the two... judging the two competing theories that whether the urban spatial restructuring in China is similar or distinctive to the pathway of cities in Western countries Conceptually, the objective contains four interrelated layers: 1) the context of firm development; 2) the spatial distribution pattern of firms; 3) the location determinants of the pattern; and 4) the interaction processes behind the pattern As such,... findings in spatial restructuring and firm location in Chinese cities are summarized as well Location of firms in cities Urban internal spatial restructuring Evolution of concentration/ dispersal Causes of concentration/ dispersal Globalization and the urban imprints Firm location behavior Neoclassical approach Institutional approach Empirical findings on spatial restructuring and firm location in Chinese... of firms and underlying concentration/dispersal process within the cities The topic is, however, at the intersection of two strands of theories, namely, the urban internal spatial structure theories and the firm location theories The former aims to reveal the spatial patterns and processes of economic activities within the cities and the underlying contributing factors, which is not confined on the firms. .. examines the location determinants for different types of the firms by quantitative approach, and compares the locational preferences of the different types of firms; and 7 CHAPTER ONE • investigates the interaction process between firms and the relevant institutional actors behind the firms location pattern by case studies, and assesses the roles of the actors involved in the location decision-making... been introduced and performed well in China (Wang and Zhou, 1999; Ding, 2004); the other theory claim that transitional cities in China are distinctive rather than in convergence to western cities, as the state still dominates the location pattern within the cities (Ma, 2002; Wu, 2003) In fact, changes in China’s national urban system and in the internal structure of individual cities, especially the. .. different sectors of the firms exactly As the urban economy is made up of the sectors, the results provide the evidences to explain the urban spatial structure from the perspective of the city’s economic structure Thirdly, in the face of overwhelming globalization of economic activities, the location behavior of transnational corporations (TNCs) in the cities and their aggregated spatial pattern are... distribution pattern of the firms within cities, despite their empirical significance on labor markets, residential patterns, and commuting systems Since the pioneering work of Weber’s industrial location theory (1929), the understanding on the firm location behavior has been gradually expanded Initially, the theory conceived that the firms are located in the locus to minimize the cost of transportation,... urban spatial restructuring in China and other developed countries is whether and how there exists a single converged pathway of urban spatial development (Wu and Ma, 2005; Heikklila, 2007) There are two competing theories related to the urban spatial restructuring in China One theory argues that the changing urban spatial structure in China closely resemble those in other cities with a free market economy,... process underlying the location decision-making of firms Five cases are examined in order to investigate the relationship between the main actors in firm’s location decision-making process, which are the firms, the property developers, and the local governments Emphases are put on different interests and strategies, as well as relative bargaining power of the actors Chapter 8 summarizes the findings and . of the firms are investigated. The location decision-making of firms includes a dynamic bargaining process among the firm, the developer and the local governments. For the firms making location. 115 Location Pattern of Firms in Shanghai 5.1 Introduction 115 5.2 The Structure of Firms in Shanghai 115 5.2.1 The Sub-sectoral Structure of Firms 115 5.2.2 The Ownership Structure of Firms. on the urban spatial restructuring in Chinese cities, by a systematic and thorough investigation on the concentration/dispersal pattern of firms in Shanghai, one of the largest cities in China.