Professors William Strange of the University of Toronto's Rotman School of Management and Stuart Rosenthal of Syracuse University in New York studied the market forces governing industrial location by analyzing U.S. firms listed in a comprehensive industry database. "Companies relocate to cities because it makes good economic sense," Strange says.
The researchers found two other major benefits for companies in cities - innovation and cost-savings. "Roughly 75 per cent of the population lives in cities but more than 95 per cent of innovations are urban in origin," Strange says. In addition, companies in related industries are able to share resources. For example, apparel manufacturers in Montreal can benefit from the specialized button manufacturers who are located nearby. "This both reduces shipping costs and facilitates product design because two companies are in the same location," says Strange.
The study supports the idea that New York City's financial district ought to be rebuilt after the Sept. 11 terrorist attack, he says. "Cities are the engines of economic development and it is to the cities that we should look for prosperity and competitiveness."
The study, funded by the Social Sciences and Humanities Research Council of Canada, was published in the September issue of the Journal for Urban Economics.
CONTACT: Professor William Strange, Rotman School of Management, 416-978-1949, wstrange@rotman.utoronto.ca or Sue Toye, U of T public affairs, 416-978-4289, sue.toye@utoronto.ca