Transportation Infrastructures, Location and Productivity. A micro-geography approach

This dissertation collects three empirical studies aiming at investigating (i) the foreign location choices made by multinational enterprises (MNEs), and (ii) the productivity of firms, most notably by looking at the quality and extension of urban transportation infrastructures, and secondarily, to the magnitude of intersectoral demand. By building upon past research we argue that the efficiency and the extension of transport infrastructures generate on one hand positive productivity gains for firms, and on the other hand, a change in location’s attractiveness. Chapter 1 of this thesis explores the relationship between FDIs location patterns along the value chain and the mobility within urban boundaries. Here we conceptualise the intracity connectivity, which reflects both the efficiency, e.g. travel times, and the extension of available within-city connections, i.e. the capacity of infrastructures connecting both the core and the suburbs. Here findings from 21.888 FDIs located in 69 cities all over the world, reveal that firms engaged in capital-intensive activities, less amenable to telework, exhibit higher sensitiveness to the quality of intracity connections, whilst service-related activities show higher sensitiveness to international connections. In the first chapter we test our assumptions across all activities in the value chain, openly accounting for the logistics activities, largely overlooked in the business literature. Here we observe that logistics is affected by the same connectivity factors affecting manufacturing’s location choices. However, we wonder whether findings in chapter 1 implies that logistics and production necessarily proceed “hand in hand”, as the literature seems to suggest. Given the considerable gap in the empirical literature, in Chapter 2 we place attention to the location determinants of logistics MNEs, being aware that firms supplying intermediate inputs, e.g. logistics, may be sensitive not only to the transport infrastructures investing in the territory where they are located, but also to the degree of existing intersectoral demand generated by the firms’ typical users, e.g. retailers. Here we aim to fill a gap in the literature which investigated logistics’ location decision as merely determined by the location of production activities. We assume that as other business services, logistics providers are characterised by strong supplier-user interactions and therefore they might be sensitive to the magnitude of existing intersectoral demand from other industries, and particularly so with the retail trade industry. Our findings based on 1777 FDIs across 380 NUTS3 open avenue on future insights about the logistics industry, and particularly MNEs by showing that logistics MNEs are more attracted by the inter-sectoral demand generated by the retail and wholesale sector in NUTS3 regions. This result is consistent with the current debate in the literature arguing the shifting towards a demand- driven economy, in which consumers’ preferences for quicker deliveries are paving the way to a more customer-based supply chain. In the third chapter of this dissertation, we explore whether the so far considered location determinants might as well affect firms’ productivity at a remarkably fine spatial level, i.e. the sub-city dimension. Particularly, we evaluate the role played by location in proximity of sources of talent, where proximity is mediated by travel times along the road network that facilitate the access to skilled human capital. The general idea is that better urban networks enhance economic productivity by (i) allowing a better matching between the firm and a specialized labour pool, (ii) and by favouring knowledge spillovers, highly localized in space. We focus on the accessibility to talents, i.e. the resident population having at least a bachelor’s degree, as the accessibility dimension likely to positively impact firms’ productivity the most. In order to test our assumptions, we develop an accessibility indicator in which we consider the volume of talents in each firm-own location and talents in other areas within London, weighted by real travel times. Our analysis is based on an unbalanced panel of 4090 firms over the period 2012-2019, located in 1,051 SOAs. Our findings open avenue for future insights on the determinants of firms’ productivity, acknowledging that indeed it is important to account for strong spatial decay effects, and that firms may be more productive if they tap into a pool of talents, who reside in a sufficiently close area of influence.