Urban Response to Global Intercity Competition

1 Urban Responses to Global Intercity Competition by Ari-Veikko Anttiroiko, Adjunct Professor Department of Regional Studies, University of Tampere, Finland Reference to the original version: Anttiroiko, A-V. (2009) Urban Responses to Global Intercity Competition. In: Kultalahti, J. & Karppi, I. & Kultalahti, O. & Todisco, E. (Eds.) Globalisation: Challenges to Research and Governance, pp. 257-279. Helsinki: East-West Books. Introduction Globalisation is a gradual macrostructuration of world order which implies a development towards a world-scale systemic interdependency (cf. Robertson 1992, p. 22). In such a process real exchange and interactive relations and people’s orientation bases become global and consequently boundary-eroding as they crumble institutional boundaries of territorial communities. This, in turn, is why globalisation is changing dramatically the context of local communities as well as the premises of local development policy. Due to increased cross-boundary flows of resources local governments have become more concerned with global economic development than they have ever been before. In a way, they are becoming networked cities with their strategic task being the adjustment of local communities to the conditions of global economy. Local governments may do this by increasing their competitiveness and by trying to affect the overall context within which this intercity competition takes place. At both areas local governments need to increase their governing capacity and to design favourable governing structures. Thus, creating successful responses to global intercity competition is essentially both governance challenge and a challenge of strategic positioning. 2 The objective of this article is to describe how globalisation and related intercity competition pose challenges to the development of cities. A primary attention is paid to specialisation and profiling of cities and related strategies designed to attract resources from the global flows of values. The ability of cities to effectively attract external resources – especially in the areas of high-value adding activities – determines to a large extent their position in the global urban hierarchy, which both reflects and conditions their overall attractiveness and capability in the globalised environment. Spatial inequalities and side-effects of globalisation It is generally held that globalisation increases the efficiency in the utilisation of scarce resources by competition and global division of labour. On the other hand, global competition of territorial communities causes various side-effects and risks too. Castells (1999) claims that the networks of instrumental exchanges selectively switch on and off individuals, groups, regions, and even countries, according to their relevance in fulfilling the goals processed in the networks dominated by multinational corporations. This leads to a fundamental social tension between universal instrumentalism guided by corporate interests and historically rooted identities of people and their communities. What is critical in globalisation from the point of view of urban development is its spatially polarising effect, which concentrates the benefits of economic growth in a handful of cities, worsens the environment in those areas that are currently most attractive to footloose industries, increases over-concentration of population to often poorly financed and managed megacities, and decreases the viability of many provincial towns and rural areas (cf. Douglass 2002). The picture is hardly black-and-white, but these are tendencies that may decrease the aggregate welfare if not controlled and managed properly. That is why they also pose 3 challenges not only to national, regional and global governance systems but also to individual urban governments. Most local communities especially in developing countries do not have assets, know-how and attraction factors that would make it possible for them to utilise global flows of values or to link them to the global knowledge-based economy. Even many high-rank cities have been shadowed by the darker side of globalisation, such as volatile or vulnerable economic structure, extreme polarisation, and fiscal distress. Lastly, there is need to remind that globalisation has also penetrating impact on public policy and governance. According to Douglas (2002, pp. 56-58), hyper-competition may reduce overall welfare in local communities, lead to oversupply of infrastructure and services, increase social and economic costs of relocation, and strengthen the tendency to extreme developmentalism. City governments’ devotion to attraction-oriented urban development policy diverts attention away from social and environmental concerns of the local community (Logan 1999). Urban response to globalisation As global and national governance structures have not been particularly effective in determining ‘globalisation policy’ and its outcomes and at the same time local communities have become sensitive to footloose economic activities, polarisation and volatility of development have gradually tended to increase. There are various signs of this tendency. For instance, the number of countries promulgating favourable policies towards foreign direct investment (FDI) have skyrocketed since the early 1980s, which implies that the number of candidate locations for businesses increased exponentially (Douglas 2002, p. 56). Another sign 4 of this trend is that the relocations of factories from Western and Northern Europe and the USA to low-cost countries have become daily news. There are two fundamentally different ways of responding to this challenge: to increase the competitiveness of a local community, in which the positioning and attractiveness of a city is approached within dynamic competitive environment, or to affect the very condition within which these intercity relations are determined and regulated. In other words, local response to globalisation has two paradigmatic forms and arenas: (a) competitive development-oriented responses in a dynamic environment of economic competition by which cities attract values of global flows, and (b) collaborative welfare-oriented responses in an institutionalised environment, which are needed to promote solidarity and sustainability from the local to the global level as a joint effort of local governments and other public entities and sometimes also in partnership with private sector actors. It goes without saying that transnational solidarity showed by local governments is for understandable reasons difficult to realise than pursuing local development policies. Globalisation Global solidarity Global competitiveness Pressure to urban communities Local welfare policy Institutional welfare setting Responses of city governments Local Competitiveness policy Dynamic competition setting Figure 1. Dynamic and institutional aspects of local-global dialectic. 5 In a dynamic competitive arena city governments need to define local development strategies which help to attract and utilise local and external resources in an optimal way to the benefit of local community. Such an urban community with dense connections to the space of flows and with a capability of adjusting local economic, political and socio-cultural structures and processes to contextual changes can be called a networked city, as illustrated in Figure 2. Global flows of values: workforce, capital, information, expertise, innovation and technopreneurship Networked city Improving governing capacity Networking for innovations and learning Utilising local resources and attraction factors Public policy and governance Local economic development Everyday life and culture Community characteristics: institutional environment, population, physical assets, logistics and location of a community Figure 2. Networked city attracting the values from the space of flows. (Cf. Kasvio & Anttiroiko 2005.) A network city operates as a node in vast networks of translocal markets, organisations, communications and distribution (Sellers 2002, p. 37). This pervasive exposure to external influences and market competition does not imply that local public policies, governance capacities and development efforts would not make a difference. Indeed, local public policies can contribute to local attractiveness and service-led growth in various ways. For example, physical infrastructure is still important factor that allocates market opportunities among 6 places. Innovation-intensive development emphasises the role of investment in human and social capital. Increases in attractiveness of cities may help turn them into centres of consumption. Similarly urban redevelopment and revitalisation projects may serve as sources of growth. (Sellers 2002, p. 111-112.) Networked city and its local-global dialectic may be built on two alternative premises: (a) attraction-oriented strategy aims at effective absorption of external resources from the global space of flows, whereas (b) more locally-oriented capacity building and place promotion is based on endogenous growth model. At the core of attraction strategy are business promotion activities with appealing incentives offered to businesses, including donation of land, pledges to build infrastructure to support a new facility, low-interest loans, tax reductions or tax holidays, free training for workers or provision of other public services. As large part of policy decisions on taxation, trade regulation and similar issues fall outside the legal competence of local authorities, some of these promotional activities are based on the decisions by federal or state governments, as in the cases of special economic zones (SEZ) of China, India and many other countries. Such economic favouritism has usually significant impact on local level, of which a famous example is China’s first special economic zone in Shenzhen, a well-known success story based on SEZ policy. Even if macroeconomic policies and other policies, regulations and interventions by national governments are vital for economic development, both increasingly borderless competitive environment and strive for maximum utilisation of local resources and potentials provide rationale for local government involvement in economic development efforts. There are many success stories of local restructuring based on municipal business promotion campaigns to attract foreign direct investment (FDI). There are cases like an ambitious FDI attraction campaign of Spartanburg of South Carolina, which helped to restructure industrial 7 base, to create tens of thousands of jobs and to transform the city into more dynamic cosmopolitan city. Attracting FDI is an example of high profile attraction strategy. Other forms of attraction-based approach include providing premises for international agencies, hosting major international events or promoting tourism. (Kresl & Fry 2005, pp. 57-62.) Irrespective of the focus attraction-oriented strategy is usually costly and highly risky. Moreover, if attraction strategy is not based on local strengths, the benefits are unlikely to be sustainable. Sometimes rosy growth expectations do not materialise in spite of determined attraction strategies and huge investments. Even cities like Tokyo, Osaka and many other leading cities in Japan failed to achieve their goals of becoming integral part of world city network. More importantly, while focussing on world city strategy, they failed to deal with various serious urban problems. (Miyamoto 2007, pp. 67-68). Illuminating examples of such a syndrome are Osaka City and Osaka Prefecture, which on the basis of their strategies emphasising internationalisation and high-tech development introduced several large-scale business site and technopole development projects in the 1980s and 1990s in order to claim their share of anticipated global economic growth. These megaprojects – especially Technoport Osaka, Rinku Town and Tsuda Science Hills as a part of Kansai Science City – encountered severe problems, because of too rosy growth image, governance failure, defective triple helix, and bad timing relating to the bursting of the bubble economy in the early 1990s. (Kamo 2000; Anttiroiko 2009.) In this case business sites were built but high-tech firms or business service providers did not find Osaka that appealing at that situation, leaving skyscrapers half empty and related business sites under construction. The lesson learned was that business site developments need to be built carefully on premises that match the requirements of a global knowledge economy. Best chances to succeed in the global intercity competition are for those communities that possess some unique assets or competitive advantages, be they natural resources, location 8 advantages or intangible assets. Yet, most of the cities do not enjoy such a unique position. Their success depends more than anything on local transformative capacity and local capabilities, which are needed to develop and manage inclusive governance structures and development networks, to support clustering, flexible specialisation and the development of adaptive business models, and to enhance creativity and innovation potential of local business and wider community. One of the strategic decisions of a networked city is to determine the most beneficial connections to the global flows of values. This requires understanding of both local community and its economic environment and related trends and developments, which are briefly outlined next. The context: global trends in industrial development Cities’ competitiveness is associated with and largely conditioned by the most pervasive trends in global economy. One of the indicators of these trends is the decrease in manufacturing jobs in advanced industrial countries and the respective increase in service economy. The former trend is illustrated in Figure 3. Of course, the trend is reverse in those low-cost countries that have been able to attract manufacturing activities, such as China and many other Asian countries (see Figure 4). 9 Percent 24 23 22 21 20 19 18 17 16 15 14 14 12 - Manufacturing share of total employment Year 1980 1985 1990 1995 2000 Figure 3. Share of manufacturing of total employment in the USA. (Adopted from U.S. Department of Commerce 2004.) In low-income countries usually sectoral structure is balanced with a special feature of relatively high share of agriculture (around 25%) in comparative perspective. In the middleincome countries usual structure is characterised by low share of agriculture, fairly high manufacturing sector and service sector as the largest sector (the last one making some 50%). In high-income countries the visible feature is very low share of agriculture (only some 2% on average) and a high share of services (close to 70%). (The World Bank 2000.) In some fifteen years from 1980 to the mid-1990s post-industrialised countries lost a lot of manufacturing jobs, which equals in relative terms the gain of industrial jobs in developing countries, as illustrated in Figure 4. 10 Percent 40 37 % High-income (postindustrialising) countries 32 % Low-income (industrialising) countries 38 % 35 32 % 30 1980 1995 Figure 4. Industrial output as a % of GNP in high-income and low-income countries in 1980 and 1995. (Adopted from The World Bank 2000.) Job losses in manufacturing increased interest in high-tech development and service sector. The post-industrial transformation has for decades paved way to the predominance of services, consumption and technology, building a new city with office towers, university campuses, business parks and shopping facilities. (Sellers 2002). As to such recent trends, since the 1990s in developed world there has been a shift away from ICT-dominated growth image towards more diverse high-tech development as well as continuing growth in services. An important longer term trend of employment has been the shift away from the goods and lower-valueadded service sectors to higher-end services. (Fisher 2007.) Focussing on attraction factors As factors of production and other values are increasingly exchanged on a macro-regional and global scale, this creates both pressures and opportunities to local communities to attract values from the global space of flows. Attraction factors associated with production include everything from traditional ‘hard’ factors of production, such as natural resources, labour and capital, to ‘soft’ factors such as knowledge, know-how, creativity and entrepreneurship. Two main consumption-related sets of attraction factors are factors of consumption by business such 11 as innovation milieu, business services, fairs and logistics and factors of consumption by consumers manifested in shopping, fashion, sports, cultural events and tourism. The strategic challenge at the local level is to determine how and in what areas to increase the attractiveness of a local community vis-à-vis global flows of values. This is why municipal marketing, place promotion, city profiling and city branding are vital for responding to global intercity competition. One tool for crystallising the local-global dialectic from a city attractiveness perspective is to determine the profile of a city. Generic city profiles are illustrated in Figure 5 on the basis of main economic sectors. Profile of a city Service city Serving individuals (e.g. tourism) Industrial city Serving institutions High-Tech R&D (e.g. finance) Agricultural town Low-tech Manufacturing Farming, tillage etc. Forestry, mines etc. Attractiveness of the city Citizens and consumers Public organisations Corporations and business networks Figure 5. City profile typology by main economic sectors. The standard response to global intercity competition has for a long time been to create favourable conditions for industrial activities in the growth sectors. Attracting footloose industries and influencing manufacturing firms’ location decisions are at the very core of conventional local economic development policy especially among world cities. Yet, this picture is gradually changing due to the transformation form industrial society towards knowledge-based network society. 12 New approaches to local development policy in developed countries reflect post-industrial conditions, i.e. they widen the local development perspective to the cost-effective utilisation of soft factors of production as well as to the range of demand-side attraction factors when compared with more industrial and production-oriented development paradigm that lasted until the 1980s. Attention is based increasingly on services and especially on knowledge-intensive and high value-adding activities. Another general trend is to rely in development policy design and implementation on new forms of governance – especially networking and partnership - and on such progressive ideas as sustainable development and smart growth (cf. Savitch & Kantor 2003). At local level this development is conditioned by different national contexts, which indicate that high-value adding services have the most fruitful soil in Western countries with developed service sector, high standard of living, high educational level and sufficient governing capacity. Due to differences in the level of development, community characteristics and governance capacity, the scope and nature of strategic actions of cities differ from each other. The preconditions for generating economic activities and attracting external resources vary to a great extent. Most of the cities in the developed world have opportunities to focus on high value-adding activities, ranging from high-tech industries to business services. This competition is intensifying especially since the 1980s when the large countries like China and India started to open their economies and are gradually increasing their expertise in high technology and business services. The formation of urban agglomerations is one of the major indications of this trend which has its reflection in the global urban hierarchy. These points are further elaborated in the next two sections. Urban concentrations of high value-adding activities 13 Theoretically speaking, in order to maximise welfare for their communities cities strive for as high position as possible in the urban hierarchy, which relates to the attraction of high valueadding activities to the community. Such high value-adding, knowledge-intensive and serviceoriented economic activities rely on sufficient concentrations of skilled workers and creative people, referred to as knowledge workers, symbol analysts or creative class (see e.g. Florida 2005). This is an indication of the increased importance of knowledge, know-how, innovativeness and creativity to high-profile urban development strategy, reflecting not only informational mode of development but a transition towards a kind of creational mode of development, in which growth is increasingly based on innovativeness and creativity (cf. Castells 1999; Florida 2005). It is noteworthy that also in services and creative industries agglomeration economies and thus proximity factors have considerable role to play (Rubalcaba & Carrido 2006). Cities may profile themselves utilising both hard and soft productive inputs. At the core of hard factors are corporate power and capital, on the one hand, and knowledge and technology on the other. Softer factors may focus on business and professional services or culture and entertainment. These form a field of high-value adding city profiles, which are illustrated in Figure 6. The profiles presented in the figure are examples of city profiles, meant only to show some of the most widely discussed city conceptions and profiles. 14 Knowledge city Headquarters city Knowledge Learning High-tech city Corporate power Business intelligence University campus Technology R&D High-tech park Financial centre Head office cluster Financial complex Capital Assets City profiles Logistic hub Transport Logistics Warehousing Logistics city Cultural centre Exhibition Tourist centre spot Exhibitions Conferences Hospitality MICE city Arts Culture History Creative city Entertainment Tourism Well-being Service city Figure 6. City profiles, related core activities and typical development areas. Cities of corporate power, capital and business intelligence A special place in the global urban hierarchy is reserved to those cities that have attracted corporate management functions – strategic planning, corporate law, tax, finance, marketing, human resources and so forth – and various business services, some of them specialised in international business. A headquarter city is a special agglomeration of such functions. Large number of headquarters do not only strengthen city as command-and-control centre of economy but also increases demand for legal and accounting staff and various business services. In the USA well-known headquarter cities are for example New York, Houston, Atlanta, Dallas, Chicago and Charlotte. Another well-known case, which also shows the profound impact of the headquarters of a successful global company is Toyota City in Aichi Prefecture, the “Motown of Japan” or the “Detroit of the Far East”. At the heart of the Toyota phenomenon is Toyota Motor Corporation and its headquarters in Toyota City, which 15 epicentres a network of several manufacturing plants and supplier facilities located within a 30 km radius. It is the most important single reason behind the successful regional development in Aichi prefecture. Finance is the most globalised sector in economy and consequently financial centres have traditionally had high profile in global urban hierarchy. Preconditions for building such centres include open and fair financial markets; free flow of capital, transparent political, regulatory and tax regimes, skilled workforce and high quality physical infrastructure. Financial services include not only banking and insurance but also nondepository financial institutions and financial and commodity brokers. Financial services has been a growth sector for long even if in the latter half of 2007 it also seemed to be the major trigger of US credit crunch which cast a long shadow over global economy. Old and most powerful financial centres locate in the USA and Europe, such as New York, London and Frankfurt, but rising Asian economies have attracted increasing attention in this area. Singapore is a good example of a city-state which places a lot of attention to financial services. The same goes with Hong Kong and Seoul. Since the opening of Chinese economy Shanghai, the old business centre of China, has emerged as a new rival to claim to become the economic and financial centre of the Greater China region. Its role in finance and banking and as a destination for corporate headquarters has fuelled demand for a highly educated and professional workforce. Competition is fierce, though, even among Chinese cities. Especially Beijing and Shenzhen have pitted Shanghai for China’s financial centre. City profiles based on knowledge and high technology A group of cities which reflect current trend in knowledge-based economy are concentrations of knowledge, science and technology, sometimes referred to as knowledge cities. According 16 to Carrillo (2006), knowledge cities are urban communities that possess an economy driven by high value-added exports created through research, technology and brainpower. In these communities knowledge is valued and nurtured, resources are allocated to supporting knowledge dissemination, learning and innovation and knowledge is harnessed to create products and services that add value and create wealth. Paradigmatic examples of such cities are university towns and cities of science, such as Cambridge, Oxford and London in the UK or Boston and Cambridge, Massachusetts and Berkeley and Palo Alto, California in the USA. Under this category we may also include more technology-oriented conceptions, such as technocities, high-tech cities, e-cities, smart communities, ubiquitous cities, intelligent cities, science cities, and so forth. (e.g. Downey & McGuigan 1999; Aurigi 2005). Next we discuss briefly one example of the family of these kinds of urban formations, high-tech cities. High-tech cities are known of their high-tech industries and R&D activities. This was probably the most popular urban high-tech development paradigm in the 1980s and especially in the 1990s reflecting the overall information society development and related IT enthusiasm boosted by the Great Internet Explosion of the first half of the 1990s. In high-tech development Silicon Valley became a global benchmark to urban developers. One indication of the power of this trend is that since the 1980s the number of sciences parks mushroomed in different parts of the world (Anttiroiko 2004; Castells & Hall 1994). There was a good reason behind this trend: Silicon Valley was the first world-class high-tech region with entrepreneurial culture, which enjoyed ten-fold increase in jobs between 1980 and 2000, when manufacturing jobs in Detroit and many other industrial regions decreased alarmingly during the same period (Kresl & Fry 2005, p. 13). Interest in Silicon Valley is paradoxical in the sense that the region itself is a unique expression of American entrepreneurship and technological advancement, which is practically impossible to replicate in any other context. Actually, in high-tech development each context has its distinguished profile and characteristic development schemes, such as 17 Nordic innovation system thinking, university-based science parks in the UK, the role of smallscale business incubators in Germany, large-scale technopolis projects in East Asian countries and so forth (Anttiroiko 2004). Most of the high-tech cities are specialised on few products and technologies. A competitive environment inevitably leads to specialisation, for no single site can create world-level expertise with a broad set of high-technologies or to attract all kinds of high-tech expertise and business. Cortright and Mayer have analysed 14 American high-tech metropolitan areas and observed that high technology varies dramatically from place to place, which emphasises the role of specialisation. In fact, each area tended to specialise in relatively few products or technologies, with the exception of such large-scale concentrations as so called Route 128 around Boston and San Jose at the heart of Silicon Valley. Various indicators point in this direction. For example, high-tech employment is concentrated in only a few industry segments and also patents in high-tech areas are granted to only a handful of firms specialising in one or more related technologies. This mirrors an important historical aspect of the geography of high-tech development: many high-tech centers have been highly dependent on one or a few leading high-tech firms which originally started to generate a cluster around it. (Cortright & Mayer 2001; Anttiroiko 2004). Paradoxically, even if high-tech specialisation is a reality and a necessity to a certain degree, in terms of local economic development it is also a risky strategy due to increased vulnerability, why some degree of diversification should be given a role in local development policy (Chapple et al. 2004). In addition, high-tech field is changing slowly from production-oriented conceptions towards stronger demand-orientation and high-tech services even to the extent that in spatial terms the time of isolated suburban science parks is said to be over (Castells 2001). The new paradigm emphasises closer connection to rich innovation milieu, demand and services, which requires a close proximity to the very heart of urban life. 18 Cities of transportation, exhibitions and hospitality In addition to knowledge and technology also services in various forms have been and continue to be on urban development agenda, building on such a range of activity areas as logistics, transportation, tourism, hospitality, entertainment, retail trade, consumer services, welfare services, and cultural services (see e.g. Clark 2004; Miles & Miles 2004). Let us discuss first types of cities which have two different roles in international business and trade: transport interchange and host city for trade fairs and conferences. Some studies indicate that investments in transport infrastructure are maybe the most important single contributor to urban growth (UN-HABITAT 2008). Related to this, transportation is also critical to the location decisions of international business. That is one reason why the development of logistics city – be it global or regional logistic hub or a specialised port city, airport city, warehousing hub or something similar – is appealing local economic development policy in the globalising world. Many European cities, especially those in Germany, France, the UK, and the Netherlands, have for long been major global and regional logistic hubs. Similar kinds of hubs in the USA include New York-Newark, Houston, Minneapolis-St. Paul and Dallas-Fort Worth. In Asian context world-class logistic hubs include Singapore and Hong Kong, challenged by such ambitious developments as Shanghai and other Chinese logistics hubs as well as Dubai Logistics City (DLC) in United Arab Emirates, envisioned to be the world's first truly multi-modal integrated logistics platform. An example of more conventional regional development project is the case of Western Melbourne region, which has plans to integrate its competitive strength in logistics to become a ‘National Logistics City’ in Australia stimulating economic development for the whole region. 19 A special form of service city which combines logistics, events and hospitality is so called MICE city, which provides a range of MICE services (MICE is an abbreviation from meeting, incentive, convention and exhibition), offered mainly to business people, companies, and professional and international organisations. Well-known MICE cities include Paris, Vienna, Barcelona and Berlin in Europe and Singapore, Seoul and Hong Kong in Asia. Cities of consumption, well-being and culture Tourism, shopping and entertainment are conventional elements of service city as illustrated in fashion capitals like Paris and Milan, sports cities such as Melbourne, Sydney, Vancouver and Manchester (n.b. Dubai Sports City is a project that aims at building the world's first city revolving around the world of sports, planned to be completed around 2011), shopping cities like Düsseldorf and Hong Kong, quick wedding destinations like Las Vegas and New York, and the like. Interestingly also welfare services are slowly attracting increased attention of developers due to continuing increase in demand in services related to health, well-being and self-development. An expression of this trend is the idea of a healthcare town, which is based on increased regional and global demand for medical tourism, which is actually one of the world’s largest industries. This is particularly lucrative business in Asia, but also Latin American and Eastern European countries have had their share of its growth. India and Thailand have been estimated to emerge as key players in this field. Singapore is becoming an important healthcare hub, for each year some 200,000 people from around the world go there for quality medical care. Another example is Dubai Healthcare City (DHCC), which is designed to attract medical tourists. An example of the newcomer in this field is the Jeju Government, which has a plan to build a mammoth healthcare town to Seogwipo in Jeju Island, which is a 50-minute drive from 20 Jeju International Airport. Jeju Free International City Development Center has been working on strategies to attract foreign investment to a medical tourism site in Seogwipo. Lastly, arts, culture and creativity within a community may help to generate income and jobs. This is highlighted in the concept of creative city, which reflects the transition towards a higher trajectory of urban development and is often a part of a wider progressive agenda combining it with the ideas of smart growth and sustainable city (Miyamoto 2007; Scott 2006). The formation of creative cities or creative centres is a global phenomenon and has many expressions in different parts of the world. Globally well-known examples of creative cities are Kyoto and Kanazawa in Japan. They reflect well the culturally and historically oriented approach to the development of creative city. Examples of creative city developments in larger cities are the City of Yokohama in Japan, Sydney in Australia and Toronto and Vancouver in Canada. Even if cultural services as an industry are not seen as high-value adding business as such, this is one of the emerging urban development trends, not least because it gives a fairly coherent view of how to respond to the need to restructure a local community that is losing manufacturing industries and is often in immediate need of considering how to utilise local culture in the development of service sector and how to turn old factory buildings into cultural attractions as a part of the construction of creative city. Global urban hierarchy Cities’ positions and principal roles in the global division of labour form a global urban hierarchy, which does not have a clear hierarchical nature, but is rather like a continuum (Abrahamson 2004). The “hierarchy” is also relative to some extent, as it depends on criteria how the cities position in the hierarchy. Special attention has for long been paid to the top of urban hierarchy, i.e. global cities or world cities with a wide range of attraction factors and global capabilities, which make them the most powerful nodes of global flows of values. In the 21 apex of this hierarchy there are three cities from three different continents: New York, London and Tokyo (see Sassen 2001). Manuel Castells and David Harvey were among the researchers who revolutionised urban studies by linking urban-regional development processes with the globalising world economy. A research tradition that was built mostly on similar premises with sharpened insights into the role and nature of cities with global functions, is associated with world city hypothesis developed by John Friedmann and global city theory developed by Saskia Sassen (see e.g. Friedmann 2005; Sassen 2001; Castells 1999; Miyamoto 2007; Abrahamson 2004). To illustrate differences in cities ability to attract high value-adding activities and thus to position themselves in the global urban hierarchy, let us look at two rankings of world cities. A fairly narrow way of comparing cities’ position in the global hierarchy is to assess their role in industrial and business services. One of the rankings based on such criteria was made by Beaverstock, Smith and Taylor (1999), who ended up with the following global view of the hierarchy of world cities: A. Alpha world cities (full service world cities) 1. London, Paris, New York, Tokyo 2. Chicago, Frankfurt, Hong Kong, Los Angeles, Milan, Singapore B. Beta world cities (major world cities) 3. San Francisco, Sydney, Toronto, Zurich 4. Brussels, Madrid, Mexico City, Sao Paulo 5. Moscow, Seoul C. Gamma world cities (minor world cities) 6. Amsterdam, Boston, Caracas, Dallas, Düsseldorf, Geneva, Houston, Jakarta, Johannesburg, Melbourne, Osaka, Prague, Santiago, Taipei, Washington DC 7. Bangkok, Beijing, Montreal, Rome, Stockholm, Warsaw 8. Atlanta, Barcelona, Berlin, Buenos Aires, Budapest, Copenhagen, Hamburg, Istanbul, Kuala Lumpur, Manila, Miami, Minneapolis, Munich, Shanghai An example of a ranking in which broader categories are used is presented in a Global Urban Competitiveness Report (2007-2008) prepared by a team led by Dr. Ni Pengfei and Prof. Peter Karl Kresl. In this report urban competitiveness is defined as a city’s ability to create more 22 wealth in a faster and better manner than other cities in the world. The report measures the comprehensive competitiveness of 500 cities around the world in terms of 9 indicators, namely GDP, GDP per capita, GDP per unit area, labour productivity, number of multi-national enterprises settled in the city, number of patent applications, price advantage, economic growth rate and employment rate. The top 20 most competitive cities identified by the report are: New York, London, Tokyo, Paris, Washington D.C., Los Angeles, Stockholm, Singapore, San Francisco, Chicago, Toronto, Seoul, Boston, San Diego, Auckland (U.S.), Helsinki, Madrid, Vienna, Philadelphia and Houston. (Global Urban Competitiveness Project 2008.) There is need to remind that the hierarchy especially at the lower ranks is relative to the criteria used and is also changing over time. Most notably, large portion of high-tech jobs have already moved from Silicon Valley and other high-tech regions of developing countries to regions in India, China and other developing countries (Kresl & Fry 2005, 14). There is also a trend of offshoring services and white-collar work (Collins & Brainard 2006; Markusen 2005). These have boosted the development of many Asian urban centres, such as Seoul, Taipei, Shanghai, Bangalore and the like, which can be expect to improve their positions in the global urban hierarchy as the hubs of the world’s fastest growing economic region. A governance challenge Local transformative capacity is the key to success of urban communities in global intercity competition. It is about democratic and creative governance, innovative business models and initiatives and everyday life of the community that is linked to local government’s promotional activities. Yet, local responses to globalisation are not only matters of adjustment strategies and capabilities of individual local governments. There are also collective efforts of local governments and their associations to take progressive and solidaristic urban agenda into account in wider governance and policy fields. 23 At the core of the global urban agenda are issues of democracy, sustainability, development, and solidarity (see e.g. Borja & Castells 1997). The UN Habitat II conference in Istanbul, Turkey in 1996 was an important landmark in the formation of this agenda. It was also the scene where the representatives of regional associations of local governments throughout the world started to intensify their co-operation, resulting in the establishment of a new global network, which eventually became a worldwide advocate and voice for democratic local governments, the Union of Cities and Local Governments (UCLG). Another sign of the shift in governance is active role of sub-national governments in the international arena, sometimes referred to as municipal foreign policy or municipal diplomacy. For example, in Europe cities are lobbying in Brussels, making them an essential part of a multi-level governance system of the European Union. There are a lot of similar cases in different parts of the world that illustrate the emergence of the higher profile of local and regional governments on the macro-regional and global scene. (Kresl & Fry 2005.) One indication of new governance paradigm is contractual and informal collaboration in the form of specialised associations, sister-city relationships and development networks, such as Four Motors for Europe, Eurocities, ICLEI-Local Governments for Sustainability, World Technopolis Association (WTA), Global Cities Dialogue (GCD) and the like. These kinds of arrangements are designed to give local governments a voice in the scene of global governance. Institutionalised bodies are formed to represent local government interests and perspectives on a high-level political agenda, whereas more informal alliances and networks are set up to promote strategic interests and development policies of individual local communities in a competitive environment. Irrespective of the efforts to strengthen global solidarity, cities face the challenge of intercity competition. They need good governing and 24 innovation capacity as well as ability to generate local adjustment strategies in order to guarantee sustainable welfare of urban communities in a globalised world. Literature Abrahamson, M. (2004). Global cities. New York: Oxford University Press. Anttiroiko, A.-V. (2004). Editorial: Global competition of high-tech centres. International Journal of Technology Management 28 (3/4/5/6), pp. 289-323. Anttiroiko, A.-V. (2009). 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