Authors: Patrick Adler*, University of California Los Angeles, Richard Florida, School of Cities, University of Toronto
Topics: Economic Geography, Business Geography, Urban and Regional Planning
Keywords: Corporate Strategy, Site Selection, Human Capital, Fortune 500
Session Type: Paper
Start / End Time: 9:55 AM / 11:35 AM
Room: Diplomat Room, Omni, West
Presentation File: No File Uploaded
This paper develops a modern theory of corporate locational strategy for the largest firms. The location of headquarters operations is the biggest and costliest decision a company makes. We depart from well-established literature examining how regions fashion competitive advantage to consider the key strategic implications of the modern firm’s location decision. We propose that a human-capital centered location paradigm has supplanted cost-minimization.
We turn to a historic study of the geography of Fortune 500 firms which offers evidence that the largest firms tend to locate in high skill areas. Based on our analysis, Fortune firms are prone to locate in areas that are relatively rich in human capital. 70% of Fortune 500 and 80% of the F100 are in the top quartile for human capital. We show that the association between Fortune activity and human capital has become more pronounced since 1955. Furthermore, among large and talent rich cities, there has been increased specialization by sector; Houston (Energy), San Jose (Technology) and Bridgeport (Finance) are iconic examples of this tendency.
Our results might inform how large-firm location decisions are conceptualized by local policymakers. They show that the environmental ‘niche’ for Fortune 500 firms is narrowing and with it, so is the ability of jurisdictions to induce the relocation of large firms.