Globalization Trend of Global Cities

Globalization Trend of Global Cities

For quite some good time, efforts have been made by various stakeholders to bring the countries of the world together to facilitate free trade, free movement of people and goods, and to create an enabling environment in which companies and organizations can thrive in a process dubbed globalization of the world. McCann &  Acs (2015) opine that globalization is the process by which countries, economies, and different regional blocks are integrated together into a single global network to facilitate societal developments. The concept of globalization has elicited several technological innovations in fields like agriculture, the manufacturing sector, the communications sectors and the educational sector in an attempt to transform the world into a small global village in which there is a seamless transfer of information between people in different parts of the continent within shorter periods (McCann & Acs, 2015).

Globalization has a raft of benefits that have positively impacted the economy of various countries in the world. The concept of free trade that comes along with globalization has inculcated transparency in the pricing of goods by companies, thus eliminating cases of consumer exploitation by middlemen in the market. It has further enabled the free transfer of labor and expertise from one region to another, facilitating different industrial developments (Beugelsdijk, 2008).   For instance, in the wake of the coronavirus pandemic, nations that have been hit hard like Italy have managed to receive a high influx of medical experts to aid in containing the spread of the virus. By making ramifications in the economies of scale, globalization has led to more specialized productions by companies hence reducing the costs attached to different products in the market.

To make globalization more effective and convenient, the concept of global cities has emerged. This concept insists on organizational structure globalization in which the process of globalization is divided into strategic locations that are treated as single units. These units, whose structures form cities, undergo industrial developments and are integrated into one another to have a resultant global impact. Cities have proven to have repulsive effects on global; affairs like political advancements, technological developments, and socio-economic activities. According to Mathur (2005),  global cities are places or regions in which the processes of globalization take localized and concrete forms. These cities are a result of economic and industrial developments that impact on the economies of other regions in the world. Globalization promotes consistent cooperation between different regions in the world in which transnational corporations that offer goods and services to different regions of the world play a greater role in shaping the economy of the world (Sunny, 2019). These corporations dictate the flow of production and the adoption of various technological schemes that further boost industrial production levels, thus increasing the connections and interactions between the global cities. Further still, the location of the headquarters of these international and multinational corporations is related to the concept of global cities. Most of the global cities are homes to some of the multinational corporations whose stake in the world’s economy is very high.

As opposed to the many existent cities, global cities drive the world’s economy as they are a beehive of crucial industrial activities that are central for the survival of man on the planet (Sunny, 2019). They form centers of global communication that facilitates the cooperation between different industries and multinational companies. These cities also house financial institutions that are responsible for managing the financial services of some of the best economies in the world.

Innovation Factors and FDI

…… defines innovation as the introduction of new ideas and concepts into the market place or an improvement in the production or manufacturing process of various goods and services. The concept of innovation has been at the center of globalization and the development of global cities as it facilitates the introduction of ideas that expedite the production process of goods and efficiency in the provision of various essential services. Through innovation, multinational corporations and large financial institutions that control the economy of the world are able to stay afloat in the market, ensuring the seamless production of essential goods and products that are used people in all parts of the globe. Global cities being products of innovation have adopted various innovative factors to keep them on a global scale. Some of these factors include cultural assets, networked markets, human infrastructure, cultural assets, and sustainable innovations.

Determinants of Innovation and Globalization

Geography

The geographical location of a city or town is a great determinant of innovation and hence globalization. The location of the city determines how different agents of innovation and globalization interact with one another, exchanging ideas and learning from one another hence leading to inexplicable transformations (Divisekera & Nguyen, 2018). The nature of the landscape of a region also stirs innovation and hence globalization that leads to the development of global cities. As such, different aspects of geography always come into play to influence innovation and the development of global cities (Lavery et al., 2017).

Frankfurt, the largest city in Germany, is located at the heart of the European continent, giving it a cutting-edge advantage over other cities (Schamp et al., 2018).  Its strategic location that is suitable in terms of distance to other major cities attracted major financial institutions from different parts of the globe that opted to invest in this city that had a bright future. The high influx of large financial institutions from the Eurozone region was critical in making Frankfurt a major financial center. As noted earlier on, global cities are those cities awash with multinational corporations and multinational financial institutions. The central location of the city further attracted multinational corporations that wanted to associate with the city making the city a hub of innovation in different sectors of the world’s economy.

An international location of a city based on the stability of its economy is another factor that influences innovation and hence globalization. For instance, the city of Frankfurt, one of the major global cities, has a stable economy that attracts investors into making notable investments within the city (Schamp et al., 2018).  The influx of multinational financial institutions and multinational corporations that rake in exorbitant profits led to the stability of the economy of Frankfurt, making it an ultimate investment destination for investors (Schamp, 2018). Most of the revenue made by companies in the city is cultivated back into the city’s infrastructure, making the city have a sophisticated transport system that facilitates the movement of people and goods with much ease (Divisekera & Nguyen, 2018).

Human Resource

Human resources, in terms of human capital and institutions, play a vital role in innovation and the development of global cities (Beugelsdijk, 2008).  Globalization involves seamless movement of people (labor) and goods from one region to another to facilitate the exchange of ideas and information that are used to come up with amicable solutions to challenges that slow down the production of goods and the provision of essential services to the population (Chen et al., 2009).

Due to the influence of human capital and institutions on the globalization of the world, the governments of different countries are making various attempts to ensure that global cities within their territories have efficient educational systems that churn out a competent labor force capable of coming up with innovative models that further lift the status of these cities (Chen et al., 2009).

For instance, In Detroit, the largest city in the state of Michigan, the government has empowered institutions in different ways to ensure quality education and learning in these institutions (Segarra-Blasco, 2018). The state government of Michigan is fully accountable for higher education tuition fees within the city of Detroit (Atkinson, 2012). This is an effort that the local government came up with, in an attempt to ensure that a larger percentage of students from high schools progress to universities where they acquire skills that are used to sustain and transform the city of Detroit. To further ensure that talent made in Detroit is retained in Detroit, the local government exempts students who study in Detroit from paying their student loans in exchange for working in Detroit for at least three years (Lubienski & Lee, 2016).  This talent retention scheme ensures that the city of Detroit has enough experts in various sectors to maintain the global state of the city (Mason &  Arsen, 2014).  The state has further given more independence to institutions of higher learning within its jurisdiction by allowing them to draft their own tuition fees, facilitate the construction of more facilities and come up with by-laws that improve the quality of education offered.

The global status of the city of Detroit can be highly attributed to its strong educational sector that churns out professional that come up with various innovative models that improve the production of goods and the provision of different services (Mason &  Arsen, 2014). The strong educational sector further attars the attention of students and expatriates from different parts of the globe that come together in Detroit, exchange ideas and information, and thus improving the performance of financial institutions and corporations in the city (Mason &  Arsen, 2014).

Research and Development

Research and development, when properly conducted, contribute to innovation and the sustainability of global cities (Laperche & Lefebvre, 2012). Countries that house some of the global cities in the world have put great and numerous investments in research and development hence leading the stability if their global cities. Through research conducted by experts, innovations in different sectors of the economy are birthed. These innovations facilitate the growth of multinationals corporations and facilitate the exchange of information that further transforms the global cities.

For instance, Germany that houses many global cities, is amongst the leading countries in research and innovation in the whole world. Germany spent 2.92 percent of GDP on research and development in 2016, compared with an EU average of 2.03 percent. Since 2000, German R&D has grown relative to GDP. In the context of the 2025 high-tech strategy, Germany hopes to increase its R&D investment to 3.5% of GDP (Narula & Dunning, 2010).

In the automotive field, the Frankfurt Motor Show is not only one of the top five auto shows in the world, but also the most extensive international auto show in Europe (Pray, 2001). As a result, the Frankfurt Motor Show attracts a large number of innovative car brands such as BMW, Mercedes, and Volvo. At the 2019 Frankfurt Motor Show, electric cars and autonomous driving laid the foundation for the future direction of vehicles. On the other hand, Hesse, where Frankfurt is located, has a large number of car brands, such as Opel, Volkswagen, and Skoda. Therefore, Hessen ‘s car export sales account for 54% of German car sales (Edquist & Hommen, 2009).

In the financial field, according to an analysis report from Ernst & Young, Germany’s fintech ecosystem is on a healthy development track, the number of fintech companies continues to grow, and the scale and volume of transactions are also rising.  In 2016, to encourage innovation in the financial industry, Germany invested 400 million euros in fintech, which is 40 times the amount invested in 2012. Among them, 23% of fintech companies are located in Frankfurt. Also, in 2017, Frankfurt’s Financial Services Technology quarter was completed. All these are instances of high-degree research and development in Germany that have given its cities a global status. Research and development are, therefore, recipes for innovation and globalization (Luostarinen & Gabrielsson, 2006).

Innovation Investments

Despite innovation being a leading cause of globalization, it has a raft of negative effects that negatively impact on the environment and the lives of people (Tavassoli, 2014). Through innovation, several sectors of production that initially employed, many individuals have been automated, rendering these individuals redundant and hence massive layoffs. The introduction of machines fastens the process of production of goods and provision of services to the public leading to the development of cities with free trade and free movement of labor (Sassen, 2015). The people that are rendered jobless due to innovation may end up being robbers or thieves in a bid to eke a living or throng streets of the global cities as beggars. Innovation should, therefore, consider the well-being of the people as it contributes to globalization (Kraiczy, 2013).  Innovation has also led to the degradation of the environment via the wastes that are into rivers and the gases released into the environment (Sassen, 2015).  Globalization has bee noted to be a major contributor to global warming that has been declared a global disaster by the United Nations.

References

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