ICT loves agglomeration The urban impacts of ICT in the Netherlands

Information and Communication Technology (ICT) has had an undeniable impact on our society. Some people argue that technology has projected us onto a new wave of social and cultural change. Nevertheless, despite the growth of technology and the social significance of its applications, we have only a poor grasp of its actual impact on the use of physical space. The key question addressed in this paper is therefore: how will ICT influence the spatial-economic patterns of business activities in the Netherlands? In offering answers to this question, the paper develops a conceptual framework that distinguishes two roles of ICT in spatial-economic development: that of a ‘motor’, enhancing productivity and encourages the development of economic sectors, and that of an ‘enabler’ (of e-work, e-commerce and e-business), which may lead households and firms to adopt a different attitude to space requirements. The paper is based on a thorough survey of the current literature on the subject, the results of a recent survey of ICT’s impact on society, and original empirical research into specific factors such as ICT companies’ location preferences and the willingness of knowledge workers to commute. The paper presents an assessment of the usefulness of these concepts in terms of the Dutch situation, both today and in the future. We conclude that Information and Communication Technology has not yet had a marked visible impact on the use of space. To the contrary, despite predictions neither Dutch companies (particularly those in the ICT sector) nor knowledge workers display any unusual degree of mobility at the local or regional s 2perfect substitute for ‘traditional’ behavioural patterns. Nevertheless, there are clear indications that the ‘spatial order’ of the Netherlands is likely to change. Although it is likely that ICT will consolidate underlying spatial patterns, on the regional aggregate changes are occurring within those patterns. While (inner) cities have traditionally been the breeding ground for new ICT companies, this function has now largely been taken over by the outlying city regions, in which multiple clusters of economic activity are emerging: a process of ‘splintering urbanism’. However, despite this regionalized pattern of deconcentration, the traditional city centres continue to fulfil a number of essential functions. These centres remain the meeting places, and the shopping and entertainment centres for businesses and households (the ‘Consumer City’). In the processes of deconcentration and multimodality, ICT should be seen to play an important facilitating and strengthening role. cale. ICT does not function as a 2perfect substitute for ‘traditional’ behavioural patterns. Nevertheless, there are clear indications that the ‘spatial order’ of the Netherlands is likely to change. Although it is likely that ICT will consolidate underlying spatial patterns, on the regional aggregate changes are occurring within those patterns. While (inner) cities have traditionally been the breeding ground for new ICT companies, this function has now largely been taken over by the outlying city regions, in which multiple clusters of economic activity are emerging: a process of ‘splintering urbanism’. However, despite this regionalized pattern of deconcentration, the traditional city centres continue to fulfil a number of essential functions. These centres remain the meeting places, and the shopping and entertainment centres for businesses and households (the ‘Consumer City’). In the processes of deconcentration and multimodality, ICT should be seen to play an important facilitating and strengthening role.

The knowledge economy and Dutch cities

How can cities and metropolitan regions remain prosperous and competitive in a rapidly changing economy? In our paper we argue that ‘the knowledge economy’ offers perspectives for growth and added value creation. The paper clarifies what elements the knowledge economy actually consists of, how it can be measured in statistical indicators, in which regions and cities in the Netherlands the knowledge economy has its most significant imprints and what statistical association there is between these regions and cities and relatively good economic performance of firms. We test two contrasting hypotheses often heard in the international literature. The current embedding of knowledge externalities in endogenous economic growth theory have led to important contributions that stress the urban character knowledge transmission in particular. The reasoning is that if knowledge spillovers and –externalities are important to growth and innovation, they should be more easily identified in cities where many people are concentrated into a relatively small geographic space so that knowledge can be transmitted between them more easily. Much recent research indeed finds a limited extent of spatial spillovers and a large degree of local clustering. Alternatively, a large body of literature on Western spatial configurations of innovation and high-technology firms predominantly stresses the supposed ‘urban field’ character of firm performance: location and agglomeration aspects do not seem to have a systematic impact on the distribution of innovative and growth inducing activities over space. We test the urban hypothesis using spatial econometric modeling techniques. On the one hand, the fact that a distance squared distance weight matrix in spatial lag estimations fits the performance data best in relation to knowledge economy factors indicates that spatial relations are limited and urban fixed. On the other hand, the significance of several spatial regimes though (especially those of the Randstad core region, the so-called intermediate zone and medium-sized cities) indicates that the urban structure related to the knowledge economy and economic performance is not straightforward hierarchical (largest cities are not the relatively most attached to the knowledge economy). Both hypotheses (urban and non-urban) are too extreme to fit the Dutch situation. We also conclude that the locational attributes of the factor ‘knowledge workers’ are much more significantly related to economic growth and added value (in practically all specifications over regimes and spatial lag estimations) than the R&D-based innovation input factor. This questions Dutch policy initiatives that mainly focus on R&D as stimulator of the ‘knowledge economy’.

ICT and Productivity - relations and dynamics in a spatial context

The strong emergence of ICT in the past decades was accompanied by much research on the potential productivity boosting qualities of ICT: high productivity growth was expected. However, empirical evidence on the productivity impact of ICT stayed behind: the Solow paradox. Since then analytical steps were made by using alternative indicators for both ICT adoption and productivity and including longer time periods, distinctions in types of economic activities and adding micro level and firm specific characteristics like size, age, and intensity of innovation. Moreover, ICT was linked to network relations including externalities. These adaptations led to outcomes in favour of a positive relation between the use of ICT and productivity. However, most convincing in this debate was the finding that the effects of ICT on economic performance should be analysed from a perspective which, besides ICT, includes changes in knowledge and organisations. Knowledge is defined here broadly and includes both codified and tacit knowledge. In this paper we focus on the trinity ‘ICT, knowledge and organization’ and add the regional dimension to this. Based on economic literature our hypothesis is that regions where firms increasingly use ICT show a stronger growth of added value and productivity. This positive relationship is, however, co-determined by changes in the broadly defined knowledge level. The use of ICT by firms is analysed at different levels of urbanism in the Netherlands. Most central is the distinction between the metropolitan Randstad, the intermediate zone and the national periphery. By this regional distinction the debate on the centrifugal and centripetal effects of ICT (the death of distance) is included. The empirical measurement as such is based on the low spatial scale of 496 municipalities.

What When Space Matters Little For Firm Productivity? A multilevel analysis of localised knowledge externalities

This paper contributes to the debate on localized knowledge externalities as potential source for firm productivity gains. We apply multilevel analysis to link firm productivity (and growth) to knowledge intensive spatial contexts in the Netherlands. If localized knowledge externalities are important, then firms are hypothesised to co-locate in order to capitalize on each other's knowledge stocks. We conceptualise the regional knowledge base by three dimensions: local 'research and development' intensity, local 'innovativeness', and the characterization of locations by a ‘knowledge workers’ dimension (based on ICT use, educational level, communicative and creative skills). Controlling for firm's heterogeneity, we find a relatively small spatial effect: regional characteristics contribute for only a few percents to firm productivity. The regional intensity of 'innovation' most significantly contributes to this effect. We do not find a contextual spatial effect for productivity growth. These results suggest that the territorial dimension of knowledge externalities should not be exaggerated.productivity, multilevel analysis, localized knowledge externalities, Netherlands

Agglomeration and New Establishment Survival: A Mixed Hierarchical and Cross-Classified Model

Recent empirical studies in regional science and urban economics show that agglomeration economies may be one source of the uneven distribution of economic activities and economic growth across cities and regions. At the same time, the body of research into the importance of agglomeration economies for the performance of firms is still growing. Such development is necessary, as the theories that underlie agglomeration economies are microeconomic in nature, but still insufficiently understood. In this study, we focus on the determinants of survival among new establishments in the advanced producer services sector in the Netherlands. Employing a mixed hierarchical and cross-classified probit regression, we introduce a model of establishment survival that is specific to characteristics of the internal and external environment of the establishment. Controlling for firm and sector characteristics, we conclude that location accounts for about 4% of the variance in the probability of survival of new establishments. We also find that localization and urbanization economies have a positive effect on the survival of new establishments. However, new establishments with large start-up sizes appear to profit more from agglomeration economies than new establishments with small start-up sizes

On the Economic Foundation of the Urban Network Paradigm: Spatial Integration, Functional Integration and Economic Complementarities within the Dutch Randstad

The current debate on polycentric urban development suggests that inter-firm relations are important for the creation and sustainment of urban networks. Conceptually, the degrees of spatial and functional integration and urban complementarities in economic network relations are hypothesised to be important. However, the theoretical economic rationale has not been convincingly tested. In this paper, we use data on inter-firm relations in the Dutch Randstad to test conditions for integration and the existence of economic complementarities within this region. Contrary to the ‘polycentricity hypothesis’, we observe a clear hierarchy in the different types of spatial interdependencies in the Randstad, in which the central place model prevails. Furthermore, we do not find evidence for the functional integration of municipalities in the Randstad. We conclude that at this moment the Randstad does not function as a spatially and functionally integrated region, and that spatial economic policy can better focus on smaller regions within the Randstad when urban economic complementarities and integration are desired. This also calls into question the applicability of the urban network concept in general, as the Dutch Randstad is usually seen as a prime example of an economically successful polycentric urban system

Multilevel Approaches and the Firm-Agglomeration Ambiguity in Economic Growth Studies

Empirical studies in spatial economics have shown that agglomeration economies may be a source of the uneven distribution of economic activities and economic growth across cities and regions. Both localization and urbanization economies are hypothesized to foster agglomeration and growth, but recent meta-analyses of this burgeoning body of empirical research show that the results are ambiguous. Recent overviews show that this ambiguity is fuelled by measurement issues and heterogeneity in terms of scale of time and space, aggregation, growth definitions, and the functional form of the models applied. Alternatively, in this paper, we argue that ambiguity may be due to a lack of research on firm-level performance in agglomerations. This research is necessary because the theories that underlie agglomeration economies are microeconomic in nature. Hierarchical or multilevel modeling, which allows micro levels and macro levels to be modeled simultaneously, is becoming an increasingly common practice in the social sciences. As illustrated by detailed Dutch data on firm-level productivity, employment growth and firm survival, we argue that these approaches are also suitable for reducing the ambiguity surrounding the agglomeration-firm performance relationship and for addressing spatial, sectoral and cross-level heterogeneity

Growth of new firms and spatially bounded knowledge externalities

C21, O18, R11, R30,