"Over the last 10 years, people have suggested that advances in telecommunications and the Internet have made cities less relevant," says U of T real estate and urban economics professor William Strange. "However, if you look at commerce in Toronto and elsewhere, companies still require close contact to do business with each other." Strange is the co-author of Geography, Industrial Organization, and Agglomeration, published in the May issue of the journal The Review of Economics and Statistics.
Strange, along with Professor Stuart Rosenthal of Syracuse University, examined a database of 40,000 U.S. zip codes which they cross-referenced to new businesses. They were then able to determine the number of start-up companies established in industries such as software, machinery and fabricated metals over the past year. Using geographic information software, they determined why some locations attracted more new businesses than others.
New businesses are most strongly attracted to cities where similar companies are located within an eight-kilometre radius of each other. They are also attracted to locations with many smaller, related companies to which services can be outsourced. In addition, start-up companies gravitate towards cities that have a diverse range of businesses. "Cities are essential for Canada's prosperity so we need to make sure they remain a vital force in providing new business growth and innovation for this country," says Strange, RioCan Real Estate Investment Trust Professor of Real Estate and Urban Economics at the Rotman School of Management. The study was funded by the Social Sciences and Humanities Research Council of Canada.
Addditional Contact: Professor William Strange, Rotman School of Management, 416-978-1949, william.strange@rotman.utoronto.ca
Journal
The Review of Economics and Statistics