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close this folderPart 2. Changing Asia-Pacific world cities
close this folderSeoul: A global city in a nation of rapid growth
View the document(introductory text...)
View the documentIntroduction
View the documentThe determinants of a world city
View the documentThe spatial pattern of industrialization
View the documentThe primacy of Seoul and the capital region
View the documentA new perspective in spatial policy: Globalization
View the documentConclusions
View the documentReferences

The determinants of a world city

What are the factors making a city global? What are the characteristics of residents that make the city global? What makes the spatial domain of people and industry global? If the orientations of the residents of the city are global, is the city global? What are the city "environments" that make people and industry located in the city competitive in the international arena? These are some of the main questions we have to raise at the outset.

A number of published works attempt to define the characteristics and hierarchy of world cities (Cohen, 1981; Friedmann, 1986; Soja, 1986). World cities, according to Friedmann, are characterized by the location of major financial centres, headquarters of transnational corporations (TNCs), and international institutions, the rapid growth of business services, important manufacturing centres, major transportation nodes, population size, etc. (Friedmann, 1986). It is also suggested that the most fundamental feature of a world city is its global service functions (King, 1990). Indeed, "the world city lies at the junction between the world economy and the territorial national state" (Friedmann and Wolff, 1982).

Globalization is not a static concept. The concept of world city varies over time and differs by nation. In this era of globalization, information, commodity trade, and factors of production are shared among all nations. The contrasting ideology of the East and the West has lost its pointedness. In spite of the differences in ethnic and historical backgrounds, nations are converging in their economic objectives and values. In the process, globalization has also been accelerated with the Uruguay Round. The differences in institutions and business practices are also narrowing. All nations are tied to one another through global institutions and individuals in their cities. Therefore, all nations have global cities for their own survival and most cities function well because their residents have personal networks with other world cities.

Traditionally, global industries possess firm-specific comparative advantages over domestic and overseas markets. Firm-specific comparative advantages are linked to the individual firm's capabilities new products requiring advanced production technology and outstanding capabilities in financing, marketing, planning, etc. Another important comparative advantage stems from the socio-economic context of the firm's location. The factors determining these locational advantages range from the work ethics of workers, to the amenities of the city, to the wage and industrial structure of the city where the industry is located or originated. The comparative advantage originating from the location factors can thus be defined on a national, regional, or city basis. Consequently, a world city should be analysed in the light of its specificity in a national context - its urban system, the stage of economic development, and the nature of globalization of the nation.

In classical locational theory, the transportation costs of raw materials and the accessibility of the firm to the market have been treated as the main locational factors. However, in recent years, with the rapid developments in transportation and information technology, the importance of low labour costs or cheap raw materials, as low-order advantages, has decreased. Instead, the locational factors gaining more importance are those created by the industries and the region. They include training programmes for specialists and skilled labour, professionals, R&D centres, access to specific information, and an environment conducive to the coordination of various activities of supporting and related industries. The comparative advantage of industry is a dynamic concept. As industrial development progresses, comparative advantages should be improved in order to be sustained. In the process of industrial restructuring, the accumulation of knowledge- and information-oriented industries in Seoul seems to create such a dynamic environment, suitable for the development of sophisticated and diversified production activities.

A study of the world city can also be based on major determinants that work collectively and cumulatively. Porter (1991) listed four major categories of locational factor in a nation that create locational advantages for industry: factor conditions, demand conditions, related and supporting industries in the nation, and the firm's strategy, structure, and rivalry in relation to other firms. In figure 5.1, Porter's diamond is extended by two additional determinants, namely, government policy and access to the outside world. In the following sections, we will explore the role of government policy and foreign exposure, along with the four determinants, in the process of globalization of Seoul.

Fig. 5.1 The determinants of a global city

During the past 30 years of compressed economic growth, government policy has had a large influence on industrial and spatial development in South Korea. The central government selected strategic industries and developed industrial estates for them, and also employed administrative and financial assistance extensively to support those industries. With the great influence of the central government, domestic and international business transactions are conducted by the central government on a face-to-face basis.

However, with scarce natural resources and a small domestic market, the South Korean economy has inevitably been tied closely with overseas markets. Because of this overseas orientation, the city's contacts with the outside world have proved to be an important attribute in attracting central decision-making functions of various industries. Starting with the large corporations that led South Korea's overseas trade over the decades, other related industries and supporting services are clustered in Seoul and enjoy close contacts with central government agencies and other key decision-making bodies. In addition, manufacturing subsidiaries and vendors not only benefit from close contacts with trading corporations, but also are exposed to various opportunities in a cluster of related businesses. Small vendors establish direct contacts with large overseas clients as a spin-off and these often turn into key suppliers of specific items.

In the South Korean economy, where economic growth oriented to the overseas market was led by strong support from the central government, the central government and international exposure play critical roles in determining the competitiveness of industry. Access to the central government and international exposure are thus important determinants of the global competitiveness of an industry and a region. The determinants of regional growth are, therefore, also the determinants of a city's globalization. All of the determinants of industrial competitiveness are intertwined and reinforce each other in a circular and cumulative fashion ready for the competitiveness of industry and the globalization of a city, at least in the case of Seoul. The global nature of a city should be regarded as the product of the synergistic interplay of the collectivity of determinants.