Cities and Footlooseness: In Search of Place-Bound Companies and Effective Location Policies

The present study addresses the relevance of geographic proximity for companies in our age of advanced information and communication technology (ICT). Many visions of, and speculations on, an increased footlooseness of companies and a concomitant dispersal of urban economic activity have been published in recent years. To identify whether urban agglomeration economies (in particular, knowledge spillovers) are still a key force in preventing such dispersal, we investigate the degree of footlooseness of young, innovative companies. The exploratory analysis, based on interviews with twenty-one companies, employs an artificial intelligence method, called ‘rough-set analysis’, to increase our understanding of the crucial factors that influence needs for physical proximity. On the basis of these results, we argue that agglomeration economies still remain important for various categories of young, innovative, firms, even those providing ICT services, but that we need to make a distinction between agglomeration economies that work exclusively in the largest city (that is, Amsterdam) and agglomeration economies that cover a larger metropolitan area. The only fundamental change in proximity needs among these young, innovative companies originates from a small class of ‘network companies’, which are footloose even beyond the larger metropolitan area. The study also addresses urban policies to use opportunities better to attract companies with high proximity needs.