THE OFFICE LOCATION PROBLEM: Implications for the Growth and Structure of Cities in Newly Industrializing Countries

This paper looks at the dynamics of interurban office location as national economies evolve. Offices are defined as producer service establishments that provide tradeable information†intensive services, found both within the secondary and the tertiary sectors (i. e. head or branch offices). A simple model of the decision to locate is presented that emphasizes communications cost as well as information and skilled labor input costs. The author suggests that as the firm evolves, and as information outputs become more non†standardized, the relative weight of externally purchased information†intensive service inputs will increase, pushing office establishments up the urban hierarchy. Equally, as national economies evolve the demand for information†intensive inputs will increase, behind the demand for services. Thus, in a growing export†driven economy (South Korea is taken as an example) the demand for office†based services will grow rapidly, creating locational pressures in the largest urban centers, in turn pushing more standardized activities (often manufacturing) to more peripheral locations. The end result is the rapid growth of office activities in the largest cities where the upper bounds of the national urban hierarchy will be defined by the (head) office locations of the largest multi†establishment corporations.