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Financial Centers Between Centralization and Virtualization

In: The Changing Geography of Banking and Finance

Author

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  • Michael H. Grote

    (Frankfurt Institute for Private Equity and M&A, Frankfurt School of Finance & Management)

Abstract

The chapter examines the current and future role of European financial centers. The “virtualization” of space leads to the weakening of the benefits from agglomeration through the widespread use of information and communication technology. Virtualization works well, however, only for standardized information, like stock prices, but not for complex information requiring constant interpretation. For the latter, face-to-face contacts cannot be substituted, and thus, financial centers are here to stay. Nevertheless, it is not clear how many financial centers will survive. The chapter finds strong competition between Europe’s first-tier financial center London and second-tier centers, such as Frankfurt and Paris. Due again to the nature of information, national centers will remain serving opaque domestic businesses. Thus, there is little competition between second-tier centers which are caught in between centralization – toward London – and regionalization toward the most opaque businesses within their respective countries.

Suggested Citation

  • Michael H. Grote, 2009. "Financial Centers Between Centralization and Virtualization," Springer Books, in: Alberto Zazzaro & Michele Fratianni & Pietro Alessandrini (ed.), The Changing Geography of Banking and Finance, edition 1, chapter 13, pages 277-294, Springer.
    • Handle: RePEc:spr:sprchp:978-0-387-98078-2_13
    DOI: 10.1007/978-0-387-98078-2_13
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    Cited by:

    1. Du, Huibin & Xia, Qiongqiong & Ma, Xuan & Chai, Lihe, 2014. "A new statistical dynamic analysis of ecological niches for China’s financial centres," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 395(C), pages 476-486.
    2. Klagge Britta & Zademach Hans-Martin, 2018. "International capital flows, stock markets, and uneven development: the case of Sub-Saharan Africa and the Sustainable Stock Exchanges Initiative (SSEI)," ZFW – Advances in Economic Geography, De Gruyter, vol. 62(2), pages 92-107, May.
    3. Carmen Vargas Pérez & Juan Luis Peñaloza Figueroa, 2018. "Tracking the New Demand for Justice in the Big Data Ecosystem," European Journal of Economics and Business Studies Articles, Revistia Research and Publishing, vol. 4, January -.
    4. SCHULZ Christian & WALTHER Olivier, 2010. "Adaptation strategies of Luxembourg's financial centre under pressure," LISER Working Paper Series 2010-26, Luxembourg Institute of Socio-Economic Research (LISER).

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