How Local City and Its Hinterland Impact Global Firms: An Empirical Test of Beijing

Abstract

The location of global firms in a city has been regarded as a critical factor for a world city classification. Context factors of world city at different levels have also been recently considered to influence the location of global firms. In this paper, we use dynamic factors at three levels of the host city and its hinterlands namely state (country), city, and service sector to analyse the relations between these factors and the global firms during the globalization progression of Beijing. We use comprehensive data sets from Beijing Statistical Yearbooks from 1988 to 2014 for the city, firm level, and service sector factors; and the China Statistical Yearbook for the same period for the country level (Gross Domestic Product-GDP) factor. Using a Granger causal test, we find that the relationships among the four factors are not symmetric; especially, factors of larger scopes have more significant effects on the ones of smaller scopes than vice versa. This therefore shows that global firms tend to locate at the leader city with access to the big market of the national economy.