Redistributing business activities
Most businesses still co-locate around some historical clusters. Take financial firms, for example, most of them still reside around major financial centres of the world, although practically all of their activities relies on the electronic means that can be done from anywhere in the world where there is good internet infrastructure.
The point is not about moving business activities to cheaper labour pool, although that certainly plays a role in assessing the return on investments. This is about promoting sustainable development outside of urban clusters. Across the globe, there is a clear trend of population shift into ever larger (or denser) urban areas. This happens because those are where job creation happens. Job creation relies on, among others, the availability of information and the resulting value creation, be it from information processing, service or physical business activities.
With internet technologies, competitive edge that used to come from access to information has been obliterated. Business practitioners are able to receive the business information instantaneously where ever they are and where ever the information source is. Thus what remains, theoretically, is the physical business activities, e.g. production, distribution, etc. And these do not need to reside around urban clusters.
Business activities can now reside in areas where goods and services can be best produced. Obviously where to "best produce" anything is subjective, but for the sake of argument, let's adopt the following criteria: lowest ratio of transportation cost to the value of goods, all else being equal. By implication, this will favour locations that are close to the various material sources that are needed for value creation, e.g. products, services, etc.
Many of such locations will not be in current urban clusters as we know it. And these will potentially create jobs outside of these urban clusters. This is attractive as this opens up opportunities in less developed areas of the world.
All else being equal
Determining the "best" location to achieve lowest ratio of transportation cost to the value of goods is theoretically easy - it is a matter of data analysis. But what about the "all else being equal" part? This is where it gets challenging because it will require investments to "upgrade" infrastructures ator around the target locations. This includes transportation infrastructure and internet infrastructure obviously, but also much more.
On the other hand, infrastructures development brings job creation and with job creation comes service industries with their associated job creations too, not to mention labour force training and education. Once the infrastructures are developed and businesses move in, further job creations will continue to support the businesses. Thus further reinforcing the redistribution of opportunites.
Skeptics would argue that there are not many locale on earth that would have sufficient sources of raw materials to produce value added goods without importing raw materials and services from elsewhere. This is correct obviously, but the point is not for total independence. The point is to strike a balance for low enough ratio of transportation cost to the value of goods while ensuring the availability of labour forces and support services at competitive costs.
A different kind of vision
To some degree, there are examples of distribution of the job creation at the macro level. Business outsourcing in data processing and software development is one example where information technology in general and internet specifically have played a role. But even in this example, the movement is from urban clusters in developed countries to yet another urban clusters, albeit to developing countries. There are still a lot to be done in terms of redistribution to non-urban clusters to spread the job creation around the globe.
There is nothing wrong with developing new internet businesses purely for the sake of wealth creation. The challenge here is to do more of value creation through internet whereby the internet can help advance sustainable redistribution of opportunities around the globe. The internet can do this because internet entrepreneurs have proven themselves to be resourceful in finding ways to advance new business opportunities where there is none previously.
- -November 2009