Abstract
This paper builds a theoretical link between agglomeration economies of Multinational Corporations (MNCs) headquarters and the development of financial service centres, with special account in the extant literature of financial geography. Specifically, four distinctive factors, namely path dependency, asymmetric information, institutional support and exogenous advantage are brought forward as the determinants of managerial considerations for MNCs strategic locations. Among them, the factor of asymmetric information is argued as the key factor to drive geographic agglomerations of financial activities in China. To examine the validity of the theory, China's Beijing-Shanghai city-pair is presented as a case. A binary logistic regression model-test is applied to compare the locational behavior of MNCs regional headquarter in the two cities. Finally, a financial centre index (Findex) analysis which quantifies the significance of financial sectors in the city-pair is conducted. The results reveal that contrary to the traditional point of view, Beijing has more advantages than Shanghai in developing to be a strong service and financial centre in China.
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