The Location Dynamics of Firms in Transitional Shanghai, 1978-2005

Abstract

China's economic reform started in 1978 has brought in profound changes to firms by transforming the state-owned-enterprises and by encouraging the growth of the non-state sector business. These changes have been accompanied by broader institutional changes and economic restructuring in the cities, especially in the larger ones. This paper focuses on the changing spatial distribution patterns and the underlying location factors of firms in different sectors within Shanghai, one of China's largest and most dynamic cities. The central research question is raised as do the rapidly changing spatial patterns of corporate activities within Shanghai since the onset of China's economic reform reflect the influence of market forces? Data were collected from Shanghai Administration of Industry and Commerce. Both GIS mapping and statistics (i.e. Moran's Index, density gradient) were used to assess the spatial distribution pattern of firms in Shanghai. An empirical model derived from neo-classical location theory is employed to examine the location factors of firms in different sectors. Findings of the paper indicate that the spatial distribution and location factors of firms in Shanghai demonstrate the city's unique urban restructuring process, which is closely related to the city's specific economic stage and unique transitional characteristics. However, market forces do play an increasingly import role in firm's location-choice behavior in Shanghai. This study contributes to the understanding of firm location dynamics in post- socialist cities.