Michael H. Grote

A value chain approach to financial centres – The case of Frankfurt

This paper uses a value chain approach to identify possible patterns of spatial (re)organisation resulting from the implementation of information and communication technologies (ICT) in wholesale financial services. Although ICT can be used to split up production processes and thus increase mobility, proximity – not only spatial but also cultural, organisational and professional – remains essential for the financial industry. Thus, while ICT may induce a ‘re–bundling’ of functions among financial centres, location continues to be a relevant factor. An analysis of the value chains of three financial products is presented with a focus on implications for the financial centre in Frankfurt. Frankfurt is a particularly interesting case study of this phenomenon as it is one of the centres for the development of ‘financial technology’, such as computer–based trading systems with remote access.

Offshoring the Financial Services Industry: Implications for the Evolution of Indian it Clusters

The authors explore the opportunities for existing Indian IT clusters to upgrade and undertake financial research activities. Wholesale financial activity and the accompanying financial research in banks are still highly concentrated in Western financial centers. Increasing competition in the financial services industry, as well as regulatory pressure, place the options of outsourcing and offshoring activities, especially research, to low-cost locations high on the agenda of financial institutions. For the first time, complex tasks at the core of financial activity are being offshored, which makes this an interesting case for a lot of other industries and their spatial economic organization in an ever-globalizing world. Will there be a World Financial Research Centre in Mumbai? With the aid of qualitative interview data as well as a quantitative analysis, the authors argue that research activities are locally embedded in Western financial centers to an extent that such a development is not likely. Two different research activities, country analysis and institutional equity analysis, are examined. The analysis suggests, however, that there is a certain potential for some research activities to be relocated to India. So far, investments take place in a very few existing IT clusters which have already gained a reputation in the financial community.

Financial Geography—A Banker's View. By Risto Laulajainen

Financial Geography breaks new ground as the first significant English-language work to address the traditionally neglected topic of financial issues in economic geography. Originally prepared for undergraduates and distributed free, the first edition has evolved into a costly textbook with a

When outsourcing is not an option: International relocation of investment bank research — Or isn't it?

150 price tag. The book aims to present international financial markets from a geographic perspective and is deliberately not written in a critical manner. Instead Laulajainen writes from a technocratic “banker’s view,” focusing explicitly on the mechanisms of the financial system. Although the book includes primary research and an extraordinary amount of data on many facets of finance, it is designed to deliver a framework and outline the scale and scope of international finance and is not intended to serve as a reference manual. The book’s seven chapters include a literature review on financial geography, as well as treatments of institutional background, markets, exchanges, banking, insurance, and financial centers. The “playground” chapter provides an overview of different asset classes, their global distribution, and the money flows between the different poles (the United States, Europe, and Japan). It also introduces the most important investors: pension funds, insurance companies, and investment funds, as well as regulators, rating agencies, and accountants. Laulajainen groups national financial systems by share of asset classes using cluster analysis. In addition to finding well-known differences between the AngloSaxon and European systems, this method yields surprising results, for example, how Scandinavian countries are similar to the United States. Yet, Laulajainen offers only a few geographic (and historical) explanations for these cross-national comparisons. The chapter on markets is one of the cornerstones of the book. International bank lending, debt, and foreign exchange markets are covered in some detail, as is the infrastructure of the clearing and settlement systems. Equity and derivatives markets are also mentioned, along with a discussion of the differences in the nature, risks, and trading locations of these financial instruments. Most of these instruments are traded predominantly “over the counter,” that is, directly between banks and their clients, not on formal exchanges. Here, as in the other chapters, maps show the different spatial distribution of the various assets on a global scale. For the different financial instruments, spatial patterns vary considerably. The subsequent chapter on exchanges covers the formal trading of equities and derivatives on stock markets, the markets’ players, and the relevant regulations. Although many electronic trading systems now allow actors to participate in far-away markets, distance has not lost its significance. Households prefer to hold shares of companies that are close by, traders perform better when they are spatially close to the headquarters of the companies whose shares they are trading, national regulations are of the utmost importance, and time zones ultimately stop trading activity from collapsing into one global stock exchange. Nevertheless, geographically distant stock exchanges compete against each other in foreign listings, traders’ participation, and liquidity. Banks are featured prominently throughout Financial Geography because they are the backbone of financial transactions, globally organizing the financial space in which investors operate. The chapter on banks contains an extensive survey on the business of collecting deposits, lending, advising, and money transfers. Regional regulations and differences are shown to exist, rendering geography a fruitful #2314—ECONOMIC GEOGRAPHY—VOL. 81 NO. 3—81309-grote_BR