Trade and Location of Producer Services: A Canadian Perspective

The increasing importance of the service sector in modern economies necessitates the elaboration of a body of location theory applicable to service activities. An attempt is made in this paper to present elements of such a locational framework, with specific reference to producer services. Patterns of trade and of location are complementary aspects of the same problem. Thus three distinct channels through which producer services are traded are examined: direct and intrafirm exports by producer-service firms, and intrafirm exports by manufacturing firms. The last two ‘invisible’ channels, in particular, have important implications for the locational decision. A model for the locational analysis of producer-service establishments is then posited. The producer-service location problem may be conceptualized essentially as one of a trade-off between market-pull factors, specialized labour needs, and urban externalities. Last, the location of producer-service activities within the Canadian urban system is examined. These activities are found to be highly concentrated, but not in a simple hierarchical pattern, suggesting the importance of both specialized labour pools and urban externalities.