Abstract
Urban economists and regional scientists occasionally focus on the long-term transformation of some dominant metropolitan area or on the long-term changes experienced by a small number of metropolitan rivals. Decades ago the study of New York by Hoover and Vernon (1959) and the comparative study of New York and Pittsburgh by Chinitz (1961) established high standards for such studies; in more recent times, McDonald (2016) has traced the evolution of greater Chicago, while Storper, Kemeny, Makaren, and Osman (2015) have examined the different growth paths taken by the Los Angeles and Bay area economies. These studies—whether idiographic or comparative—typically look at each city’s changing economic base and the composition of its workforce; summarize important land-use shifts, including suburbanization; remark on the quality of infrastructure; evaluate the factors of scale and externalities in promoting economic growth; and assess the role of governance in guiding or maintaining growth. Sometimes future projections and useful policy advice are also provided for these metropolitan areas.
Headquarters Economy, by J. Myles Shaver, certainly follows in this tradition. But here the scope of concern is restricted because he focuses entirely on the historic change seen in the corporate landscape of Minneapolis–St. Paul over the past six decades. In many ways, the narrative reflects Shaver’s ever-widening inquiries about corporate location as his career unfolded at the Carlson School of Management at the University of Minnesota, and he became disenchanted with “folk theories” that headquarters (HQs) colocated only in those regions having benign climates or superior work ethics. By identifying the underlying reasons for the continued concentration of HQs in the Twin Cities region—which, according to him, claimed 19 Fortune 500 HQs in 2011, making the region number six in the nation—Shaver sets out to expose those factors that determine corporate competitiveness in all metropolitan regions.
Chapter 2 looks at the HQ turnover that was experienced between 1955 and 2011. In 1955, the Twin Cities had only nine companies (topped by General Mills and Pillsbury Mills) listed in the Fortune 500; however, two other very visible companies (Hormel and Marshall-Wells) were headquartered elsewhere in Minnesota. By 2011, the Twin Cities rivalled Greater San Francisco (with 19), Dallas (20), Los Angeles (21), and Houston (22) in HQs numbers and its HQ density, calculated to be 5.79 HQs per million inhabitants, was only exceeded by Bridgeport, CT, and San Jose. Over that time span 30 companies in the region lost their Fortune 500 rating, either through relative decline or migration (including mergers), but these were replaced by 40 other companies that entered the region’s Fortune 500 list. Part of this turnover was due to the change in industry definition introduced by the Fortune analysts in 1995, which favorably reflected the great diversity of industries that were (and still are) headquartered in Minneapolis–St. Paul. In fact, Shaver argues that the ability to sustain a dominant HQs economy only becomes apparent when a metropolitan region can replace the inevitable loss of some HQs with the addition of entirely new HQs. However, compared with other important cities like Atlanta and Phoenix, the Twin Cities area almost completely relied on homegrown industries—like United Health (insurance), Target (retailing), U.S. Bancorp (banking), and Land O’Lakes (food)—to enhance its Fortune 500 profile during the closing decades of the 20th century. According to the alternative Forbes listing, Minneapolis–St. Paul also houses many HQs of the nation’s most important private companies, including Cargill (food) and Carlson (hospitality), and recently its HQ density was only exceeded by five other metropolitan regions. Moreover, various operational, divisional, or regional HQs of public companies can be found there, where Wells Fargo (banking) recently employed 20,000 people and Thompson Reuters (publishing) employed 7,700 other people that were “hidden” from the Fortune 500 list. Thus, by any measure, Minneapolis–St. Paul continues to be a very important U.S. HQs center.
In chapter 3, Shaver clarifies the subtitle of the volume. Here, he makes the claim that management talent, intraregional mobility, and interregional migration are the key elements of any HQs economy. First and foremost, he sees that sustaining a pool of managerial and administrative talent is imperative to the continuation of corporate competitiveness. These workers should not only be well-educated but also should be balanced in terms of age, gender, and experience. This attribute seems especially important for the Twin Cities, where talent is spread over diverse industries, and individuals with new ideas and practices often move across both firms and industries within the region. This talent can also flow downward from larger companies to smaller companies, or even start-ups, within the region, so that experienced managers can help smaller firms scale up in their operations. The balance between inward and outward migration is also important because this movement can bring entirely new talent into the metropolitan economy. Shaver is particularly interested in the migration of highly educated and high-earning households in the working-age population and especially those who have children of school age. Compared with 22 other metropolitan rivals, Minneapolis–St. Paul ranks number three in this category (after Washington and Boston), and consistently exhibits low levels of outward migration (like the greater New York or Los Angeles regions) along with moderate levels of inward migration. In fact, based on the data for these three attributes, I have ascertained (using cluster analysis) that the Twin Cities economy most closely resembles those of Boston, San Francisco, and Seattle, all high-tech regions that are blessed with highly educated workforces and dynamic business environments. In fact, Shaver suggests that a classification system for HQ talent can be generated by simply looking at each metropolitan region’s score on in-migration and out-migration, where the positive in-migration of talented workers indicates either expansion or churning and the negative in-migration of such workers indicates either contraction or outright decay. Moreover, Shaver goes to some lengths to demonstrate that the migration patterns of recent years have remained stable since at least the mid-1970s. In short, Minneapolis–St. Paul has always experienced some difficulties in attracting new extraregional talent into the administrative and management sectors but, once there, most of these people have been very content to remain in this insulated metropolitan labor market.
Chapter 5 summarizes the results of survey data taken over time from some 3,000 professional workers employed in 23 HQs across the Twin Cities region. These data confirm many of the findings already mentioned but provide a lot of rich detail about the reasons for the choices made by individuals or two-earner households (where 69% of respondents noted they were balancing dual careers). In terms of mobility, it seems clear that most managerial talent would prefer to switch industries and remain in the region instead of relocating outside the region, even when continuing with the current company. In fact, some 70% of the survey participants indicated that there is not another metropolitan area in the United States where they would rather live. Shaver’s surveys indicate that Minneapolis–St. Paul rates much higher than nearly all other major U.S. cities in a wide range of quality-of-life factors, including restaurant and shopping availability, high-quality public schools, good health care, and shared community values.
Chapter 6 closes the book by articulating the relationships existing between the individual (or household) decision maker and four linked constituencies: the company, local government, nongovernment organizations, and other persons with the same skills, preferences, and values. Shaver argues that these constituencies must constantly nurture (with long-term feedbacks) the decision maker to maintain or enhance the region’s pool of managerial and administrative talent. Here, he sees the Twin Cities region as being an HQs economy that is distinct from other HQ economies, where HQs might instead manage visible industry clusters or oversee more dynamic high-tech businesses. In some ways, this discussion echoes that found in the closing chapters of Storper et al. (2015), who focused instead on the growth recently seen in California’s two most important metropolitan rivals.
Although this short book is generally well organized and clearly written, there are some well-recognized references and topics that are either missed or underplayed. First, there is no mention of several early works on the nature and location of HQs economies in U.S. cities. Pred (1974), for one, adopted the Myrdal-Kaldor “virtuous circle” logic in arguing that corporate centers use their key positions in the national urban hierarchy to control flows of information and allocations of financial capital, thereby ensuring their continued growth and prosperity. Second, Shaver demonstrates only limited appreciation of the role of specialization in occupations, as opposed to industries, when assessing the attributes of the metropolitan workforce. The considerable jobs movement seen today across similar occupations, but between different industries, is widely viewed as an indicator of fluidity in metropolitan labor markets (Florida, 2002; Markusen, 2004). Other analysts have even claimed that the quality of a city’s occupation base is a key ingredient of its resilience during economic downturns. Third, Shaver could have clarified more how HQs employment is often tied to both the locations and sizes of suppliers and final markets. This would have allowed him to discuss, if only briefly, the effects of global value chains and to comment on the issue of corporate scale: for example, Collis, Young, and Gould (2007) estimated that a doubling of company size typically leads to a 25% reduction in the proportion of employees working in that company’s various HQs units. Fourth, there is no mention of the important role played by social capital: Minnesota and other parts of the U.S. upper Midwest are widely known to exemplify the low-friction transactional advantages that arise from having high degrees of social trust (Fukuyama, 1995). Finally, there is no recognition of the ever-widening international literature on the intermetropolitan migration of college graduates, especially those Mincer-type studies that seek to uncover the series of stages that well-educated and mobile migrants typically make throughout their professional careers (Corcoran & Faggian, 2017).