Globalization, Economic Restructuring, and Locational Trajectories of Software Firms in Shanghai

Abstract

Producer services are traditionally considered as place-bound and clustered in city centers to benefit from agglomeration effects. Such a pattern has been reshaped, however, by the decentralization of the service industry and the development of information and communication technology (ICT), especially for the software industry. This study investigates locational trajectories and underlying factors of software firms from 1990 to 2011 in Shanghai to detect intraurban location trajectories and spatial dynamics. We find that location of the software industry has changed from a monocentric pattern concentrated in the central city area toward a polycentric pattern with a relative decline of the core area. Using a conditional logit model, the study has found that government policies, accessibility, environmental conditions, agglomeration economies, and site characteristics are important determinants of location choice for software firms. In addition, the firm-level survey and in-depth interviews in Pudong Software Park show that government policy and planning, especially rent and tax incentives, have played a vital role in attracting software firms to locate in development zones.