Does city management matter? Despite the pivotal role played by cities in today’s international business landscape, we still do not know whether, everything else being equal, the improvement of a given city’s management model impacts the profitability of firms located in such a city. Our expectation is that this effect is positive and even stronger for those firms that compete in high-tech industries. This is because the way in which cities are organized and managed is crucial to facilitate the creation and exchange of services and goods, especially in the context of high-tech industries. We examine these relationships using a 2014-2016 panel of 27,933 firm-year observations of 9,952 firms based in 127 cities located in the U.S, Europe, and Asia. We find evidence that the effect is positive and significant and its magnitude larger for firms in high-tech industries. Our analysis also shows nuanced variations across regions. Specifically, the effect is significantly larger in the U.S., followed by Europe and Asia. Additionally, whereas in the U.S. human capital and governance are the critical dimensions of the city’s management model driving its positive effect on firms’ profitability, our analysis reveals that in Europe it is primarily urban planning and technology, and in Asia public management and governance, that matter the most. Our study therefore adds important evidence to the debate on cities’ role in today’s economy, emphasizing how contextually grounded research can better inform firms’ city-level location strategies. Implications for policy and research are discussed.

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2019 27th Finance Forum, Madrid 25th International Conference on Computing in Economics and Finance (CEF), Ottawa, 2018 World Conference of the Spatial Econometrics Association (SEA), Vienna Uddevalla Symposium, Sweden Global Finance Conference, Paris European Regional Science Association (ERSA Congress), Cork
Incae Business School

Memarian, M, Berrone, P., Ricart, J.E., & Pisani, N. (2019). Does Home City Matter to Corporate Profitability? A Global Study of the Effect of Cities Management Models on Firms Profitability. Presented at the 2018 World Conference of the Spatial Econometrics Association (SEA), Vienna Uddevalla Symposium, Sweden Global Finance Conference, Paris European Regional Science Association (ERSA Congress), Cork.