The network structure of city-firm relations

TL;DR

This paper constructs a bipartite network linking cities and economic activities using data from the world's largest firms, revealing ecological-like nested structures that relate to economic balance and quality of life.

Contribution

It introduces a novel network-based approach to analyze city-firm relations, applying ecological indicators to assess economic activity deployment and its implications.

Findings

Cities exhibit nested network structures similar to ecological systems.

Over-representation of certain sectors indicates economic imbalance and potential vulnerabilities.

Network structure correlates with city quality of life indicators.

Abstract

How are economic activities linked to geographic locations? To answer this question, we use a data-driven approach that builds on the information about location, ownership and economic activities of the world's 3,000 largest firms and their almost one million subsidiaries. From this information we generate a bipartite network of cities linked to economic activities. Analysing the structure of this network, we find striking similarities with nested networks observed in ecology, where links represent mutualistic interactions between species. This motivates us to apply ecological indicators to identify the unbalanced deployment of economic activities. Such deployment can lead to an over-representation of specific economic sectors in a given city, and poses a significant thread for the city's future especially in times when the over-represented activities face economic uncertainties. If we compare our analysis with external rankings about the quality of life in a city, we find that the nested structure of the city-firm network also reflects such information about the quality of life, which can usually be assessed only via dedicated survey-based indicators.