APS firms have specific characteristics, which impact their locational strategies. Knowledge- intensive nature of the APS firms (Todtling, et al. 2006), importance of access to a skilled labor pool (Keeble and Nachum 2001), and the dependency on advanced infrastructure (Castells 1989; Graham 1999) are the most important characteristics highlighted in literature and they will be discussed in this section.
Knowledge has become a key source of competitiveness for advanced regions and nations, indicating a transformation of capitalism towards a “knowledge economy”. Knowledge intensive sectors in production and in services have a lead in this respect and they are seen as role models
of the future. The innovation process and knowledge exchange together make APS differ from other service sectors (Todtling, et al. 2006, 1035). Information is important for APS firms
because they are operating in areas that have great uncertainty. They compete and corporate with other APS firms for information. Information then becomes knowledge through the act of
interpretation (Bryson, et al. 2004). Cooperation is important for technology intensive APS firms because it helps to reduce uncertainties, provides access to complementary resources and technologies, and speed up the innovation process in knowledge creation (Todtling, et al. 2006, 1051). Strambach (2002, 221) suggests that the guranteed long-term relationship of APS firms with their customers is associated with their ability to transfer existing knowledge in innovations systems to firm-specific context and application.
There are two types of knowledge: codified and tacit (Bryson, et al. 2004). Codified knowledge is commonly available knowledge, which is codified in a format that makes it easy to transfer between the parties. Manuals, reports, blue-prints are examples of codified knowledge. On the other hand, tacit knowledge is the knowledge that is not codified yet, which makes it difficult to transfer between parties. Tacit knowledge can be hidden in people’s heads and actions (Bryson, et al. 2004; Hall 2001). Due to its unstructured nature, tacit knowledge is most difficult to gather, understand, and implement. Tacit knowledge is best transmitted via face-to-face contacts and through fr equent interaction (Todtling, et al. 2006). For example, Thrift describes the core of financial activities as “information, expertise, contact”, which all require spatial proximity (Thrift 1994, 334).
Todtling et al (2006, 1037) identify two knowledge bases for APS firms : synthetic and analytic. Synthetic knowledge base is created by the application of existing knowledge, low levels of R&D and applies to solving specific problems brought by customers. Learning by doing and interacting, practical skills and tacit knowledge are highly important. Synthetic knowledge base is found in traditional APS firms such as finance, banking, accounting, and insurance. In analytic knowledge base there is a strong reliance on scientific inputs and codified knowledge.
Knowledge generation is based on the application of widely shared and understood scientific principles and methods and outcomes tend to be documented in reports, electronic files or patent descriptions. Biotechnology research and information technology are two APS sectors with analytic knowledge base. In sectors where an analytical knowledge base prevails there is much more systematic basic and applied research than in traditional industries. Analytic knowledge base is also shaped by tacit knowledge to a certain extent (Todtling, et al. 2006, 1037). Due to its highly unstructured nature, tacit knowledge is the most important determinant factor in defining the locational strategies of transnational APS firms with either the synthetic or analytic
knowledge base. In order to have an access to informal knowledge networks, the logic suggests that these firms need to be located close to each other.
APS firms are highly labor intensive because specialized expertise of the workforce is the main material for their production. Thus, access to skilled labor is a particularly important location consideration for APS firms. Vacancy is more likely to find a match with an unemployed worker when the labor market is larger (Anas, et al. 1998, 1447), global cities supply this large labor pool. Professional skilled labor working and living in global cities are aware of their special status. According to Reszat (2002, 7) they may complain about traffic jams and air pollution, but
they enjoy the advantages related to the way of life and the feeling to be a part of a special global city culture.
Robert Reich (1992) argues that there are three different types of work emerging in the new American economy, which also have an affect on division of labor: routine production services, in-person services, and symbolic-analyst services. Routine production services are blue-collar, routine manufacturing and data entering jobs. In-person services depend on catering people such as restaurant and hotel work. Symbolic-analyst services depend on knowledge creation and problem solving. They can be traded internationally. Reich (1992) calls them symbolic because their practice involves solving problems through manipulating symbols or abstract images (Bryson, et al. 2004, 42). Professional skilled labor in APS falls into this category. Problem solving depends on information flowing in global information networks and face-to- face contact with other symbolic analysts. The transnational APS industry feeds on these interactions, which are concentrated in global cities. Thus, professionals working for APS firms benefit to be in global cities and by this way APS firms have an access to the skilled labor pool, which is vital for their operations.
All aspects of development and functioning of global cities and APS firms also depend on advanced telecommunications networks and appropriate urban infrastructures embedded in good transportation. Global cities concentrate the most-communications intensive elements of all economic sectors and transnational activities within small portions of geographical space (Graham 1999, 930; Moulaert and Gallouj 1995, 153).
Advanced producer services in global cities highly depend on sophisticated urban infrastructure (Wernerheim and Sharpe 2005, 181), which increases efficiency and reduces transaction costs by allowing clients to interact with suppliers remotely and in real time (Graham 1999; Todtling, et al. 2006). Talking about the law firms in London, Taylor and Smith (1999) mention that firms have developed intranets as an internal notice board to facilitate rapid delivery of information to their offices worldwide. They also use the latest technology to serve their clients better with electronic document transfer, internet web pages, video confe rencing, and 24- hour phone services (Taylor and Smith 1999).
Most of the telecommunication networks are handled by private TNCs (Graham 1997a; Graham and Marvin 2001), these companies selectively serve markets as part of their profit- making strategy. As a result, telecommunications and fast transport infrastructures is not evenly distributed in global cities. They link nodes and city centers together into networks, whilst
excluding much of the peripheral spaces. They link global cities into a single virtual marketplace. Cambridge-London and Stockholm- Uppsala corridors and Randstad Holland are examples (Graham 1999; Graham and Marvin 2001). The privatization of telecommunication companies also support the “fortress effect”, or the commercial gated community appearance of many postmodern buildings (Graham 1997b). Telecommunications also bring efficiency to transport networks. Global cities are nodal locations for the largest airports in their regions (Moulaert, et al. 1995); airports have become gateways for the transnational business travelers. In parallel airports are also developed as “abstract spaces”. Thus, telecommunications reinforce the character of global cities as important nodes in the global economy and efficient locational choices for APS firms (Thrift 1996).
Telecommunications networks are actually invisible except for construction stage. Since
demonstrating that cities have technological capability to house global operations is an important marketing strategy, efforts have been made to increase the visibility of telecommunications in cities. Large satellite dishes are located near buildings just for cosmetic reasons (Doel and Hubbard 2002). The most challenging part of construction of telecommunications infrastructure in global cities is termed as the “last mile” problem. Getting satellite installations, optic-fibre cables under streets and sidewalks constitute a major construction problem and it is a very expensive operation (Graham 1997b; Graham and Marvin 2001). Buildings that bring together all the high-tech equipment in the construction stage necessary for their occupants become the top choices for global companies.
Producer services have a dependency on built environment. For example, in older times in London, developers used to put up offices for financial institutions, and these institutions were easily moving in and out of those buildings for speculative reasons. Today, requirements of banks have become too specialized and major financial companies design their own buildings with large trading floors and technological capability to handle huge amounts of electronic transactions everyday (Keeble and Nachum 2001).
The above discussion has demonstrated that APS have specific characteristics: most importantly they need to have close relations with associated companies and specialized services for their knowledge base, a high level of accessibility (international airport, junctions of motorways and railways, sophisticated communication facilities), access to a large and diversified labor market,
and a wide range of cultural, educational, and consumer facilities (Graham 1997b). The next section will focus on how these specific characteristics of APS industry affecting their locational strategies.