"Is
distance dead?"
Technological development as a factor influencing the spatial distribution of economic activities.
Author: Mara Kapodistria
Published in the Greek scientific journal: “Geographies”, issue 44, 2024
Official link pending
1. Introduction
It is widely known that the geographical distribution of economic activities is one of the most important and indicative factors for their development as well as region in which they take place.
On the occasion of reading the book “Death of Distance”, the concern of this paper lies in whether technological development, especially in communication and transportation, has contributed to the decomposition of the concept of distance, or not.
This current publication is not intended to challenge the aforementioned reading. However, numerous examples and developments throughout human history lead us to investigate the opposite view.
We are undoubtedly experiencing an era of significant technological change. A “digital era” in which technology has invaded and plays a prominent role in human life, influencing numerous sectors and aspects of it: society, economy, politics, governance, culture... “Digital technologies affect the entire spectrum of human activity, constituting the core of the transition to a new technoeconomic paradigm.”
Thus, we enter the business sector. The inseparable relationship between technology and entrepreneurship is certainly not a recent phenomenon. From the first Industrial Revolution we reach the Digital Revolution, or otherwise the fourth Industrial Revolution, in which the character and position of economic and business activity is being reshaped, with the introduction of new concepts such as ICT, IoT or AI, which today “are at the forefront of global competition or coordination”.
According to these, the question we are called upon to answer is whether or not transport and communication technologies affect the spatial distribution of economic activities. The issue is complex, and therefore, in order to approach its answer, both perspectives ought to be analyzed.
INFLUENCE OF GEOGRAPHY ON WORK AND INNOVATION”
2. Technological evolution implies the Irrelevance of the location of economic activity
2.1. Transportation Technologies
Initially, the view that supports the connection between technology and geographical distance of various businesses, is being reinforced by the location of each business as well as the transportation it requires.
The development of transfer technologies, and in particular the widespread use of the car with the combination of the extensive air transport, contribute to the spread of cities and consequently to the dispersion of businesses in more remote areas. The creation and development of means of transport or the construction of transport networks and infrastructure, results in an increase in the mobility of people and products. Consequently, the phenomenon of decentralization in production and internationalization in distribution is observed, as these new strategies of displacement of productive and commercial activities, transcend geographical boundaries. Similarly, the widespread dissemination of electricity or water supply networks, for example, gave greater “geographical freedom” to industries. The same happens with the industrialization of agricultural activities, which now, thanks to modern technologies, are able to transport agricultural products more easily, employ less human resources which entails less travel, or even take place in artificial environments, regardless of geographical and climatic conditions.
The modern evolution of the above phenomena includes autonomous and “smart” vehicles, which conduce even more to facilitating the transportation of a business outside a marked area, as they are already beginning to reshape the way a city operates. A typical example is Amazon, which is testing a way of distributing goods via unmanned remote-controlled aircraft (drones).
Secondly, geographical distance has undoubtedly been influenced by mass production. Sophisticated technological systems have allowed, on the one hand, the mass production of goods, while at the same time globalization has
also strengthened the establishment of businesses and physical stores in numerous parts of the world, under the same brand name.
In this context, new technologies are responsible for eliminating geographical boundaries, through modern applications. The so-called “Mobile Apps” have contributed to the re-creation of economic activities that are identified with transport. Car sharing, carpooling, Mobility As a Service, food delivery companies are some of the examples that highlight the connection between technology and the “elimination” of distance. The internationalization of these examples (e.g. Uber) further strengthens this argument.
Furthermore, with “outsourcing”, i.e. the assignment of business functions from one company to another, operations are co-located in common infrastructures, while the central location differs, with examples such as technical support or customer service.
What is more, IT infrastructures allow modern businesses to centralize redundant services, such as payroll, in one location, so that the geographic location of each operation does not play a significant role. This is also achieved by moving to online environments.
2.2. Communication Technologies
On a second level, communication technologies have contributed to the lack of importance of geographical proximity of businesses.
Due to the fact that telecommunications allow communication over longer distances, questions arise about the power of technology to “support the diffusion of human activity.” A historical example in the technology of the economy could be the “gold standard.” The so-called “gold standard” aimed to eliminate borders by creating an integrated global market that would reduce the role of national units and national governments.
Approaching the modern era, the Internet has brought revolutionary changes in the way products and services are advertised, purchased and distributed. This is further enhanced by mobile applications and of course social networks. A small business has the opportunity to develop a relationship with a clientele from various regions around the world - web based customer relationship –particularly nowadays by being able to distribute goods to various places through one account, often without the existence of a physical store.
“Economists have long recognized the importance of technological innovation for economic growth; however, […] they have overlooked the fact that economics itself has been the source of a surprising number of inventions.”
In this sense, in addition to conventional goods as they have been presented, ICTs contribute to the non-respect of geographical boundaries with “digital products”. The sale of such creations (artistic works on Netflix, Spotify or even NFTs) and services (Augmented Reality, Artificial Intelligence, Blockchain, Cloud or Spatial Computing and Software As A Service) without physical substance, takes place in virtual spaces of the internet and is not subject to geographical boundaries. The ambiguity of spatial distribution also includes new payment methods (e.g. cryptocurrencies).
Additionally, in eliminating the limited spatial distribution of various economic activities, teleworking occupies a prominent position. With the so-called “remote work”, geographical boundaries are abolished, as employees have the ability to work from any place to any place with the same ease.
Digital and “smart” technology applications have undoubtedly been instrumental in this, with striking examples such as Slack, Zoom, Webex, etc. which form a working environment or a meeting point, without spatial restrictions to the users concerned. By extension, the concern about whether information technologies “undermine the raison d’être of urban settlements and industrial areas” remains and is currently growing.
3. Technological evolution entails the Importance of the site selection of economic activity
On the other hand, the question arises: have information and communication technologies actually led to more dispersed spatial structures or have they essentially reinforced urban external structures and, therefore, contributed to more concentrated spatial ones?
Over the years, many historians have emphasized the importance of space and distance in trade, using the example of “feudalism”; linking the dispersion of trade and the economy to its disintegration. Directly dependent on place and site selection, the development of transportation made it possible to concentrate industry in cities, produce on a mass scale, and sell products to a widespread and interurban market. In this sense, it seems that transportation technologies do not eliminate distance, but rather expand and strengthen it. “Characteristically, economic geography advanced. Convinced that it was an error to isolate the network relationships in local scale, the financial geographers began to they turn their attention in cross-border, globalized networks". Even the example of the "gold standard" mentioned earlier ultimately ended up creating even more expanded relationships with spatial structures, leading to "two terrible world wars".
Additionally, although some research supports the first claim, findings in England and America have shown that digital systems and especially the use of the internet in businesses have strengthened cities, specific urban structures, fact which could trigger us to connect the geographical proximity of activities with technology. The concern is found in the fact that if urban space is indeed weakened by modern technologies, how did we get to the point of referring to “smart” cities with particularly strong e-governance and involvement of giant companies in ICT?
Similarly, within this globalized economic environment, as already mentioned, numerous businesses, mainly small and medium-sized enterprises (SMEs), are
characterized by their locality and constitute a significant percentage of the international flow of products and services.
Subsequently, one of the strategies of urban structures, which also justifies geographical proximity in relation to technological progress, is the “encouragement of the creation of cooperative formations, such as business networks and business clusters”. Clusters are characterized, among other things, by the integration of new technologies. They concern the connection of geographically close businesses, suppliers and institutions (universities, etc.) that interact to implement specific actions in their field of interest.
Indeed, they constitute a leading example of a policy for strengthening entrepreneurship, conquering new markets and occupying prominent positions in the development agenda of the most advanced economies. They effectively highlight and promote the local market, have particular benefits for both businesses and the local society such as the “creation of economies of scale”, with various examples around the world (USA, EU, Southeast Asia) but also with Greek examples (Athens, Patras, Kozani).
Similarly, new start-ups and venture capital firms, which are directly related to high technology, are successful examples of geographic concentration. As reported in the Harvard Business Review, they are acquiring a “winner-take-all pattern geographically”, with an increasing trend.
Then, returning to online businesses, communication and transport technologies enable better tracking. In this sense, each business can analyze, among other things, data on the location of users or consumers. As a consequence, to what extent is location independent of the online activity of each business in terms of advertising, development, and prospecting?
Remaining in the business climate, the aforementioned argument regarding remote work is questionable. Interpersonal communication plays an important role in human and, by extension, economic activities. “Despite the power of communication technology, face-to-face communication is still valuable in
many theories of human geography.” In economic geography, “the creation of a software” or “the production of a project” are typical examples of the spatial proximity of work activities or the economy in general, as well as in these industries, among others, interpersonal communication is also an element of developing trust between members and stakeholders
It should also be noted that despite the rapid development of technology and its distribution in urban and peri-urban areas, limited availability and accessibility are still issues that exist. The absence of a well-equipped information network in some areas seems to limit the favorable location of facilities, thus creating a more concentrated business environment and accordingly specifying its spatial distribution. The benefits differ, but cities also differ.
A recent report in The New Oxford Handbook of Economic Geography finally challenges the “death of distance” claim. Specifically, it suggests that while technology can be effective as a way to organize programs and partnerships for businesses, it may be less effective as a way to create them. It also argues that business activities may have benefits, virtually, but these benefits are not equally distributed and experienced. “The internet has comparatively benefited areas that were already doing well. It is important to emphasize the “comparative” aspect,” says Shane Greenstein. “With few exceptions, the technological gap” between “developed and developing countries is widening”. The already "rich" businesses or regions, which already possess the human resources and advanced infrastructure, in other words, are the ones that exploit technological progress, hence contributing not only to the strengthening of geographical proximity but ultimately of regional inequality.
A final example worth considering about the relationship between technology and geographic distribution in trade is the recent incident in the Suez Canal with the container ship “Ever Given.” Despite the possibility of building vehicles of such a range due to the development of transportation technology, the
accident with the blocking of the ship hindered the transport of goods, halting business activities and having an impact on global trade and the economy.
The importance of the evolution of spatial patterns can be summarized in Tobler's view, in the first law of geography: "Everything is related to everything, but things near are more related than things far away", emphasizing that despite the wear and tear that distance often undergoes, it is still a dominant factor in numerous phenomena.
4. Conclusions
Therefore, the answer to the question of whether technological advances in transportation and communication have resulted in the non-importance of geographical proximity with regard to the location of businesses is not unambiguous.
On the one hand, we could conclude that technology has influenced the elimination of geographical boundaries of economic activities, in various ways such as global online businesses, advertising and communication on social networks, or the digital economy.
On the other hand, technologies have the ability, on the contrary, to reinforce the distinction of spatial distribution through the uneven distribution of their development or through modern forms of business that are based on their geographical location.
“The greatest influence of technology on geopolitics in the coming years will come not just from the technology itself, but from the system that surrounds it.”
In this sense, we need to think about how technology companies themselves influence the economy and digital governance, what businesses they include, what regions they affect, and which consumers they focus on.
Returning to our primary concern, the geographical proximity of businesses has undoubtedly been influenced by technological development. However, while the digital revolution has reduced the importance of distance in some ways; in others it has exaggerated it, concluding that Distance Is Not Dead (yet).
Indicative Bibliography
International Bibliography
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Greek Bibliography
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List of Figures
Figure 1. “THE INFLUENCE OF GEOGRAPHY ON WORK AND INNOVATION”,https://www.alumni.hbs.edu/stories/Pages/storybulletin.aspx?num=7293
Figure 2. “The Geography of Innovation”,https://pacojariego.me/2018/12/09/the-geography-ofinnovation/