Global and non-global city locations: the effect of clusters on the performance of foreign firms

This study examines the effects of subnational regional heterogeneity on the performance of foreign firms. Based on the global city concept, it identified regions with and without global connectivity and then compared the effects of within-country location advantages on foreign firm performance between the regions within a country. Given that present studies offer conflicting findings on how industrial concentration, that is, clusters, affect the performance of business firms, this study argues that they fail to address the global connectivity of subnational regions. Findings from Australia suggest that industrial concentration in regions with global connectivity as highlighted by global cities have a positive effect on the performance of foreign firms located there; however, that is not the case in other non-global city locations. This study thus offers an insight into better understanding this unresolved issue by arguing that the effect of industrial concentration upon a foreign firm’s performance is contingent upon the subnational regions’ global connectivity.