Amazon is far from the only company evaluating where to invest for growth, geographically speaking. While others aren’t necessarily seeking a second headquarters location, certain cities may be more attractive than others for new or expanded business units or sales outposts.
However, identifying the most appealing sites for carrying out such ambitions may require a more complex calculus than one might imagine.
In fact, management consulting firm A.T. Kearney’s 2018 Global Cities Report ranks the current business appeal of 135 metropolitan areas across 27 metrics spanning 5 dimensions: business activity, human capital, information exchange, cultural experience, and political engagement. The rankings are based on facts and publicly available data.
The current ranking weights both business activity and human capital as 30% of a city’s index value, while information exchange and cultural experience both count for 15% and political engagement for 10%.
In the study, which A.T. Kearney has been conducting annually since 2008, New York retains its status as the world’s most influential city, which it wrested from London a year ago. However, the report notes that there is no “perfect” city for businesses. A theoretical such “city,” one with index scores of 100 across all 27 metrics, is composed of 15 cities. New York claims the top spot in only 5 of the metrics, while Brussels is ranked at the top in 4 metrics.
Among the five ranked dimensions, New York is first in both business activity and human capital; Paris is the leader in information exchange; London in cultural experience; and Washington, D.C., in political engagement.
Here are the top 15 cities in the current Global Cities Index:
- New York
- Hong Kong
- Los Angeles
- Washington, D.C.
The report also evaluates cities’ future potential for attracting businesses, using 13 metrics across 4 dimensions: well-being, economics, innovation, and governance, each accounting for 25% of the forward-looking index values.
The Global Cities Outlook index has some of the same cities, including its top 5, as the above list. Otherwise, though, the places expected to be leading business hubs are mostly different from the current ones. Here’s the list of the top 15:
- San Francisco
- New York
“Even the most established global cities face significant competition from emerging urban hubs,” A.T. Kearney says.
San Francisco claims the top spot in the Global Cities Outlook index because of its strength in innovation. In a five-year span, from 2011 to 2015, Bay Area companies filed for 34,324 international patents, with Google alone accounting for 6.5% of them, the report notes.
The study highlights that key cities in China have experienced greater progress than counterparts elsewhere during the 11 years the consulting firm has produced the study. The first study, in 2008, included 7 Chinese cities; the 2018 report included 27.
The new report, for example, shows that in just the past year Guangzhou climbed 19 spots, due largely to its growing infrastructure investment. Xi’an, meanwhile, was bolstered by increased foreign direct investment, private investments, and patents.
Indeed, the index scores for the original 7 Chinese cities included in the 2008 study have grown at an average annual rate of 1.8%, compared with 0.6% for North American cities and 1.2% for all cities included in the first report.
“This evolution of China’s cities reflects intentional efforts by national, regional, and local entities to improve the country’s competitiveness,” A.T. Kearney says.
A key component of China’s performance is its increasing ability to attract multinational companies. For example, Google has offices in Shanghai and Beijing and plans to open one in Shenzhen, home of Chinese technology giant Tencent.
Breaking down the studied dimensions by the metrics each one includes, the Global Cities ranking has:
- Business activity: capital flow, market dynamics, and major companies present
- Human capital: education levels
- Information exchange: access to information through the internet and other media sources
- Cultural experience: major sporting events, museums, and expos
- Political engagement: political events, think tanks, and embassies
And the Global Outlook ranking has:
- Personal well-being: safety, health care, inequality, and environmental performance
- Economics: long-term investments and GDP
- Innovation: entrepreneurship through patents, private investments, and incubators
- Governance: proxy for long-term stability through transparency, quality of bureaucracy, and ease of doing business