Manufacturing incubation and the inner city. A case study of Greater Vancouver and implications for land use policy
Creators: name: Chu, Millie
Publisher: name: University of British Columbia
Year: 2008

description: Urban governments in Canada face a major challenge from the growing demand to convert inner city industrial land to alternate uses, especially residential. This demand seems to accord with "de-industrialization" and trends to a growing service economy in the metropolitan areas of industrialized countries. However, a concern remains that reducing inner city industrial land might erode metropolitan manufacturing vitality by jeopardizing the inner city's incubator function, which provides the region with new manufacturing firms. The thesis reviews some compelling arguments which suggest that manufacturing continues to be important to industrialized countries. At the metropolitan level, while the economies of older, large cities such as London and New York are based primarily on corporate services, smaller cities such as Greater Vancouver can rely less on such services to sustain their economies. Thus, smaller cities have an additional rationale for maintaining an incubator function in their inner cities. The empirical evidence reviewed also suggests that differentiation between cities may influence the continuing existence of the inner city incubator function. This thesis contributes to the resolution of the land use policy dilemma described, by focusing on an investigation of the inner city hypothesis and using Greater Vancouver as a case study. The simple version of the inner city hypothesis states that the inner city has a higher birth rate of manufacturing firms than the rest of the metropolis. Thus, the inner city functions as the principal incubator for new manufacturing firms in the metropolis. The complex version of the inner city hypothesis states additionally that firms incubated in the inner city will, upon maturation, relocate to less dense areas outside the inner city. In this way, the inner city contributes to metropolitan manufacturing growth. Industrial location theory suggests that new firms find the external economies available in the inner city beneficial for their start-up and initial growth. There is disagreement among researchers about the type of external economies which are most beneficial to new firms. While there is general consensus that the hypothesis is based on the importance of urbanization economies to new firms, some researchers argue that young firms actually benefit from localization economies. This thesis does not undertake to directly investigate the topic of external economies. However, the thesis proposes to use the supplementary thesis research, i.e. a review of the manufacturing sector, for some insights to help clarify the disagreement. The thesis also suggests that applying the inner city hypothesis to policy development requires an analysis of the qualitative aspects of inner city incubation activity, in order to determine if the inner city is performing a key incubator function in the metropolis. A key incubator function may include either a principal incubator function in the aggregate or a principal incubator function in specific sub-sectors which are significant to the regional manufacturing sector or the regional economy. Therefore, the thesis undertook a review of Greater Vancouver's manufacturing sector and identified some "sunrise" industries which have demonstrated growth in the number of establishments and employees. Through a count of firm births disaggregated by sub-area and sub-sector, the thesis concluded that the inner city had in fact performed both a principal and a key incubator role during the study period (i.e. 1987 to 1990). On a sub-metropolitan level, the inner city's share of new firms exceeded its share of existing establishments in 1986, thus confirming the simple hypothesis. On a sub-sectoral level, the inner city also led new firm growth in "sunrise" industries in Greater Vancouver, indicating that the inner city's incubator function was qualitatively significant to the regional manufacturing sector. However, serious data and methodology limitations precluded a confident estimate of firm relocations from the inner city to the suburbs. The complex hypothesis thus needs to be studied further in Greater Vancouver. The thesis research also suggested that firm incubation in Greater Vancouver might benefit from both localization and urbanization economies. The thesis concludes generally that urban governments of small metropolises should approach the rezoning of inner city industrial land with caution. The thesis also concludes specifically that a choice to retain inner city industrial land in Greater Vancouver can be justified on the basis of the inner city's sizeable contribution in existing establishments to the regional manufacturing sector, and the inner city's regionally significant incubator function.