while the added value of governance for a global city is the differential performance of a city in Quadrant IV compared to one in Quadrant III.

**Hypothesis 2:** _Globalization matters_ .

We can then also test whether a global city is better performing than a local city, for a given quality of governance (whether for a given level of good governance, i.e. comparing quadrants I and IV, or poor governance, as in quadrants II vs. III, which would measure the independent effect of globalization on city performance). From the literature, it is expected that a city that is global is able to attain such global status because of specific actions taken by its political leadership or by its citizens, as well as the firms that locate within such a city. We would expect citizens of global cities to have better quality and access to services such as water, sewerage, electricity and telephones than local cities.

# **Hypothesis 3:** _Globalization and governance interact positively_ .

While in principle it is conceivable that a city could compensate for its ‘local’ (vs. global) character by exhibiting good governance, in practice the dynamics of good governance may point to a linkage between globalization and governance: those cities that globalize, bring about the checks and balances of competition (say by the discipline imposed by FDI and credit markets), as well as the techniques, that are likely to positively impact on city governance. In turn, improved governance, involving transparency, control of corruption and property rights protection, may attract further demand and pressures for a local city to become more global.<sup>13</sup> Thus, a dynamic virtuous circle may be at play in which globalization and governance interactive positively to further improve performance. In particular, we will empirically investigate whether good governance is less likely in local cities, and thus whether becoming a global city, and a globalized country, helps improve city governance.

Thus, in terms of schematic chart 1, we would expect that the worst performance would take place in cities in quadrant II (poorly governed local city). If it attempts to attain higher levels of globalization, that is unlikely to take place without pressures to take measures to also improve governance. Thus, a rapid and fully horizontal move out of quadrant II to quadrant IV, or a rapid and fully vertical move to quadrant I, are less likely than either the city staying within a low equilibrium trap, or moving out of such a low level quadrant II towards the good performance equilibrium in quadrant III via the diagonal route.

> 13 Taylor defines alpha cities as those with global significance in four key global city functions (international accountancy, advertising, banking, and legal services).  A beta city is one that has global significance in three of the four key world-city (global city) functions.  A gamma city is one that has global significance in two of the four key global city functions.  Using the network aspects of the GaWC is a key advantage that we consider in looking at the issue of governance, asking questions like: “Is it that less globalized cities are relatively less well governed and that results in them trailing even further behind?”  We group cities into two categories of “global” and “local” to present some of the results in charts that visually capture the main empirical findings.

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