The new economy embedded in an old city : a Mixed Method Approach : mapping and explaining cognitive-cultural economic activity patterns in the Amsterdam canal district

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Author: Erik Jansen 11095687 Supervised by: Professor R.C. Kloosterman

20-6-2016 Mapping and Explaining Cognitive-Cultural Economic Activity

Patterns in the Amsterdam Canal District

The New Economy Embedded in an Old City:

A Mixed Method Approach

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Preface

Back in the days when I was a youngster at high school, I had three favorite subjects: Economics, Geography and History. Interests that have made me decide to study Human Geography after graduation. During my time of studies, like everybody, I sometimes forgot this motivation. When professor Kloosterman introduced me to Scott’s book on the world in emergence, this original motivation totally came back to me. I loved to read the historical overview on capitalism and its subsequent urbanization processes embedded in an economic line of reasoning. I would like to thank professor Kloosterman for this suggested reading and his coordination. The book puts all theories I studied in the past four years in an overarching framework, from agglomeration economics to processes of gentrification. Furthermore, it formed a strong theoretical backbone of my research.

In addition, I would like to thank Karin Pfeffer for her support regarding the spatial analysis. Besides that, my dad Gerard Jansen, my sister Inge Jansen, and my dear friend Teun Smorenburg, were of tremendous help reading the first drafts of my thesis and providing me with valuable feedback. Last but definitely not least, I would like to thank all the people in the Amsterdam Canal District who were willing to share their stories with me. It was a pleasure to talk to you all.

Besides these important persons, I want to thank the geography department for providing the curriculum of the Human Geography master program. At the introduction day, it was mentioned that this year would be about ‘doing geography’. I have the feeling I did. Personally, I very much liked this practical approach and I hope this master thesis shows to be a product in line with this philosophy, embodying what doing geography looks like.

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Abstract: This research is aimed to answer the central question: To what extent do cognitive-cultural economic activities spatially cluster in the Amsterdam Canal District and how does this affect the attractiveness of the Canal District for cognitive-cultural firms in terms of modern location factors? This

is an important question to answer because in the new ‘cognitive-cultural economy’ competition is increasing. Not only firms are faced with increasing competiveness, also large cities and countries are caught up in the so called ‘war for talent’. Defining the strengths of the Amsterdam Canal District, the inner part of the Dutch capital, can be helpful to policy makers, in indicating how to effectively brand this district for example. Furthermore, it contributes to a broader debate in identifying the competitive advantage related to large agglomeration economies. A mixed method approach will be used to conduct this research, designed on a sequential basis. The first part will be based on a spatial analysis using hotspot mapping to identify possible cognitive-cultural clusters within the Amsterdam Canal District and clusters of locations where these firms are locating. In the second part the intention is to explain these patterns by interviewing relevant actors in cognitive-cultural sectors within the Canal District about their locational decision in favor of this district and in this way define why it is an attractive place to locate. The focus in these interviews will be on the influence of modern location factors (interaction with other firms, human capital and image) on their decision. The overlying goal of this research, as presented in the hourglass model in figure 1, is to de-contextualize Amsterdam specific findings to the broader question: why do firms want to locate in cities?

Why do firms want to locate in Amsterdam?

What does this say about general location decision of firms in favour of cities? Why do firms want to locate in cities?

Figure 1: Hourglass model research design (Trochim, 2006); from general to specific, from specific to general

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Introduction

“Amsterdam has a fantastic opportunity to profit from the characteristics it currently has. The profile of the city fits the requirements of current economic growth sectors. Amsterdam would be wise to adjust to the promising circumstances, just as it did in the seventeenth century; a new Golden Age

may have started (Musterd, 2009, p. 233)”.

Scott (2012, 2013, 2015) argued that after a long period of defining our current economic system as post-Fordist; it is time to define what the system is, instead of describing what it is not. Several authors contributed to this quest and came up with definitions like ‘the knowledge economy’, ‘information economy’, ‘cybercapitalism’, ‘the creative economy’ and ‘cognitive capitalism’ (Cooke & Piccaluga, 2006; Drennan, 2002; Peters et al., 2009; Markusen et al., 2008; Moulier Boutang, 2007 cited in Scott, 2012). In A world in Emergence Scott tries to construct an overarching theory on the emergence of cities based on previous work. The cornerstone of this theory is that patterns of urban and regional development are dependent on the core principles of capitalistic practices. Along with this, he argues that every capitalistic regime of accumulation has had its own associated urban form. Instead of post-Fordism he entitles the current regime as cognitive-cultural capitalism.

Kloosterman (2010) argues that whilst the points of departure of the cognitive-cultural economy are ubiquitous, it is important to embed this theory within the local institutional context. “The structure and dynamics of capitalism are invariably filtered through an inherited urban milieu that acts reflectively on their expression on the ground (Kloosterman in Scott, 2011)”. The Amsterdam Canal District offers an interesting case to do so. It is special because the morphology and aesthetics are already set; in contrast to American and Asian cities for example, where the city centers are more based on new build high rises. The outer boundary of the Canal District was already established at the end of the 17th_{century (IJselstijn, 2011) and ever since then the Canal District has been developing. It}

is interesting to examine how cognitive-cultural economic activities fit in to this old city structure. Furthermore, as Musterd (2009) suggests in the quotation above, Amsterdam has a promising future. The characteristics of an old city, that Amsterdam offers, seem to serve the requirements of economic growth sectors. Which is supported by the fact that over the last fifteen years Amsterdam has been generating a higher economic growth rate than the rest of the Netherlands (Savini et al., 2016). It could be argued that there is something happening in Amsterdam that is of extraordinary qualities, which makes embedding theory on cognitive-cultural economy within the Canal District and identifying the mechanism behind Amsterdam’s economic success relevant.

Besides this, the topic is also relevant from a society perspective. The Dutch government is actively steering to make the Netherlands internationally attractive. By luring international companies, entrepreneurs and knowledge migrants to the Netherlands, the international competiveness is tried to be improved, in order to maintain or become a knowledge-economy (Rijksoverheid, 2014). So gaining knowledge on how the Netherlands can maintain and increase its attractiveness can be of worthwhile contribution to these goals. Likewise, this research contributes to the understanding of the attractiveness of the Amsterdam Canal District for new economic activities and can give insight in what is needed to be attractive for these type of firms as such. In addition, defining the strengths of the Amsterdam Canal District can help policy makers of the local government in terms of branding the Canal District. According to Savini et al. (2016) the local government is intended to stimulate the creative economy and entrepreneurship by small and piecemeal interventions, correspondingly this research can give useful insights in terms of identifying what type of interventions are needed.

In conclusion, this research is aimed to answer to following central question:

To what extent do cognitive-cultural economic activities spatially cluster in the Amsterdam Canal District and how does this affect the attractiveness of the Canal District for cognitive-cultural firms in terms of modern location factors?

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7 To answer this question, the first two chapters will provide a theoretical background on both possible explanations why firms are located in cities and current issues in the field of human geography related to Amsterdam and the Canal District. By providing this information first, it is clear in what context the research questions have been designed. These questions will be discussed and explained in chapter four. Chapter five contains a description of the methodology needed to conduct this research; this consists of theoretical and operational definitions, the conceptual framework and the way in which the data will be collected. There will be explained that this research will be conducted by first a spatial analysis, followed by a qualitative part. Correspondingly, the results will be presented in chapter six and seven. These results will lead to an answer on the central question, which will be presented in the conclusion in chapter eight, along with a de-contextualization of the case back to theory and implication of this research.

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2. Why do firms want to locate in cities?

By addressing the question why firms want to be located in cities, this chapter aims to explain the relationship between cities and economic activities. However, there are various theories of the emergence of cities and why cities are attractive places for both people and firms. For example Florida (2005) explains the development of cities from a people’s perspective; here, however, the argument will be based on the economic line of reasoning that is in line with Scott (2012), which happens to be useful in explaining economic activity. This line of reasoning starts by explaining the principles of capitalism. In short these principles lead to an urge for capital accumulation, which is facilitated by agglomeration or urban economies. After that, the new cognitive-cultural form of capitalism and its related forms of economic activities will be discussed. Then, it is argued that the shift towards this type of capitalism has led to a shift in the importance of location factors, from classic to modern. What these modern locations factors are will be described afterwards. The chapter will be concluded by answering a more practical question, how do we recognize a cluster when we see it?

2.1 Some principles of capitalism

Presumably, the term capitalism is known by almost every person on earth. But whether everybody understands its true meaning is questionable. To me it was more like a basic assumption. I knew the term and somehow related it to markets and competition, but I never questioned the underlying dynamics of capitalism. So it is important to further specify these dynamics.

Let’s start with some definitions. For example Arneson (2011) describes capitalism as “an economic system in which economic production is organized through voluntary contracts among owners of resources, in which individuals are free to contract on any mutually agreeable terms so long as these do not generate certain types of harm to third parties, and in which economic production is undertaken for the most part, by business firms that consist of owners of capital who hire non-owners as workers” (p. 233). Coe & Young (2014) describe capitalism in relation to global production networks (GPN). They define the capitalist dynamics as the core drivers for the formation of these networks and global strategies. These dynamics inhabit costs-cum capabilities, markets, finance and risk. Scott (2012), however, offers yet another view on capitalism and describes its dynamics as a system of capital accumulation.

Within capitalism the central motive is capital accumulation. According to Scott, capitalism at its core, is a system that involves a search for profit. This occurs by means of investment in physical assets and the employment of workers, in order to produce sellable goods and services. Which happens in the context of competitive markets and leads to the reinvestment of these profits in the quest for more profit or capital accumulation and thereby securing rounds of production in the future. This drive towards accumulation results in an ongoing change in the economic sphere or regimes of accumulation. These regimes are characterized by related products, technologies, divisions of labor, managerial strategies, financial instruments and locational outcomes. In understanding temporary city development, these locational outcomes of capitalism happen to be of major importance.

Over time different waves of capitalism and related regimes of accumulation can be characterized. In ‘A World in Emergence’, Scott argues that every wave of capitalism has resulted in a related pattern of urban and regional development. So, capitalism and urbanization are very much interrelated. The cornerstone of ‘A World in Emergence’ is to describe the interrelations between capitalism and the configurations of geographic space, the locational outcomes. Scott argues that because competiveness, profitability and accumulation depend so intimately on agglomeration, there is no hitherto realized form of capitalism that is not also associated with urbanization. Different forms of capitalism can be described by a time-specific leading collection of sectors; central technological dynamics; the particular set of labor regulations and labor market outcomes and the given state of market competition. These four elements of a given regime of capitalism results in four generalized abstractions of cities: a particular kind of economic base and employment system; specific forms of human and social capital; a complex local labor market and a generalized pattern of residential activity reflecting (see Figure 2).

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9 The latter has made clear how capitalism results in a certain type of urban or regional development. Besides this relation, Scott states that capitalism is reproduced in cities. So there is also a backward link between cities and capitalism. According to Scott (2011), the leading edges of capitalism today rely on a basic cognitive-cultural system of production that is transforming economic foundations of metropolitan areas. What this cognitive and cultural system looks like and how it is transforming metropolitan areas will be discussed in the next paragraphs of this chapter.

Figure 2: Characteristics waves of capitalism and its associated pattern of urban and regional development

2.2 Cognitive-cultural capitalism

To describe the current state of capitalism, cognitive-cultural capitalism, we first go back to the world

in emergence (Scott, 2012). As stated above the central tenet of the book is to relate capitalism to

geographical space, resulting in the wider theoretical question: what are the interrelations between capitalism and the configurations of geographic space? To answer this question the first part of the book is mainly concerned with explaining the history and geography of capitalism. Chronologically, there have been three waves of capitalism; first the 19th_{century factory and workshop system, second}

the 20th_{century Keynesian-Fordist society and the present form, according to Scott a cognitive and}

cultural form of capitalism. This form can be characterized as a combination of digital technologies and cultural work tasks calling for wide discretionary decision making on the part of individual employees.

So, the leading collection of sectors is based on both digital and cultural work. In general, three types of economic activities can be distinguished: technological intensive industries, business and financial services and creative and cultural activities. The associated central technological dynamic relies upon lean production and computerization. In comparison to the previous waves of capitalism there are less workers on an assembly line. Because production is characterized by multiplicity and variety, manufacturing firms need to be flexible in order to adapt to a rapid changing market and varying consumer preferences.

This form of organization is called ‘flexible specialization’ and demands a workforce that is both able to think (cognitive) and to be creative (cultural). Ever since the 1980s, labor markets are disciplined due to forces of neoliberal politics. Labor unions are eroding, which led to more flexible employers-employees relations. The white collar- blue collar labor market of the industrial and Fordist waves of capitalism have made place for another type of dualism. In the cognitive-cultural economy there is a hightier of cognitive-cultural workers or symbolic analysts which are creating surpluses; characterized by intellectual, immaterial, communicative labor-power. Accompanied by a low tier, the service underclass. These workers have low wages and minimal qualifications. Their role within the urban system is to maintain and support the urban economy. The service underclass jobs also increasingly ask for cognitive and creative skills. For example, because they are associated with the delivering of services, the workers need to have a sufficient amount of personal skills.

Generalized abstraction cities:  Particular kind of economic

base and employment system  Specific forms of human and

social capital

 Complex local labor market  Generalized pattern of

residential activity reflecting socio-economic relations Elements waves capitalism:

 Leading collection of sectors  Central technological

dynamic

 Set of labor regulations and market outcomes

 Given state of market competition

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10 The previous described flexible markets are a product of an increasing form of market competition due to forces of globalization. Both companies and workers are faced with competitors all over the world. At the one hand this forces firms to work with a flexible labor force in order to anticipate to rapid changing markets. But it also gives them a better bargaining position towards employees, because supply in labor increased, since it has turned global. Furthermore, the quest for cognitive-cultural workers can be explained by the current form of market competition: Chamberlinian competition. In this type of competition firms offer the same product, but are distinctive in the way they offer it. This gives them some sort of monopoly. The form of Chamberlinian monopolistic competition in the cognitive-cultural economy, builds on distinctive attributes to individual producers and to individual places of production. Competition thus is increasingly organized around semiotic and aesthetic attributes (Kloosterman, 2004). This asks for high skilled, cognitive-cultural human capital in order to produce certain attributes.

2.3 A shift from classic to modern location factors

Drivers of change, like changing technologies, deregulation and privatization, the intensification of linkages across the globe and a rising individualism (Kloosterman, 2010), have resulted in a shifting global economic system to the cognitive-cultural economy. Although the previous waves of capitalism are also associated with agglomeration and urbanization, companies in the old industrial and Fordist capitalistic system were more focused on classic location factors like the availability of airports, highways and telecom connections, land prices, available skills and materials (Musterd, 2009). These are still necessary conditions, but Musterd argues that they are not sufficient anymore, nor as prominent as they were. The previous described change in technology, the leading collection of sectors, set of labor regulations and market outcomes and the given state of market competition, make firms more than ever value modern location factors associated with localized economies of scale that occur in large agglomerations or urban areas. Instead of a suggested decline of the importance of location by for example Freeman (2005), location has become of increased importance. Somehow, despite companies are footloose and can locate wherever they want, they decide to locate together in big agglomerations (Florida, 2005). Because interconnections have improved substantially, local, place-specific characteristics have gained importance instead of losing it (Musterd, 2009). This results in the world in emergence as described by Scott (2012), as a mosaic of great city-regions that have made their appearance in countries at many different levels of average income. In the cognitive-cultural economy the shift to modern locations factors is favoring great city regions.

In the next part these modern location factors will be described as local, place specific characteristics which are made up out of a combination of the particular economic base and employments system, the specific forms of human capital (figure 2). Furthermore, the image related to cities will be discussed, which provides added value in the form of product differentiation, something valuable within the current Chamberlinian competition.

2.3.1 Modern location factors: local, place-specific characteristics

Relations with other firms

Cities and agglomerations are characterized by a particular economic system based on localized economies of scale. Scott (2012) describes this as a shared infrastructure, pooling of market information and the joint attractive power of multiple sellers. In fact, he describes a dense network of relations between companies that are co-present at the same place. There is a wide range of literature that assigns several benefits to this being co-present, for example Porter(2000), Bathelt et al. (2004), Wolfe et al. (2004). The main arguments made in this literature is that the right proximity in agglomeration economies of interrelated firms, facilitates information sharing and the innovative performance of firms. Cities and agglomerations can be seen as islands of common pool resources in a sea of deepening competition (Scott, 2013).

As stated before, innovation has become of increased importance because the current state of capitalism is increasingly competitive. Visser and Atzema (2008) state, that learning and innovation are

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11 interactive processes. Clusters and agglomerations facilitate innovation by providing these interactions. To explain this processes of interaction in this theoretical framework the focus will be on the presence of related firms and institutions and the information sharing between these actors in terms of local self-augmenting processes (LSAP), local buzz and global pipelines. To start with the presence of other firms.

An important author in describing the importance of the presence of related firms and institutions is Porter (2000). He describes clusters as “geographic concentrations of interconnected companies, specialized suppliers, service providers, firms in related industries, and associated institutions – in a particular field that compete but also cooperate” (p. 16) and states that these clusters facilitate the innovative performance of firms within the cluster. The advantages Porter relates to clusters are spillovers across firms, industries and institution in various sorts. These spillovers are made clear by his diamond model in Figure 3. Furthermore, it is important to realize that competition goes hand in hand with cooperation: “Competition and cooperation can coexist because they are on different dimensions or because cooperation at some levels is part of winning the competition at other levels” (p.25).

Figure 3: Competitive diamond (Porter, 2000)

These subtle relations between cooperation and competition are further specified by Bathelt et al. (2004) as either horizontal or vertical relations. They zoom in on processes of innovation, knowledge creation, and how this is spatially organized. The relations of competing firms producing similar products are described as horizontal relations. In a context of close geographical proximity this results in a process of continuous monitoring and comparing, which creates rivalry and serves as an incentive to innovate. On the other hand, vertical relations are the ones between firms that are complementary. The presence of a cluster creates an incentive for specialized suppliers to be near these firms. They form important markets. This results in economies of scale, because the suppliers are close to the market which cuts their distribution costs. Related firms being present in close proximity, also called communities of practice, lead to the generation of distinct routines, conventions, and other institutional arrangements.

Furthermore, Bathelt et al. (2004) state that the organization of knowledge creation can be both internal, within the cluster (local buzz) and external through outside relation (global pipelines). Before

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12 discussing these processes related to knowledge innovation and knowledge creation, local self-augmenting processes are important to mention. Brenner (2004) states that these processes are of major importance in defining clusters. With the presence of LSAP a cluster distinguishes itself from just an agglomeration. These processes develop over time and are hard to replicate. For example in a cluster with LSAP there is easier access to venture capital, which generates relocation and start-up activity with a higher incumbent growth. According to Brenner in Visser & Atzema (2008), there are four conditions that obtain LSAP: positive feedback between actors within or across populations of firms and/or with local conditions; this positive feedback should increase more than linearly with the size of factors; the time frame of a factor and changes in the population of firms should be the same and the process should be local.

Moreover, local buzz is an important term to define processes that can take place in clusters of related activity. Bethalt et al. (2004, pp. 38-39) contribute in understanding this term. They define local buzz as “the information and communication ecology created by face-to-face contacts, co-presence and co-location of people and ﬁrms within the same industry and place or region”. Firms within a place with buzz can profit from this information sharing by traded as well as untraded relations. Traded relations for example by hiring local firms for advice. In general participation in the buzz does not cost investment and gives inspiration and information to the local actors. Spillovers and joint problem solving are examples of untraded relations in an environment of local buzz. According to Bathelt et al. (2004) in an environment of strong buzz it is almost impossible to not receive the rumors and information about other firms.

Besides knowledge creation within clusters, there is knowledge creation across clusters. Knowledge creation might be best viewed as a result of a combination of close and distant relations. These distant relations are described as global pipelines. Through these pipelines local knowledge is shared across different clusters. This results in new combinations of knowledge. “The advantages of global pipelines are instead associated with the integration of multiple selection environments that open different potentialities and feed local interpretation and usage of knowledge hitherto residing elsewhere “(p. 42) To conclude, the main argument of Bathelt et al. (2004) is that a combination of ‘local buzz’ and ‘global pipelines’ may provide firms in an outward looking cluster with a string of particular advantages not available to firms outside the cluster.

Human capital and image

Besides the presence of related firms and the associated interactions between them, the presence of human capital and the image of cities, could be important factors in favor of a city’s location for firms in the cognitive-cultural economy. In terms of human capital, Scott (2012) states that both a high-tier and a low-tier type of workers are important for the cognitive-cultural economy to function. This new dualism and the new type of human capital has been discussed in paragraph 2.2. In this part there will be zoomed in on the conditions for a city needed to be attractive for these type of workers. A point that is closely interlinked with the image of the city.

For example this linkage is observable in the work of Florida (2005), which states that a location in certain cities has effect on attracting the high-skilled workers needed. The argument is that knowledge workers, entitled as the ‘creative class’, do not follow jobs, it is the ‘creative city’ characterized by attributes like diversity, openness and tolerance that attract these kind of workers. Furthermore, this group associate cities and their related wide range of amenities, with a better quality of life. Arguably, a business location in an attractive place for educated workers, is going to be of increased importance, since shortages in high-skilled workers are expected in the upcoming two decennia (Charlof & Lamaitre, 2009).

Moreover, a city’s image can provide distinctive attributes to firms, which is of increasing importance in the cognitive-cultural economy. Also cities seem to be caught up in the previous described Chamberlinian competition nowadays. This makes the city a source for distinction itself. The image related to a certain city can be of major importance for companies that want to locate in the city, since this image can be part of product diversification and branding products as well (Scott, 2012).

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13 Furthermore, Vanolo (2015) states that the representation of cities influences the actions and choices of human agents, so, cities need to represent itself in a way that makes them attractive to visit, locate or move to. By selective storytelling, cities try to present itself as technological advanced, and increasingly, as creative and cultural vibrant places. They are successful when both internal and external people start to think in these terms about the place and when this goal is achieved, due to feedback mechanisms a cumulative effect can occur.

2.3.2 Entrepreneurs and agglomeration economies

Delgado et al. (2010) show that there is significant evidence of the positive impact of clusters on entrepreneurship. In line with suggesting a positive influence of clusters on innovation, they argue that since entrepreneurs are essential agents of innovation, a strong cluster should foster entrepreneurial activity. According to Delgado et al., a focus on entrepreneurs makes sense because they may be more likely to identify opportunities. In clusters, opportunities for new business are created due to the presence of related economic activities. This creates externalities that enhance incentives and reduce barriers for new business creation. Industries located in regions with strong clusters experience higher growth in new business formation and start-up employment. Furthermore, it can be argued that strong clusters are also related with the establishment of existing firms.

2.3.3 The local context stays important

Scott and Storper (2015) state that that cities today provide the essential basis for most economic systems to function, but do not automatically fulfil this function in an optimal way (p.9). In understanding cities it is important to realize that cities are embedded in wider systems of social and political relationships at different scales. In this sense, five relevant variables are described: the overall levels of economic development; the rules that govern resource allocation; prevailing structures of social stratification; cultural norms and traditions and overarching conditions of political authority and power (p. 10-11).

Kloosterman (2010) also emphasizes the importance of embedding theory on the cognitive-cultural economy within the local context. As stated previously in the introduction, the points of departure of the cognitive-cultural economy are ubiquitous, but they play out in different national contexts. According to Kloosterman this context depends on the form of capitalism at play and on concrete historical and geographical circumstances that are present in any given instance. An important argument is that not everything has become global. The institutional contexts tend to stay the same. Furthermore, how the cognitive-cultural economy evolves in a certain location is dependent on a city’s position and role in the global urban system, the morphology and the national institutional framework.

2.4 How do we recognise a cluster when we see one?

Wolfe & Gertler (2004) brought up the question: how do we recognize a cluster when we see it? They described two approaches for cluster analysis, a statistical and on qualitative one. A common method in statistical cluster analysis is the use of location quotients. These quotients are ratios of the regional employment in a particular industry related to the national amount of employment in that industry. A quotient higher than one indicates a that some regions might have the components of local clusters. A more sophisticated quantitative method of cluster analysis is the growth-share matrix where also growth of a particular sector is taken into account. Wofle & Gertler argue, that despite the level of sophistication of these methods, they are not without critique. For example, these methods tend to overlook the development trajectories clusters have gone through. Another limitation is that from a statistical point of view, clusters in two places can look quite similar, while the on the ground processes can be totally different. The statistical methods fail to identify the more soft factors of clustering, such as trust and social capital, as well as the organizational dynamics of clusters. To overcome this problems, case studies offer an outcome. Some growth and innovation dynamics of clusters can only be captured by using qualitative research methods like in-depth interviews with the cluster’s leading members (p. 1081). However, the limitation of case studies is the difficulty to compare findings of different places, when they are not gathered by the use of a common framework.

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14 Indicating the presence of spatial clusters is also possible using GIS (Pfeffer et al., 2012; Bersimis et al., 2014). In GIS-terms, spatial concentration can be described in two ways; either as peaks, indicating higher relative values at a few locations (for example compared to the city’s average) or as the clustering of similar geographical units that are close to each other (Pfeffer et al., 2012). The latter definition can be used in a spatial analysis by, for example, using a hotspot approach combined with buffers. In this approach buffers are created around particular entities. When the buffers overlap, there is a cluster of a particular activity at that place.

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3. Amsterdam and the Canal District: A historical area in a historic rich

city

3.1 A brief historical background

Amsterdam, capital of the Netherlands and former hegemonic city, is a historical rich place. Especially when talking about business and economics, the story of Amsterdam is an interesting one, since Amsterdam has had a prominent position in the world ever since the Dutch Golden Age in the seventeenth century. Nijman (2016) entitles the city is the first ‘bourgeois city’ and states, that Amsterdam can be seen as the first place were financial capital was leading in decision-making, the city was organized around trade and making money. The power was in hands of businessmen and policy was aimed to enforce trade. For its time this was innovative, because most cities were still organized around power and politics in hands of a select group of royals, nobles and the church. This novel way of governing a city, resulted in the establishment of the first world’s stock market and the existence of companies as legal entities.

According to IJselstijn (2011), the story of Amsterdam started due to human interventions. In the Amstel River, a ‘dam’ was build, which resulted in dry land and the possibility for a city to establish. Around this medieval core (left map Figure 4), throughout the years the Canal District was arising. Especially, the previously mentioned ‘Golden Age’, made the city of world importance. This resulted in major extensions planned in two phases; the right map in Figure 4 shows the Canal District as we know it nowadays, after the fourth extension. The outer boundary is the ‘Singelgracht’. These four extensions and a planned city on such a big scale, was a unique phenomenon in Europe. Maybe it was too big for the time, because parts of land created in the fourth growth phase were not fully developed till the nineteenth century. Moreover, until this time the boundaries of Amsterdam maintained the same. In general there was not much urban growth in the Netherlands until approximately 1850. After this time major developments started to kick in, which resulted in infrastructural developments, a denser building pattern, building the central train station, and after WOII, modernism and place for cars. From 1970’s on, the old cityscapes are protected, which brought a hold to increasing numbers of modern buildings in the Canal District and making the city car friendly.

Another important development, which started in the beginning of twentieth century, was the start of city making in Amsterdam (IJselstijn, 2011). This resulted in a thirty percent decline in residential buildings. In this period, the city center started to become a service area, accompanied with the establishment of shops, places for leisure and offices.

Figure 4: On the left, Amsterdam till late 15th century. On the right, Amsterdam 1725 with fourth extension of the city; nowadays the Canal District (IJstelstijn, 2011)

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The 21

st

_{century: Amsterdam and the new economy}

According to Musterd (2009), Amsterdam has the profile to fit the needs of the new economic sectors; the city comes close to meet required conditions to fully enter the ‘creative, cultural knowledge’ era. The city provides the right economic profile and professional structure, a rich urban history accompanied by an aesthetic physical layout, a good infrastructure of public and private transport connection, sufficient consumer and producer services and the city is well connected to the rest of the world (p.225). However, a foreseen problem in the city is its current housing stock, which seems to mismatch supply and demand. Moreover, there are too many houses reserved for social housing, while facilitating the new economy asks for a broader high-end housing stock, preferably in the city center. When it comes to creative industries, also Kloosterman (2004) is positive about Amsterdam. Cultural Industries in the Netherlands seem to cluster in the big cities, but Amsterdam is significantly the capital. In this article, eight different cultural sectors have been defined; publishers, architectural services, advertising, movie and video production, radio/ TV programme production, performing arts, news agencies and journalists and libraries and museums. With a share of 12.7 percent of the total employment in 2001, almost all of these sectors are well presented in Amsterdam. Especially movie and video production, publishers, advertising and news agencies and journalists are over-represented in Amsterdam. Architectural services are an exception. This sector tends to locate in Rotterdam and The Hague.

Moreover, Amsterdam is not solely a good place for the creative and cultural industries. The economic base is much broader, as demonstrated by a higher economic growth rate than the Netherlands, generated by Amsterdam over the last fifteen years. The Amsterdam economy is determined by financial, creative and knowledge intensive sectors and economic policies in the city are oriented towards small and piecemeal interventions to stimulate entrepreneurship, creative economies and sustainable development. Also, Trip et al. (2016) spotted the recent power of the Amsterdam economy. Amsterdam showed to be more resilient than the Netherlands as a whole. To conclude this part, there will be zoomed in to the economic explorations of the Amsterdam Metropole Region, conducted by the ‘stuurgroep Economische Verkenningen’ (2015). Although this report is about the total metropole, the Amsterdam developments are reflecting the general development in the region. About these development can be stated that, the economic growth of the last year is a result of a more diverse group of sectors. In the past, there were a few big sectors in the Amsterdam Metropole, which carried the biggest part of the economic developments. Nowadays, the growth of individual sectors is less outstanding, but the economy is rooted in more branches, who all take a share in the economic development. Mainly, this growth is carried by eight sectoral clusters, the economic board of the Amsterdam metropole defines as follows; financial and business services, manufacturing, ICT and eScience, creative industries, horticulture and Agrifood, logistics and retail, tourism and congresses and life sciences and health. The financial and business services are the biggest one and take a major share in the economic growth in the Amsterdam metropole. Followed by logistics and ICT and eScience. These three clusters, along with tourism and the creative industries, are the five clusters that show a higher specialization in the Amsterdam metropole region than in the rest of the Netherlands. The latter one has the highest specialization compared to the Netherlands. The region seems to be an anchor place for creative firms, especially in media and entertainment and the creative business services, like architects and marketing companies.

Furthermore, it can be noted that on an international scale the rents of business locations, both in the city as in the CBD’s, are relatively low. Which contributes to the international attractiveness of the region. A big share of foreign investment is going to the marketing and sales sector. Another interesting point is that, the bars and hospitality industry in the metropole region showed to be less vulnerable than the rest of the Netherlands in times of crises. This sector was still doing quite well during this period (Stuurgroep Economische Verkenningen, 2015).

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4. Research questions

After previous chapters, it is possible to provide an answer on the question ‘why do firms want to locate in cities?’ In summary, reasoning from a cognitive-cultural economy perspective (Scott, 2012), the current regime of capitalistic accumulation has led to increasing importance of modern location factors. This shift is favoring great city regions, since these are places associated with certain characteristics. To sum up: first, due to increasing competition firms are continuously pressured to innovate. Agglomeration or urban economies as a dense network of relations between firms, are expected to foster this need. Second, since production is increasingly relied on talented and qualified employees, cities are attractive, because these are the places were qualified employees are living or are willing to live. And third, related to the Chamberlinian mode of competition the image of cities can be important to firms. In the cognitive-cultural economy, distinction and diversification became of increased importance and cities are the places that can provide aesthetic and semiotic attributes to do so.

As the title of this research suggest, ‘The new economy embedded in an old city’; the aim of this research is to embed theory on the cognitive-cultural economy within the context of an old city. As argued in the introduction, the Amsterdam Canal District offers in interesting case to do so. To embed this theory, first it needs to be determined to what extent the cognitive-cultural economy has found its way to this district. Furthermore, it is interesting to examine how a possible cluster influences the attractiveness of the Canal District. Cognitive-cultural firms are expected to be attracted by agglomeration economies; a dense concentration of firms and its associated modern location factors. This has led to the following research question:

To what extent do cognitive-cultural economic activities spatially cluster in the Amsterdam Canal District and how does this affect the attractiveness of the Canal District for cognitive-cultural firms in terms of modern location factors?

This research question is two folded, the first part asks for a quantitative more descriptive research and the second part, strives towards an explanation for this description. In fact this study is about ‘where’ and ‘why there’, two question that according to (de Bruine et al., 1971) are the essence of geography. Forty-five years later, these questions still seem to matter and correspond to a limitation related to cluster analysis (Wolfe & Gertler, 2004), discussed in chapter two. Namely, by only quantitatively describing a cluster, clusters in two places can look quite similar, while the on the ground processes can be totally different. So, just describing the ‘what’ or ‘where’ is not sufficient. That is why in this study, an explanation part is added to also zoom in to the on the ground patterns.

Correspondingly, to answer the central question a mixed method approach will be used. This method is designed on a sequential basis (Creswell & Park, 2011), which means that there are predefined phases in the research that will be conducted after each other.

In this research, the first stage is a quantitative one, the ‘where’ part of the research. A GIS spatial analysis will be conducted to identify cognitive-cultural cluster patterns in Amsterdam and the Canal District. In this part an abstract view will be the perspective; namely by using a raster layer, the city will be transformed into a collection of squares with firms. The questions related to this part are as follows:

1. Which cognitive-cultural economic activities take place in the Amsterdam Canal District and where do they spatially cluster?

2. Where do cognitive-cultural start-ups locate in the Canal District and does this pattern show overlap with locations of cognitive-cultural clusters?

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18 After that, the qualitative phase is focused on the ‘why there’ question. In this stage of the research interviews will be held in the area of interest determined in the first stage, in order to explain why cognitive-cultural firms cluster at that place. The interviews will provide the selected cells from the area of interest with a story. It gives words and meaning to the area in order to explain the cluster patterns found. The following questions will be addressed:

4. Why are cognitive-cultural firms locating in the Canal District and what kind of benefits do they expect of being located in the Canal District?

5. What role do modern location factors play in the perceived attractiveness of the Canal District for cognitive-cultural firms?

To define how this research was conducted, in the next chapter will be widely elaborated on the methodology used in this research.

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5. Methodology

In this methodological section, first core concepts within the research will be explained, operationalized and put in to a conceptual framework. After that, there will be elaborated on the process of data collection, a mixed method approach designed on a sequential basis. Subsequently, the two sequences will be explained in depth; a quantitative part, followed by a qualitative part.

5.1 Operationalization: From theoretical to operational concepts

Cognitive-cultural economic activities

Theoretical definition: Activities within the fields of technology intensive industries, business and

financial services and the creative and cultural economy. Scott (2012, pp. 98-100) provides a list with associated symbolic analysts occupations.

Operational definition: The different leading sectors described by Scott (2012) will be linked to Dutch

SBI codes. This is a code every company who is registered at the Dutch chamber of commerce receives and shows in which sector a business is active (KvK, 2016). The three main sectors: technology intensive industries, business and financial services and creative and cultural industries will serve as an anchor to divide these codes. These categories are again subdivided in different subsectors, which Table 1 illustrates (See appendix 1 for the full selection and subsequent SBI codes).

Table 1: Cognitive-cultural subsectors and related activities Technology intensive

industry Financial and business services Creative + cultural economy

R&D Finance Arts and cultural heritage

Tech. Consultancy Real estate Media and entertainment

Consulting Creative business services

Spatial clustering

Since this research is conducted by a mixed-method approach, spatial clustering has to be defined in twofold; both, spatial for the GIS-part of the research and qualitative, for the interview part.

Theoretical spatial definition: Either as peaks, meaning higher relative values at a few locations (for

example compared to city average) or as the clustering of similar geographical units that are close to each other (Pfeffer et al., 2012).

Qualitative definition: “geographic concentrations of interconnected companies, specialized

suppliers, service providers, firms in related industries, and associated institutions – in a particular field that compete but also cooperate (Porter, 2000, p. 16)”.

Operational spatial ‘GIS’ definition: For the identification of spatial clustering within this research a GIS

spatial analysis approach will be used. In this research, clusters are measured as hotspots in the data, using a fishnet approach combined with the cluster and spatial outlier tool in GIS. The firms of the selected sectors will be assigned to grids in a fishnet. A count field will be created that indicates how much firms in a certain sector are represented in that cell. Concluding, in this research as quantitative definition of clustering, the cluster analysis tool way of defining cluster will be used, which defines clusters as cells with high values, surrounded by other cells with high values.

Operational qualitative definition: Since the aim of this research is not only visualize clusters in the

Amsterdam Canal District, but also determine the effect of clustering on the attractiveness of this district for cognitive-cultural firms, also a qualitative definition of clustering is needed. This definition needs to describe what possibly can be the effect of a cluster on the attractiveness of a place for firms in related sectors. In this research modern location factors, related to clustering and agglomerations,

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20 describe this influence. So, the qualitative definition in this research of spatial clustering is, a geographic concentration of firms in related industries, subsequent linkages and institutions to support this firms in their activities. This concentration is surrounded by the human capital needed to deliver qualitative products and by being co-present in the same location an image is created which helps to distinct the firms in the cluster from outside companies by enhancing the semiotic and aesthetic attributes of the firms. In addition, this image is self-augmenting, because employees prefer to work in the area and other firms and start-ups are also attracted to the cluster to start doing business. Attractiveness due to modern location factors

Theoretical definition: This attractiveness is based on local space-specific characteristics (Musterd,

2009). In the theoretical framework, based on (Porter, 2000; Bathelt et al., 2004; Wolfe et al., 2004 and Scott, 2012, 2013), these characteristics are further specified as the type of related firms and institutions, the presence of cognitive-cultural human capital and the particular image of a specific city.

Operational definition: Modern location factors will be defined as the local space specific

characteristics that make Amsterdam attractive for cognitive-cultural firms. These characteristics are divided over three components; relations with other firms, the presence of human capital and image. As broadly elaborated upon in first four chapters, these factors are associated with firms in the current regime of capital accumulation and, likewise, they contribute to embedding the cognitive-cultural economy in the Amsterdam Canal District.

First, by looking at interaction with other firms, will be examined whether there is possibility for cooperation, knowledge sharing, use other firms supporting knowledge that is not in house and whether this influences their innovative performance. Furthermore, being in a cluster with related firms can stimulate untraded relations or informal contacts. Also, the presence of supporting institutions can be important in the attractiveness of places in terms of location factors.

Second, human capital is defined as the presence of sufficient qualified employees for cognitive-cultural activities. In this case workers that can both think and be creative.

Image is defined as whether a place is able to deliver distinctive attributes to the firms inside the area. As stated in chapter two, competition is organized around semiotic and aesthetic attributes. The location of a company, can contribute to these characteristics needed in distinction from other firms. The city can serve as a source for distinction in itself.

Canal District

Urban core of Amsterdam surrounded by the ‘Singelgracht’ as external boundary, the historical outer limit of Amsterdam set in after the fourth extension in 1725. In GIS, this area matches the area ‘centrum’ in the Amsterdam District’s layer (Amsterdam Open Data, 2010), which is corresponding the administrative area ‘Stadsdeel Centrum’. In map 1 on the next page, this area is visible. Furthermore, the map shows how Amsterdam is situated in the Netherlands and how the Canal District is situated in Amsterdam.

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21 Map 1: Amsterdam and the Canal District

5. 2 Conceptual model

The conceptual model (Figure 6) shows the relationship that is at the heart of this research and in this way corresponds to the central research question: To what extent do cognitive-cultural economic

activities spatially cluster in the Amsterdam Canal District and how does this affect the attractiveness of the Canal District for cognitive-cultural firms in terms of modern location factors? The model depicts

the possible influence of spatial clustering of cognitive-cultural economic activities and its associated modern location factors as a result of this clustering, on the locational decisions of cognitive-cultural firms. The relationship suggests interplay between the two components.

On the one hand, a positive relationship between spatial clustering of cognitive-cultural activities and the locational decisions of cognitive-cultural firms. As described in the previous chapters, these firms are expected to value characteristics related to agglomeration economies or clusters; like interaction with other firms, the presence of human capital and image. So, the presence of a cluster associated with these characteristics, is expected to enhance the attractiveness of subsequent business locations and in this way influence to locational decisions.

On the other hand, as a consequence of this attractiveness, locational decisions of these firms could be in favor of certain business locations, which make the cluster grow. Possibilities for interaction could be extended, as well as the presence of human capital and its image; a ‘local self-augmenting process’ (Brenner, 2004), reinforcing the cluster and its related characteristics.

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22 Figure 5: Conceptual model

5.3 Data collection

To conduct the research, a mixed-method approach was used. Creswell and park (2011) describe that a mixed-method design can be either fixed (well planned) or emergent (use second method arises during research). However most studies fall somewhere in the middle. This was also the case in this research. From the beginning, the sequences and phases were clear, but during the first quantitative phase, based on GIS, further scope was given to the research. So, there was some openness in the qualitative, second phase. This allowed for the explicit use of insights gained in the first phase to define the final scope in this research. According to the Creswell and Park (2011) framework, the design of this research fits best into the ‘explanatory sequential design’ (see Figure 6).

Figure 6: the explanatory sequential design (Creswell & Park, 2011) 5.3.1 Quantitative phase: Spatial analysis

In general, the explanatory sequential design starts with a phase of quantitative data collection and analysis. For this research the quantitative data was already available. The statistical office of Amsterdam (2012) provides a dataset which involves all the firms of Amsterdam, the type of industry according to SBI, the year of establishment and the amount of employees working in the companies for example. Before the spatial analysis, firms in cognitive-cultural economy activities will be selected. To sum up, in this spatial analysis the following sub- questions will be addressed: Which

cognitive-cultural economic activities take place in the Amsterdam Canal District and where do they spatially cluster?; Where do cognitive-cultural start-ups locate in the Canal District and does this pattern show overlap with locations of cognitive-cultural clusters? And Do locational decisions of cognitive-cultural start-ups show a pattern of spatial clustering?

To answer these questions GIS will be used. Based on Chainey et al. (2008), Pfeffer et al. (2012) and Bersimis et al. (2014), to indicate the spatial patterns of the cognitive cultural economy in the Amsterdam Canal District the following steps will be taken:

Associated modern location factors: ‘local space specific characteristics’

- Relations with other firms - Human capital - Image Locational decision cognitive-cultural firms

Spatial cluster

cognitive- cultural

economic activities

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23  Select SBI’s related to cognitive cultural activities

 Create a fishnet layer of Amsterdam and Canal-District  Aggregating points of different categories to the fishnet  Testing spatial randomness (Global Moran’s I)

 Visualize the locations of possible spatial clustering (Local Moran’s I)

 Produce maps consisting hotspots and clusters of cognitive-cultural activities and start-ups in the Canal-District

Select SBI’s related to cognitive cultural activities

Before the GIS analysis could be conducted, the three leading sectors in the cognitive-cultural economy had to be defined and related to Dutch SBI codes.

In the Netherlands, the creative industries have been a topic of interest for quite a long time, so to define this category there could be relied upon already existing definitions. In this research the TNO definition will be used (Rutten et al., 2010): “It is about a sector that inhabits creativity in its name and

relies on the creative and formative skills of individuals, groups, firms and organizations. The creation, production and exploitation of symbolic materials is at heart of this sector” (p. 2). The creative

industries are separated in three parts; arts and cultural heritage, media and entertainment and creative business services.

Furthermore, the selection of the SBI’s of finance and business services was fairly easy, since this sector is predefined as such in the list of SBI codes. Also, in this category three subsectors can be defined; finance, real estate and consultancy.

Finally, the selection of technology intensive firms was more difficult. In the list of SBI codes there is a big part consisting manufacturing firms and selecting the technology intensive ones out of the list was not easy. To come up with a meaningful selection, the monitor topsectoren (2014) was helpful. High-tech is one of the ‘topsectors’ in the Netherlands and in this publication this sector is related to SBI-codes. To complete this definition, R&D activities have been added. However, while conducting the analysis it turned out that high-tech production and repair and support firms, only have about 150 locations in Amsterdam, so these two categories were left out. This resulted in two technology sub-categories in this research: R&D and technology intensive consultancy. For the complete selection and the related SBI’s, see the appendix 1.

Creating fishnet layer of Amsterdam and Canal-District

Before creating the design, various methods to visualize spatial clustering have been experimented with; buffering points, thematic mapping of output areas and grid thematic mapping for example (Chainey et al., 2008; Pfeffer et al., 2012). The goal of mapping in this research is to indicate where certain type of economic activities cluster, in order to further specify the research area for the qualitative part. For this purpose, grid thematic mapping was found to be the most suitable, since it offers a clear and precise visualization. Furthermore, it allows for comparison between the numbers

Spatial join: points to grid Rejecting spatial randomness (Global Morans’s I) Determine clusters of high values (Local

Morans’s I)

Combining and co valitdating results

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24 of firms in various places, because points are assigned to equal size standardized units. Moreover, the individual points lack a continuous variable. By assigning them to a grid, a count field representing the amount of points per square is created. This process also deals with the anonymity of individual firms. By assigning them the bigger units, they cannot be recognized individually in the maps.

Furthermore, the size of the cells has to be defined. According to Chainey et al. (2008) there is no general rule to determine the size of the grids, this decision is based upon experimenting with possible solutions. To guide this experiment, Ratcliffe (in Chainey et al., 2005) suggests to divide the longest extent in the study area by 50. In the case of Amsterdam this would mean a cell size of 500 meters for the total of Amsterdam and approximately grids of 100 meters for the Canal District. The aim in mapping Amsterdam is to visualize gross patterns, the 500 meter grid happened to work out well for this purpose. The 100 meter grid chosen for the Canal District, provided a more precise visualization and still all grids were filled in with sufficient amount of points, so also this measure was desirable and in line with the research questions.

Assigning points in different categories to fishnet

After the grids had been created, the points representing different type of firms in cognitive-cultural activities, could be aggregated to the grids. By using a spatial join, a field that counts all the firms in the individual cells of the grid was constructed. In order to show which economic activities take place in the Canal District, it is important to map on different scales. Therefore, first maps of the total of Amsterdam were created. These maps show where the spatial concentration of a certain type of economic activity is in Amsterdam. To visualize the spatial pattern of that type of activity; maps which show solely the Canal District were produced afterwards. These maps zoom in on the Canal District and provide a more accurate view.

Testing spatial randomness

According to Bersimis et al. (2014) it is important to check for spatial randomness when researching spatial clustering. In the ‘geo-spatial analysis’ is checked for whether the deviation of firms in Amsterdam varies significantly from a random distribution (Smith, 2016), which would mean that the firms are equally divided over Amsterdam. To check for randomness in this research the spatial autocorrelation tool in GIS was used, the global Moran’s I test. In this test, the Ho is that the spatial distribution is random. The tests provide Z-scores and P-values. When the Z-scores are underneath or above the critical Z-score, is indicated that the spatial distribution of the entity is significantly dispersed or clustered, depending on the chosen significance level.

Since the global Moran’s I test only indicates whether there is significant clustering or not, a second test will be conducted. In GIS this test is called the cluster and spatial outlier tool and calculates the local Moran’s I. This tool indicates hotspots described as clusters of high values surrounded by other high values or low values surrounded by other low values. It also indicates possible spatial outliers. These are areas with for example high values, surrounded by areas with low values; or the other way around. The local Moran’s I test have been chosen because it labels areas as either high-high or high low. According to Bersimis et al. (2014) this gives an precise view on processes of spatial clustering and both categories are interesting to explore, since high-high areas indicate areas with a major level of economic development. Hence, define hot-low areas also provides useful information, because they can be characterized as developing areas and these places can be used as seeds of development (p.584).

Furthermore, the local Moran’s I test can also provide insight in areas with significant areas of low economic activity. However this can be interesting, in this research the focus is on areas with high economic activity, so there have been chosen to not map this kind of classification, because it would make the maps messy and unclear. Apart from that, the test did not indicate so many areas with low economic activity in Amsterdam, so not much information is missing.