9.3 RELATIONS OF ACTIVITIES WITHIN

9.3 RELATIONS OF ACTIVITIES WITHIN A REGION

While the previous section focused on the analysis of trade flows, functional integration really depends on a variety of complex interdependencies. A simple classification of relationships will be helpful here. We shall consider separately (1) vertical relationships, (2) horizontal relationships, and (3) complementary relationships. As has been brought out in previous discussion, the locational relation between two activities can involve either mutual attraction (sometimes called a positive linkage) or mutual repulsion.

9.3.1 Vertical Relationships

When outputs of one activity are inputs to another activity, transfer costs are reduced by proximity of the two activities, and the presence of either of these activities in a region enhances to some degree the region’s attractiveness as a location for the other activity. Thus vertical linkages normally imply mutual attraction.

Rarely, however, is such attraction equal in both directions. We can distinguish between cases in which the linkage is predominantly "backward" and cases in which it is predominantly "forward."

Backward linkage means that the mutual attraction is important mainly to the supplying activity. In other words, a market-oriented activity is attracted by the presence of an activity to which it can sell. This is called backward linkage because it involves transmission of an effect to an activity further back in the sequence of operations that transforms such primary inputs as natural resources and labor into products for final consumption.

An example of backward linkage is the case of a Pittsburgh printing firm specializing in the production of annual reports for large corporations. In 1968 a number of large corporations with national headquarters in Pittsburgh were merged into firms with headquarters in other cities, so that Pittsburgh lost its position as the third-largest center of corporate headquarters activity. As a result, the printing firm is reported to have lost a number of its larger contracts. Corporations prefer to have their annual reports printed locally if possible (in other words, the business of printing annual reports is rather closely oriented to corporate headquarters locations).

Backward linkage is extremely common because so much of the activity in any region is, in fact, producing for and oriented to the regional market. The larger the region (in terms of total area, population.. or employment), the greater the relative importance of the internal market is likely to be. The residentiary activities in a region (including nearly all retail and most wholesale trade, most consumer and business services, local government services, public utilities, construction, and the manufacturing of such perishable or bulky products as ice cream, bread, newspapers, soft drinks, gravel, and cement blocks) are likely to be stimulated by any increase in aggregate regional employment and income, and thus are the recipient of backward linkage effects.

Forward linkage means that an impact of change is transmitted to an activity further along in the sequence of operations. The activity affected by a forward linkage must be locationally sensitive to the price or supply of its inputs (that is, input-oriented). One class of forward linkage involves activities that use by-products of other activities in the same region: for example, glue or fertilizer factories or tanneries in areas where there is a large amount of activity in fish canning, freezing, or meat packing. The supply of by-products from coke ovens is similarly an inducement to establish a considerable range of chemical processes in steel-making centers—sometimes, but not necessarily, by the same firm that operates the coke ovens. The presence of steel rolling and finishing facilities is usually regarded as a significant factor in the choice of location for heavy metal-fabricating industries, since it means cheaper steel and probably quicker service.

In addition, many of the external economies of agglomeration, discussed in Chapter 5, involve the locational advantages of a local supply of some inputs—such as materials, supplies, equipment repair or rental

services, or last but not least, specialized manpower. The importance of a good local supply of business services for regional growth, and particularly for the establishment of new lines of activity in a region, has become increasingly recognized in recent years.8 There has also been marked emphasis on the vital role of infrastructure (the supply of basic public facilities and services) in the development of backward, low-income
regions, both in the United States and overseas. In all these situations, forward linkages are the key factors.