The Economic Geography of Money and Finance

Money and finance are basic to the form and operation of the economic landscape, yet
traditionally geographers have accorded relatively little attention to the spatialities of financial
systems. One of Ron Martin’s research programmes over the past decade or so has been concerned with
exploring this underdeveloped area, with constructing a new economic geography of money.
This has a key underlying aim: to demonstrate that the spatial structure of the financial system
is far from neutral in its effects, but rather influences the allocation or funds, capital and credit
across regions and localities. In recent years, financial systems in many advanced countries
have been undergoing rapid and transformative change, as globalisation, new technologies and
deregulation have combined to stimulate organisational change within and amongst financial
institutions (concentration, centralisation, rationalisation, outsourcing), the emergence of new
circuits of finance (such as venture capital) and increasing volatility and uncertainty in financial
markets. Some have argued that globalisation and new information and communications
technologies are increasingly rendering geography and location irrelevant in financial affairs.
Much of Professor Martin’s research in this field has been concerned to contest such assertions. and to argue –
theoretically and empirically – that space and place still matter, possibly increasingly matter, for
financial transactions and allocations.

Professor Martin’s early work under this task explored the implications of globalisation for the role of geography
in finance, and argued strongly against the ‘end of geography’ thesis. To the contrary, it showed
how location remains key to the conduct of financial transactions and markets, and how
financial decision-making and the allocation of finance remain concentrated in the major money
centres, with the implication that regions and location lacking such centres and remote from
them could well be at a disadvantage in accessing finance (at least on the same terms and
conditions as regions and location containing financial centres). Associated work showed how
major changes in the financial system, such as the privatisation of public utilities and industries,
involving the sale of vast numbers of shares to the public, and the operation of pension funds,
have benefited regions that contain the main financial markets and institutions.

This theme has also been explored in much more depth in work undertaken, some jointly with
colleagues elsewhere, on the private equity (venture capital) market, both in the UK and in
Germany. Because of the ‘relationship’ nature of venture capital, investment, involving close
contact between investor and investee, the need to minimise asymmetric information problems,
and the risky nature of venture capital investment, this circuit of finance is particularly likely to
exhibit ‘spatial proximity’ effects in its location and allocation of funds. Detailed survey-based
research on the venture capital market in the UK and Germany, financed by the Anglo German
Foundation (Grant 1346) tends to confirm this thesis, though because important differences
exist in the geography of the venture capital industry as between the two countries (see map),
the spatial distribution of venture finance in Germany is much less uneven than it is in the UK,
where it tends to accumulate around London and the South East, where the venture capital
industry is also overwhelmingly concentrated. This raises important questions as to whether
regions outside London and the South East are disadvantaged in terms of access to venture
finance, and whether this helps to account for their lower rates of innovative enterprise
development.

More recent research builds upon these findings to explore the possible implications of
decentralised versus centralised financial systems for the allocation of funds across regions,
and whether there is a case for local capital markets (including local stock markets).
Interestingly, whilst in Germany the traditional regional stock markets are struggling to retain a
presence and a role, in the UK there is increasing interest in the ‘resurgence’ of regional stock
markets. Further theoretical and empirical research will focus on this question of the need for
and function of regional financial centres in the contemporary era of financial globalisation.

Spatial Structure of the Venture Capital Market in Germany and the UK.

Publications

Publications arising from this research programme include:

1. The Growth and Geographical Anatomy of Venture Capitalism in the United Kingdom, Regional Studies, 23,
   5, pp. 389-403.
2. Money, Power and Space (with S Corbridge and N Thift), Blackwell (1994)
3. Stateless Monies, Global Financial Integration and National Autonomy: The End of
   Geography?, Chapter 6 in Money, Power and Space, (with S.E. Corbridge and N. J. Thrift),
   Blackwell. pp. 152-176 (1994)
4. Money and the Space Economy, Wiley (1999)
5. The New Economic Geography of Money, Chapter 1 in Martin, R.L. Money and the Space
   Economy, Wiley, pp. 3-28 (1999).
6. Selling Off the State: Privatisation, the Equity Market and the Geographies of Private
   Shareholding, Chapter 13 in Martin, R.L. Money and the Space Economy, Wiley, pp. 260-
   283 (1999).
7. Taking Risks in Regions: The Geographical Anatomy of Europe’s Emerging Venture Capital Market (with P.
   Sunley and D. Turner) Journal of Economic Geography, 2, 2, pp. 1-30 (2002).
8. Spatial Proximity Effects and Regional Equity Gaps in the Venture Capital Market: Evidence from Germany
   and the UK, (With C. Berndt, B. Klagge and P. Sunley) Environment and Planning A, 27 pp. 1207-1231
   (2005)
9. Venture Capital Programmes in the UK and Germany: In What Sense Regional Policies? (With P. Sunley, C.
   Berndt and B. Klagge), Regional Studies, 39, pp. 255-273 (2005).
10. Decentralised versus Centralised Financial Systems; Is There a Case for Local Capital
    Markets? (With B. Klagge), Journal of Economic Geography, 5, pp 387-422 (2005).