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Environment and Planning A, 1987, volume 19, pages 669-686

The role of business-service offices in the economy of


medium-sized cities

J H J van Dlnteren
Bureau Goudappel Coffeng, PO Box 161, 7400 AD Deventer, The Netherlands
Received 3 July 1986; in revised form 2 October 1986

Abstract. In the Netherlands over the last fifteen years business-service activities have
decentralized towards the intermediate provinces and the regions around the large cities in
the west. A survey, based on postal questionnaires, was conducted to analyze this sector in
thirteen medium-sized cities in the intermediate provinces. Work in this paper centers on the
role of the business-service offices in the urban economy. From Pred's information-circulation
theory it is argued that this role can be demonstrated by the following measures: the amount
of local inputs, the degree of external control, the size of regional exports, and the size of
the business-service sector (both in terms of employment and establishments). It is demonstrated
that business services are not so reliant on a local market and on the manufacturing sector as
has been assumed formerly. However, there are differences between the different types of
offices. In a consideration of the role of business services in the economy of medium-sized
cities it is shown that there are important variations between the cities studied. Initial
advantages, the region in which the city is situated, planning policies, and the nature of the
market are some factors accounting for the variations. Given the strong degree of regional
export orientation, the intermediate function of business services and their recent and possible
future growth, these results suggest that regional and urban policies, which in the Netherlands
concentrate on stimulating indigenous development opportunities in the cities and regions
themselves, need to reexamine the role of business services in the economy.

Introduction
In recent years there has been a significant increase in studies of that part of the
service sector whose output goes mainly to other businesses. These intermediate
(or producer) services, are principally wholesaling, finance, insurance, and business
services. Following the publication of a number of studies of business services in
the 1950s and 1960s (Stigler, 1956; Greenfield, 1966), the volume of articles and
books on this subject increased rapidly after 1978 (for example, Stanback, 1979;
Stanback et al, 1981; Gershuny and Miles, 1982a; 1982b; 1983; Polese, 1982;
Marshall, 1982; 1983; 1985; Marquand, 1983; Daniels, 1983; 1984; 1985;
Bade, 1985; Beyers et al, 1985; 1986; Producer Services Working Party, 1986).
A number of these studies have been examinations of the intermediate services as
a whole, others—British work in particular—have been aimed specifically at
intermediate offices, particularly business services.
Why is there an intensified interest in the intermediate services? Perhaps the
explanation lies with what Stanback (1979) has identified as a failure to distinguish
among major types of services (consumer, intermediate, and public sector) which
has obstructed intelligent discussion of trends in service growth. The growth of the
intermediate service sector—caused by changing modes of production—seems also
to have led to the strengthening of research interest by geographers, economists, and
others. The phenomenon is linked to the combined effects of the expansion of
markets, the growth of firms, the increases in personal and corporate income, product
differentiation, and the changing role of technology. All these effects have led to a
rise in demand for specialists within production businesses, but external sources are
also becoming more prominent because they can utilize economics of scale in the
production of a highly specialized service (Daniels, 1985).
670 J H J van Dinteren

Recently some studies have been undertaken to analyze the importance of


producer services for urban development by exploring the linkages and markets of
business services in a number of conurbation centres and smaller provincial towns
(Marshall, 1983; Daniels, 1983; 1984). Other studies concentrate on regions (for
example, Polese, 1982; Beyers et al, 1985; 1986). In traditional approaches to
urban and regional development nonserving activities have been considered as the
most important because of their regional exports. Services have been thought of as
being locally linked and dependent upon manufacturing industry. However, it has
been demonstrated by Daniels and Marshall that business services are much more
important as export activities than previously documented, but that there are important
spatial and functional variations between cities.
Many business-service firms export their services to other regions. An analysis
of the market areas served by business services suggests a significant regional export,
with 19% of turnover coming from customers located more than 30 km away.
Advertising agents, management consultants, and especially computer services were
more orientated towards national markets (Marshall, 1983). Daniels (1984) showed
that between 10% and 44% of the business services in eight provincial cities cited
regions outside their own economic planning region as the destination for their
external output. In both surveys by Daniels and Marshall it appears that independent
offices are more locally orientated. This raises questions on multiplier leakages by
branch and regional offices. In the study on business services in provincial
conurbations (Marshall, 1983) it is suggested that multisite firms obtained more
business from outside their immediate local area, but, within such firms, branches
had more localized markets. Daniels (1984) comes to a similar conclusion.
Local offices have grown less quickly than other components of the business
services. So, the importance of nonindigenous offices has grown and this may have
some detrimental implications for the urban economy, as these offices may internalize
purchases within their own organization. According to Marshall, this suggests that
external control may contribute to the underrepresentation of service employment
in provincial conurbations (and cities).
Following the surveys by Daniels and Marshall my objective in this paper is to
examine business-service firms in thirteen Dutch medium-sized cities ( 5 0 0 0 0 - 2 0 0 0 0 0
inhabitants). Before outlining the theoretical background and presenting the findings
of this study, it may be helpful if I outline the state of research on intermediate
services in the Netherlands.
Until very recently the service sector has drawn little attention in the Netherlands.
After a request by the government, a committee published the report "Ondernemen
in Diensten" (MEZ, 1983). However, this report hardly refers to geographical
aspects and is confined to employment. This is also the case for research projects
currently being conducted by the Organization for Strategic Employment Research
(The Hague; Gravesteijn and de Wit, 1986) and the Economic Institute for Small
and Medium Sized Enterprises (Zoetermeer; Snel, 1986) and an inventory of the
business-service sector which was recently completed by the Ministry of Economic
Affairs (MEZ, 1984).
Geographic research on intermediate services has been limited to a paper based
on secondary data about business services (Lambooy and Tates, 1983), a conceptual
approach to the subject (Lambooy and Tordoir, 1986), and a number of passages
on the sector in a book by Buursink (1985). These studies document the rapid
development of intermediate services but also draw attention to regional differences.
Employment in intermediate services is concentrated in the large cities in the
western part of the Netherlands. However, recent developments have taken place
elsewhere. This is consistent with my findings (van Dinteren, 1986). In an analysis
The role of business-service offices in the economy of medium-sized cities 671

of employment in that part of intermediate services that can be described as the


commercial office sector (banking, finance, insurance, real estate, business services),
the four large cities ( > 200 000 inhabitants) Amsterdam, The Hague, Utrecht, and
Rotterdam show a striking lag in development (table 1). Nevertheless, these four
cities still have the largest share of commercial office employment. In cities of
5 0 0 0 0 - 1 0 0 0 0 0 inhabitants and in nonurban municipalities there is higher than
average development. In the study to be described in this paper, I will concentrate
on the cities in the intermediate zone. It appears that in those cities growth in the
commercial office sector has equalled the national average.
In the remainder of this paper the theoretical background and the results of the
survey are presented. Pred's concepts on the circulation of information are important
in research on intermediate services. After a short consideration of these ideas, I
will turn to the results of the survey. Some main characteristics of the business
services and their geographical and commercial markets, and their own orientation
towards other servicing firms (inputs) will be described. So far, no attention has
been paid to the business-service sector in individual cities. A comparison of the
distribution of turnover and the structure of the establishments between the thirteen
cities will be made.

Table 1. The relationship between city-size, location and distribution of employment in the
commercial office sector (SBI-8) and its growth (source: based on Statistics of Employed
Persons, Central Bureau of Statistics).
Region City size 3 1973 1982 Growth 5
(%) (%) 1973-1982

West >200000 49.4 39.1 114


100000-200000 3.6 3.5 141
50000-100000 5.8 7.3 183
rest 6.9 12.5 262
Subtotal 65.7 62.4 137

Intermediate zone 100000-200000 10.3 10.3 145


5 0 0 0 0 - 1 0 0 000 4.4 4.4 144
rest 6.6 9.7 213
Subtotal 21.3 24.4 166

Periphery 1 0 0 0 0 0 - 2 0 0 000 2.9 2.4 120


5 0 0 0 0 - 1 0 0 000 3.1 3.5 164
rest 7.0 7.3 150
Subtotal 13.0 13.2 147

Total 100 100


Absolute total 284095 410549 145
a
Number of inhabitants.
b
1973 = 100.

Business services and the urban economy


According to the Standard Industrial Classification of the Netherlands the following
services are business services: legal services (for example advocates, notaries, legal
advice agencies), accounting services (accountancy offices, tax consultants), computer
services, consultant engineers (architects and engineering offices), advertising, and
other business services (for example, translating agencies, economic advice centres,
and temporary employment agencies).
672 J H J van Dinteren

Business services are mainly producer orientated; they supply services for other
businesses and in so doing contribute greatly to the production process of those
firms (table 2). As much as 30% of the total sales of all the businesses and
institutions in the Netherlands is intended for intermediate consumption; whereas
for business services the amount is 6 1 % . Banking and insurance are also strongly
producer orientated.
Given the intermediate function of business services they clearly have a
complementary function in relation to other businesses. The presence of (specific)
business services could even create a complex, capable of attracting other businesses
and institutions (Polese, 1982; Lambooy and Tates, 1983; Daniels, 1984). Access
to the information provided by business services contributes to an industry's
capacity for adaptation. The unavailability of specialized business services in the
peripheral regions of Great Britain, for example, is thought to be a factor hampering
industrial growth (Goddard, 1979; Marshall, 1983).
There is an increasing awareness within the Dutch government that the economic
development of cities and regions can be supported by the presence of services,
particularly business services, as well as by manufacturing industry. However, in
regional policy, emphasis is no longer on decentralization of business, but on
indigenous opportunities for development in the cities and regions, accompanied if
necessary by regional assistance, as, for example, in the northeast and the extreme
south. Being centres of employment, cities are thought to play an important role
in this policy.
The problems of regional inequality and the differences in economic growth of
cities have proved difficult to explain by means of classical location theory. According
to Pred (1977) this is mainly caused by ignoring the role of information. This has
become an increasingly important locational factor because information processing
has become more important in the production process. Given the increased and
continually increasing role of the information factor and its importance for the
development of cities, Pred (1973, page 10) outlines the need for a conceptual
model "which adequately describes the means by which interurban information
circulation and organizational location patterns feed back upon one another to
influence the process of city-system development". With the interurban diffusion
of innovation and the spatial concentration of management, urban interaction also
forms part of the proposed model. In addition to stressing the importance of
information as a locational factor, Pred (1973; 1977) has analyzed information
circulation between cities and the way it leads to urban economic growth within
the urban system. In such a system the city owes its position to the information
flows generated by the businesses and institutions that are located in the city.
Table 2. Sales structure of some services and of all businesses and institutions in the
Netherlands, 1981 (source: National Accounts 1983, Central Bureau of Statistics).
Sales structure Service (%)a Total
ba re bs go np
Export 9 7 1 2 29
Intermediate use 46 61 3 16 30
Investments 25 1 7
Final consumption 44 100 7 95 82 34
Total 100 100 100 100 100 100
Absolute total (109 guilders) 11.7 21.3 17.8 64.6 47.7 651.5
a
ba banking and insurance offices; re real estate sector; bs business services; go government;
np nonprofit sector.
The role of business-service offices in the economy of medium-sized cities 673

In the first instance, Pred describes a submodel in which local multiplier effects
(directly through the increasing demand for goods and services, and indirectly
through the expenditure of wages) are of crucial importance.
However, the development of a city-within-a-city system is largely determined by,
first, the commercial relationships of businesses and institutes in terms of inputs
and outputs, and, second, by the organizational relationships of businesses and
institutes (connected to the status of businesses or institutions within the organization).
Offices obtaining inputs from local urban businesses contribute to the urban
economy. Those that are part of a larger organization (often obtaining goods and
services outside the city in which they are located) or other offices that do not
draw on local urban potential, contribute to a loss of potential income.
In recent literature (Daniels, 1982; Marquand, 1983; MEZ, 1983) it is assumed
that, since they are basic and/or producer orientated, commercial offices contribute
to the urban economy.
The basic -nonbasic distinction is often seen as synonymous with the distinction
between intermediate and final demand. Although final services will rarely have a
superregional function, 'intermediate' services cannot unconditionally be equated to
basic. Some authors, however, suggest that, on a regional level, intermediate services
contribute indirectly to the urban economy because they offer their services to other
businesses that may be basic (Daniels, 1982; Marquand, 1983; MEZ, 1983). It is
assumed in this research project that offices able to contribute directly to the
development of a city-within-a-city system operate on a superregional level. In most
cases these offices will be producer orientated.
The location from which an office is controlled has led to the distinction between
indigenous and nonindigenous offices. Indigenous offices are those controlled from
within the area or city in which they are located. Autonomous offices and head
offices, both naturally fully autonomous, and subsidiary offices with a head office
situated in the same region or city are indigenous. The decisions affecting the
office(s) are taken within the city area or region. Nonindigenous offices are controlled
(externally) by a (regional) head office located in some other city or region (Daniels,
1983). Indigenous offices are considered to be more important to the urban economy
than nonindigenous offices. The disadvantages of nonindigenous offices are that
they are more vulnerable to fluctuations in economic conditions, that their personnel
have a lower education level (and therefore low incomes), and that profits made by
the branch offices are lost to the head office location. However, there is little
empirical research to sustain these assumptions; although Daniels (1984) has shown
that office status determines the level of reliance upon the local labour market and
the degree to which inputs come from local sources.

The Survey
Until recently, office research in the Netherlands has mainly been concerned with the
large cities in the west and with aspects of location choice (for example, Grit and
Korteweg, 1976; ter Hart, 1979). The project reported here is therefore focused
on medium-sized cities ( 5 0 0 0 0 - 2 0 0 0 0 0 inhabitants). Because not all such cities
could be studied thirteen were selected in the south and east Netherlands (figure 1).
A database was constructed using the Municipal Business Registers and the
registers of the Chambers of Commerce to identify those business services employing
five or more people. At an early stage it became apparent that a large number of
the 1163 establishments in the database did not satisfy our criteria (employing five
or more people, working commercially for the open market, belonging to the
business services). After telephone checks had been conducted only 770 offices
remained. Of these, 130 refused to complete a postal questionnaire, 459 completed
674 J H J van Dinteren

the questionnaire (60%), and 181 (24%) did not return it. The response for each
city varied from 48% in Helmond to 76% in Zwolle. From a comparison of the
respondents with those who did not fill in the questionnaire, taking into account
business class, number of staff, and type of location, it was concluded that there
were no significant differences between them. The respondents are therefore
broadly representative of the business services in the cities used in the study.

The relationship between some characteristics of business-services offices


The degree of external control and level of regional exports are significant variables
when determining the importance of business services to the urban economy. In
this section the relationship between these two variables and between these variables
and other basic characteristics of offices are examined. External control has been
made operational by distinguishing between indigenous and nonindigenous offices
(see above). Offices realizing 50% or more of their turnover outside the region
(the region is the area within 30 km of the office location) are classified as basic;
the other offices are defined as local services ('geographical market'). The degree
to which offices obtain inputs by way of other businesses in the same city, also
affects the urban economy, but this is not considered at this stage. As well as the
geographical market and the degree of external control the type of office (business
class) is relevant here. This is because we may expect differences in relation to the
two variables mentioned earlier and differences in relation to number of staff
(Marshall, 1983; Daniels, 1983; 1984).
Although as a whole the business-service sector is intensely producer orientated,
this does not have to be the case for each individual office. Hence a variable
referred to as 'commerical market' has also been taken into account. Offices in
which more than 50% of the turnover depends on private consumers are described
as final offices. The remainder are referred to as intermediate offices.
The role of business-service offices in the economy of medium-sized cities 675

Since there is of course a very strong relationship between the two variables
status and external control, only status is used in this part of the analysis.
There are ten possible relationships between the five characteristics of offices
(business class or office function, status, market orientation, number of staff, and
geographical market); eight relationships are found to be statistically significant
(p < 0.01; figure 2). The relationships which are not found to be significant are
those between geographical market and number of staff and geographical market and
status. The relationships between number of staff and commercial market, status,
and business class are not very strong, but it is notable that the smaller the office
the greater the probability that it is a consumer orientated and/or autonomous
office. Among legal services and advertising services there is a higher proportion
of small establishments (tables 3 and 4).
There are very significant differences between categories of the business-class
variable if this variable is related to commercial and geographical market orientation.
The strong relationships between intermediate or final orientation and business
class is caused by legal services, which, by contrast to other business services, are
orientated primarily towards final demand (table 5, see over).

Figure 2. Significant associations between five basic characteristics of offices.


Table 3. Relationship between market orientation and number of staff.
Market orientation Number of staff (%) Total
5-10 11-25 >25
Consumer orientated 13 8 0 10
Producer orientated 87 92 100 90
Total 100 100 100 100
Number 238 145 61 444

Table 4. Relationship between number of staff and status.


Number of staff Status (%) Total
head offices subsidiary offices autonomous offices
5-10 20 40 64 55
11-25 43 37 29 32
>25 37 23 7 14
Total 100 100 100 100
Number 35 113 305 453
676 J H J van Dlnteren

The other strong relationship between business class and the geographical market
is caused by the very strong local orientation of legal services and accounting
services; among the other professional services more firms are exporting towards
other regions. The computer service category has an especially large share of basic
offices.
When we consider the indigenous - nonindigenous dichotomy it appears that this
distinction shows very different results for the six business classes. Among
accounting services, computer services, and 'other services' there is a relatively low
proportion of indigenous offices (table 5). Given the view that the offices which are
important to the urban economy are those that export to other regions and/or are
indigenous, we may conclude, for the time being, that advertising, consultant
engineers, followed by the computer services, can be taken to play an important
role in the local economy.
Table 5. Percentages of indigenous, basic, and intermediate offices for each office function.
Type of office Office function Total
le ac co en ad others
Intermediate 53 99 100 99 100 95 90
Basic 5 13 74 49 47 45 31
Indigenous 97 62 68 80 87 63 76
Number 90 132 31 133 31 42 459
le legal services; ac accounting services; co computer services; en consultant engineers;
ad advertising.

Sources of input
The sources of eleven goods and services used by the respondent establishments
were investigated. The respondents were asked to indicate whether these goods were
purchased in the city in which they were located or elsewhere (figure 3). It has
been suggested that the more inputs that are obtained in the city where the office
is located, the larger the positive contribution to the economy of the city. The
distinction between indigenous and nonindigenous offices could also be crucial
here. And in the case of indigenous offices, a further distinction between inputs
obtained through other offices of the enterprise (internal inputs) and those obtained
through other offices outside the enterprise (external inputs) is likely to be important.
Let us first examine the percentage of offices that do or do not obtain certain
inputs. It is notable that the proportions for the different goods and services that
are obtained internally are more or less identical. This is not the case for
external inputs. Marketing services, and to a certain extent accounting, and other
professional services are used by fewer office establishments than other inputs,
whereas office equipment and printing services are purchased externally by many
more establishments.
Offices which are part of a multisite enterprise can choose whether to internalize
or externalize their inputs. The nonindigenous offices mostly seem to internalize
marketing and accounting services. However, in the case of office furniture and
equipment, they are more inclined to obtain them directly from other businesses.
As regards the location of the sources of internalized inputs of indigenous and
nonindigenous offices of multisite enterprises there is a significant difference for
seven of the eleven services shown in figure 3 (p < 0.05). Only the purchase of
office furniture, hardware, and advertising and marketing services does not reveal a
significant difference. Moreover, it must be said that when an indigenous subsidiary
The role of business-service offices in the economy of medium-sized cities 677

office internalizes inputs it does not necessarily mean that these inputs (by way of
the head office or other subsidiary offices) come from the city of location.
As regards the externally obtained inputs, the number of business services is
larger because this also includes the autonomous offices. There are some significant
differences between the indigenous and nonindigenous business services here too
(p < 0.01). A significant difference is only present with respect to the sources
used for the purchase of office furniture, software, and hardware.
Hence all the indigenous businesses are more intensely orientated towards local
producers and services than other offices (figure 3). This is most relevant for the
purchase of office equipment, printing services, office furniture, and financial
services. It applies least to the purchase of computer hardware and software.

57 334 80 10 67 336 82 10 64 217 56 11 66 217 51

Other place
Other place, same city
Same city

1 Indigenous, internal
2 Nonindigenous, internal
3 Indigenous, external
4 Nonindigenous, external

Number of offices

Figure 3. Internal and external inputs for indigenous and nonindigenous offices by source
(thirteen cities): (a) furniture, (b) office equipment, (c) hardware, (d) software, (e) advertisements,
(f) advertisements, (g) marketing, (h) legal services, (i) financial services, (j) accounting services,
(k) other professional services.

Commercial market for business-service offices


There are two methods of analyzing the market for business services and the
location of the clients. First, we could average the percentages for the distribution
of turnover. This would give a picture of the situation of an average office
678 J H J van Dinteren

(for example, Marshall, 1983; Daniels, 1984). Second, we could weight the
percentages in relation to office turnover. The result of this would provide a
picture of the business-service sector (or parts of it) as a whole. Because I am
interested in the meaning of the business-service sector for the urban economy, I have
chosen the second method.
In general, information on turnover is rather difficult to come by; 39% of the
respondents refused to answer a question on exact turnover. However, only 2% of
these refused to answer a question on turnover by class size. An estimate could
be made for the 39% that did not answer exactly.
For the business-service sector in general, manufacturing industry, business
services, and government are the main consumers (table 6). These three together
are responsible for more than half (55%) of the turnover in the business-service
sector, but their importance as clients varies in relation to different types of business
service. For example, computer services acquire 47% of their turnover through
supplying business services, whereas for consultant engineers this accounts for only
7% of turnover.
Table 6 also illustrates the intensely consumer-orientated character of the legal
services in which 4 3 % of the turnover is accounted for by individuals. By
comparison, the other offices within the business-service sector are mainly producer
orientated, although there are differences regarding the orientation towards specific
business types. For the accounting services agriculture and mining, commerce and
transport, and business services are important sectors. Consultant engineers are,
relatively speaking, more dependant on the noncommercial sector (government,
institutions). In comparison with the business-service sector in general, advertising
services obtain most of their earnings from manufacturing industry, banking and
insurance, and other business services, too, are important. Manufacturing industry
and construction, commerce and transport are important markets for the 'other
services' category.
Differences in the distribution of turnover not only occur when business services
are distinguished by office function, but also become apparent when we distinguish
between the basic and the nonbasic sectors. The biggest differences occur in the
case of clients in manufacturing industry and in the case of private individuals
(both relatively important for nonbasic offices with shares of 2 3 % and 14%,
respectively) and in the case of government (for basic services, this category of
consumers has a share of 24%).
Table 6. Distribution (%) of turnover in the business-service sector for a number of consumers
for each office function.
Consumer Office function3 Tota
le ac CO en ad others
Agriculture, mining 5 12 1 1 1 2 5
Manufacturing industry 9 20 14 19 29 21 19
Construction 7 6 3 6 7 13 6
Commerce and transport 8 19 11 3 16 21 11
Finance and insurance 10 3 7 5 11 7 6
Business services 9 21 47 7 22 12 19
Government 6 2 11 38 9 8 17
Institutions 3 7 5 14 3 6 8
Individuals 43 9 1 8 2 11 10
Total 100 100 100 100 100 100 100
Turnover (million guilders) 131 301 211 443 140 122 1349
For abbreviations see table 5.
The role of business-service offices in the economy of medium-sized cities 679

Differences in the sales structure also emerge when we distinguish between


nonindigenous and indigenous offices, although these are less striking. In fact, they
are limited to clients in manufacturing industry and those in business services. For
nonindigenous offices the manufacturing sector provides 26% of turnover, whereas
it provides 16% of turnover for indigenous offices. Clients in the business-service
sector contribute 9% of the turnover of nonindigenous offices, but 2 3 % of the
turnover of indigenous offices.
The sales are spread over a large number of clients. Most of the business services
(65%) have 250, or fewer, regular customers. Only 7% of the offices have fewer
than 10 regular customers; 12% of the offices have over 1000. Although the
number of customers is generally large, it is apparent that a small number of customers
make a substantial contribution to the financial turnover of the establishments
surveyed: 6 3 % of business services have one customer that contributes at least 5%
towards the turnover at individual offices. On average, the proportion attributable
to the major client is 24%. Nearly half the business services (49%) have an
additional customer accounting for more than 5% of the turnover and 34% have a
third customer of such standing. On average these customers account for 13% and
10% of turnover, respectively. Thus in the 210 offices with two large customers,
these customers provide an average of 37% of the turnover. The 145 offices that
have a minimum of three big customers rely on these for nearly half their turnover
(47%). It needs no further elaboration to see that the businesses concerned are
highly vulnerable to changes in the demand for their output.

Geographical markets
Office managers were asked how their earnings were distributed between different
regions. In the business-service sector 4 3 % of the sales, weighted by turnover,
occur outside the region (table 7; the region is an area within 30 km of the office
location). Legal services and the category 'others' (economic advice centres,
temporary employment agencies, and translating agencies) are strongly orientated
towards urban areas. These two sectors, together with accounting (although to a
lesser degree) are both urban and regionally orientated. On the other hand, the
computer services, consultant engineers, and advertising sectors are the principal
contributors to regional exports. Although the computer service sector has a
relatively strong orientation towards the surrounding part of the country, the other
two sectors are more orientated towards the rest of the country and abroad.

Table 7. The distribution (%) of turnover in the business service sector by office function
and geographical source.
Geographical source Office function 3 Total
le ac CO en ad others
City 62 40 14 23 30 50 32
Region b 21 33 19 26 14 32 25
Part of the country 0 9 18 48 22 25 9 23
Rest of the Netherlands 8 10 18 21 25 8 16
Abroad 1 0 3 9 6 0 4
Total 100 100 100 100 100 100 100
Turnover (million guilders) 131 301 211 443 140 122 1349
a
For abbreviations see table 5.
b
An area within 30 km of the location of the office.
c
An area larger than the region, but not covering the whole nation.
680 J H J van Dinteren

The majority of consumer-orientated offices obtain most of their earnings in the


city in which they are located. Hence, for the consumer-orientated offices, 15% of
the turnover can be classified as regional export, whereas the equivalent figure for
business-orientated offices is 45%. The turnover of nonindigenous offices is more
likely to be realized in the city and surrounding region than is the case for indigenous
offices (nonindigenous 66%, indigenous 52%). This is not surprising because the
nonindigenous offices (subsidiary offices) have been established specially to serve
the local and regional market. It is also striking that the indigenous offices, as a
group, obtain 6% of their turnover through supplying services abroad; this accounts
only for 0.4% of the turnover of nonindigenous offices. Table 8 shows the distribution
of turnover by status. It appears that the national exports of indigenous offices are
largely dependent on whether they have head-office status. Of the indigenous offices,
the autonomous offices are more intensely orientated towards the city and region
(64% of the turnover). It is notable, however, that for the autonomous offices 18%
of the turnover comes from the rest of the country. As these autonomous offices
are relatively small, this might be consistent with the finding of Daniels (1984) that
the smaller enterprises may not (always) have an adequate regional market and may
need to look for more distant clients in other parts of the country.
There is no significant association between office size and geographical markets.
It is notable, however, that most export abroad is achieved by offices with more
than 25 employees. This, again, is related to the presence of head offices, of
which 37% employ more than 25 staff (the equivalent figure for all office
establishments is 14%).
Table 8. Geographical distribution (%) of office turnover by status.
Geographical area Status Total
head offices subsidiary offices autonomous offices
City 11 34 41 32
Region 3 19 32 23 25
Part of country15 39 22 15 23
Rest of the Netherlands 18 11 18 16
Abroad 13 0 2 4
Total 100 100 100 100
Turnover (million guilders) 326 383 624 1333
a
An area within 30 km of the location of the office.
b
An area larger than the region, but not covering the whole nation.

Interurban differences
A measure of the importance of the business-service sector in the economy of the
thirteen cities studied is the size of regional exports and the degree of external
control. It has been demonstrated that the latter influences the degree to which
inputs are obtained in the city of location. A distinction is made between
indigenous and nonindigenous offices.
Jobs and turnover
For all the establishments surveyed in each city regional exports can be expressed
as a percentage of the turnover. The importance of indigenous offices can be
examined in two ways: by examining their share of employment or their share in
turnover. In practice, it appears that this does not lead to very different results.
The share of indigenous offices in turnover and their contributions to the share of
regional exports in the total turnover are shown in table 9. The number of jobs
The role of business-service offices in the economy of medium-sized cities 681

per 1000 inhabitants is also given. This is because the proportion of the business-
service sector codetermines the importance of the sector for the urban economy.
If, in addition, we also take account of the number of jobs, we can conclude that
Arnhem has the strongest business-service sector, followed by Zwolle and Deventer.
The factors contributing to the favourable position of Deventer are not clear, but it
is notable for the presence of a few large consultancy agencies. The favourable
position of Arnhem can mainly be attributed to the presence of head offices,
accounting for 58% of the turnover in the business-service sector (compared with
an average of 24% for all thirteen cities). Initial conditions in combination with its
favourable central location seem to have contributed to this position considerably.
Arnhem was able to start urban expansion earlier than other cities after the demolition
of the city walls (1830s). The city was connected to the railway network at an
early stage, and large offices located there. This city has fulfilled an important
function as an office centre throughout this century and is as important as the
large cities of Amsterdam, The Hague, and Utrecht (in the western provinces;
van Dinteren, 1986).
The fact that Arnhem is a provincial capital may have had some influence, but
this seems not to have been very important. Both Zwolle and Den Bosch are
provincial capitals but neither has reached the level of office activities found in
Arnhem.
As business-service centres, Den Bosch and Arnhem are older than Zwolle.
The first two, however, have lagged behind in the general growth of the commercial
office sector, to which the business sector belongs (table 10). In this aspect their
performance is on a par with important cities such as Amsterdam, The Hague, and
Utrecht. Table 10 also shows the favourable development of Zwolle in recent
years. The positive development in Zwolle may be attributed to it being designated
a 'growth town'. This means that, within planning policy, Zwolle has been set the
task of accommodating growth generated elsewhere. The government stimulates,
subsidizes, and designates 'growth towns'. On the basis of turnover the development

Table 9. Structure of turnover and of office establishments, by selected indices in thirteen


Dutch cities.
City Structure of turnover 3 Structure of office establishments15
bas 1 ind 1 jobs bas 2 ind 2 est
Breda 28 53 11 34 67 0.71
Tilburg 39 80 12 41 81 0.64
Eindhoven 43 58 12 34 75 0.78
Helmond 28 43 18 17 64 0.75
Den Bosch 32 72 18 19 80 0.89
Nijmegen 40 90 14 20 80 0.62
Arnhem 63 84 46 36 82 1.02
Apeldoorn 30 57 7 18 66 0.39
Deventer 53 72 17 46 78 0.53
Zwolle 48 42 19 43 70 0.69
Almelo 15 94 6 33 85 0.41
Hengelo 14 88 11 31 80 0.38
Enschede 60 89 8 21 83 0.41
a
bas 1: share (%) of regional export in the total turnover of the business-service sector;
ind 1: share (%) of indigenous offices in total turnover; jobs: the number of jobs (per thousand
inhabitants) in the business-service sector 1 9 8 1 - 8 2 (own inventory; van Dinteren, 1984).
b
bas 2: the percentage of office establishments that are basic; ind 2: the percentage of
office establishments that are indigenous; est: the number of office establishments per 1000
inhabitants 1 9 8 1 - 8 2 (own inventory; van Dinteren, 1984).
682 J H J van Dinteren

of the business-service sector in Zwolle has been caused by nonindigenous


offices. The disadvantages of this have already been mentioned, and in other cities
that have experienced intense growth (Apeldoorn and the 'growth-cities' of Breda
and Helmond) nonindigenous offices also have a higher than average share in the
turnover of the business-service sector. Apeldoorn, however, does not have a large
amount of employment in this sector. This is also the case for Almelo and Hengelo
(two cities in Twente), which have a locally orientated, indigenous business-service
sector. Enschede also has a small amount of business-service employment, but the
structure of the sector is favourable. This is, however, primarily influenced by a
few large advertising agencies.

Table 10. Jobs in the commercial office sector in a selected number of medium-sized and
large cities in the Netherlands, 1973-1982 (source: Statistics of Employed Persons, Central
Bureau of Statistics, 1973-1982).
City Office jobs per 1000 inhabitants Development (%)
1973 1980 1982 1973-80 1980-82 197:
Helmond 10 24 22 140 -8 120
Zwolle 27 57 56 111 -2 107
Deventer 21 39 39 86 0 86
Apeldoorn 21 34 38 62 12 81
Breda 26 42 42 62 0 62
Tilburg 25 39 39 56 0 56
Eindhoven 29 47 43 62 -9 48
Enschede 15 25 22 67 -12 47
Hengelo 20 30 28 50 -7 40
Nijmegen 24 36 32 50 -11 33
Utrecht 54 74 68 37 -8 26
Den Bosch 35 47 44 34 -6 26
Arnhem 62 79 77 27 -3 24
Den Haag 63 76 73 21 -4 16
Rotterdam 49 54 56 10 4 14
Almelo 15 23 17 53 -26 13
Amsterdam 78 89 85 14 -4 9
3
Total of 39 cities 40 55 54 38 - 2 35
a
All cities with more than 50 000 inhabitants in the Netherlands, 1 January 1973.

The structure of office establishments


If we look at the structure and number of offices in the business-service sector
(without taking account of number of staff or total turnover), the favourable
position which Arnhem occupies is again striking.
The size and structure of offices in the business-service sector is also favourable
in two groups of cities. Tilburg and Deventer constitute the first group which is
characterized by a high percentage of basic establishments and a large percentage
of indigenous offices. The number of business-service firms per 1000 inhabitants
is approximately equal to the average for the total group. The second group
comprises Breda, Eindhoven, and Zwolle. Although business services in these
cities have a lower share of basic firms than those in the first group, these shares
are nevertheless above the average for all thirteen cities. On the other hand, this
group has—in comparison with the other cities—a rather large number of firms per
1000 inhabitants. The share of indigenous business services is below the average.
Cities such as Almelo, Hengelo, and Enschede lag behind the other cities with
respect to the number of offices and the percentage of basic firms. Nijmegen,
Helmond, and Apeldoorn also have a relatively small percentage of basic firms.
The role of business-service offices in the economy of medium-sized cities 683

Confrontation
The three aspects of the importance of the business-service sector for the urban
economy have not yet been confronted with each other. Given the strong relationship
between the degree to which inputs are obtained in the city of location and whether
or not an office is indigenous, the proportion of indigenous offices may be regarded
as representing the extent to which goods and services are obtained in the area of
location. It is, however, desirable to include the structure of the business-service
sector in the examination, because this may indicate possible future developments.
When account is taken of the turnover and structure of business services, it
emerges that Arnhem, in comparison with the other cities studied, occupies a very
exclusive position. The business services here are at a level similar to that reached
in the large cities in the west of the country. But Arnhem also has the developmental
characteristics of those larger cities: an apparent lag in the growth of the business
services which was not replicated in the development of other medium-sized Dutch
cities during the period 1973 to 1982.
In terms of number of employees and the number of establishments in the business-
service sector, Zwolle, and Den Bosch can be considered, like Arnhem, as regional
support centres. The recent growth of business services and the structure of this
sector are, however, totally different for each city. Partly because of government
policy, Zwolle has recently experienced strong growth, but this seems to have
resulted in a relative overrepresentation of nonindigenous offices. In other cities,
too, in which employment in business services has increased greatly in recent years,
there is a higher than average proportion of nonindigenous offices.
The business-service sector in Den Bosch is characterized by a large number of
employees, a large number of establishments per 1000 inhabitants and a large
percentage of indigenous firms. On the other hand, the amount of regional exports
is below the average. Whereas development prospects are good in the case of
Zwolle, they are not for Den Bosch.
In terms of turnover and the relative sizes of the work force in the business
services and related establishments, Tilburg and Deventer also appear to have good
prospects for further development. To a somewhat lesser extent the same is true
for Breda and Eindhoven. The favourable position of Deventer, however, may be
attributable to a small number of large offices.
It can be concluded that for three cities situated in the southern parts of the
Netherlands—Breda, Tilburg, and Eindhoven—there appear to be good prospects in
the business-service sector. This gives rise to the question of whether one of these
cities will develop into a regional business-services support centre in the future. It
has been suggested that Eindhoven has the best growth potential. Managers in the
business-service sector in Tilburg think the socioeconomic structure of this city a
disadvantage, whereas managers in Eindhoven were very satisfied with the market
perspective. Moreover, the structure of business services in Eindhoven is rather
favourable with its above average number of computer services offices, consultant
engineers, and advertising agencies. Managers in Breda have no pronounced opinion
on their city. The city is, however, very well situated between the harbours of
Antwerp and Rotterdam.
In comparison with other cities, business services in Almelo, Hengelo, and
Enschede are of hardly any importance for the urban economy of these cities.
In general, the business-service offices in these cities may, to a great extent, be
classified as regionally induced. In this respect they can be considered part of the
periphery and not the intermediate zone of the Netherlands. The business-service
sector in Helmond, Nijmegen, and Apeldoorn is also of little importance for the
urban economy.
684 J H J van Dinteren

Conclusion
The current policy of the Dutch government is no longer based on spreading private
sector activities and public institutions from the west, the economic centre of the
country, to the intermediate and peripheral areas. The point of departure now is
an attempt to stimulate indigenous development opportunities in the cities and
regions themselves. This has led to an increasing spate of research into innovatory
and/or promising businesses and their role in the development of cities and regions.
In this paper, I have examined the role of one of these activities (the business-
service sector) which is considered promising. In this context, 'promising' is taken
to mean important for the future development of cities and regions. During recent
years the business-service sector has clearly displayed strong employment growth.
The importance of the business-service sector for the urban economy has been
made operational by ascertaining the size of the local inputs, the volume of
regional exports, and the degree of external control for establishments in thirteen
medium-sized cities in south and east Netherlands.
It is difficult to compare the results presented in this paper with those produced
by Daniels and Marshall in the United Kingdom. The research field is the same,
but the questions posed and the methods used are different (for example, in this
study the results for the geographical and commercial markets are weighted by
turnover of each firm, whereas in the British surveys mean percentages were
used). Nevertheless, when highlighting the key findings of the empirical research
some general comparisons can be made.
It has been demonstrated that business services are not so reliant on a local
market. Most notably advertising, consultant engineers, and computer services
export to other regions. Here is a resemblance with the groups mentioned by
Marshall. It also appears that business services do not rely on the manufacturing
sector for the largest part of their turnover. Manufacturing industries account for
only 19% of total sales in the business-service sector. Including construction
industries this percentage is 25% (Marshall: 37%). Commerce and transport, and
government also make a large contribution to total turnover and it is notable that
there is a large within-sector trade: 19% of turnover is accounted for by other
business services (Marshall: 8%). Small and independent offices (in many cases
legal offices) are orientated primarily towards the city and the surrounding region
and therefore contribute less to the urban economy (compare with Marshall, 1983).
Given the strong degree of regional export orientation and the obvious intermediate
function of the majority of the business services, one may conclude that at least
this part of the service sector deserves more attention in regional policies.
Within this framework the behaviour of nonindigenous firms is important.
Externally controlled offices create smaller local multiplier effects. In this survey
25% of the establishments are nonindigenous. These firms are likely to internalize
their inputs. (This is comparable with the findings of Daniels.) This is most relevant
for marketing and accounting services. More than 80% of the nonindigenous
establishments purchase these inputs within the organization and outside the city in
which they are located. As far as purchases are concerned, nonindigenous offices
contribute less to the urban economy than indigenous offices. However, further
analysis of the data is necessary before statements can be made about the effects
of differences in education levels and the share of externally controlled establishments
on employment in business services. One result, indeed, is that in cities in which
office-employment growth has been favourable during recent years a large part of
the turnover has come from nonindigenous offices.
As in the surveys by Daniels and Marshall it is obvious that there are important
variations between the cities in the survey. Initial advantages (for example, in
The role of business-service offices in the economy of medium-sized cities 685

Arnhem), the region in which the city is situated, and its hinterland (Almelo,
Hengelo), planning policies, and the nature of the market are some of the factors
accounting for the performance of the different cities.
Intermediate offices, and especially business services, can improve the adaptability
of urban business activity (because of their specialization and knowledge) through
their connections with other businesses. They can also generate regional exports
which can provide an important contribution to the development of cities and
regions. Because of the recent and possible future growth of business services the
claim that these services deserve an important place in policy aimed at the
development potential of cities and regions cannot be overstated. Through their
connections with other businesses, they can improve the adaptability of urban
business activity—especially that of industry—and these services can generate
regional exports, which can provide an important contribution to the development
of cities and regions.
It therefore seems vital that further research is conducted into the importance of
the business-service sector for local business activity. The research presented here
can be complemented by using the available data to examine how the business
services of a city are connected to businesses in other cities and how—in multisite
firms—organizational relations are constituted, so that we can gain further insight
into the place of the thirteen cities studied within the urban network. But other
questions remain. For example, to what extent are locally available business services
used and, if services are used elsewhere, on what grounds was this choice made?
Because of the large proportion of nonindigenous offices in the cities that have
recently undergone exceptional growth, it has been suggested that it has been
mainly the subsidiary offices that have contributed to this. The increasing role of
multisite firms within the business-service sector makes the analysis, within overall
research into urban development, of how these multisite firms constitute a network
of offices very interesting. For instance, a research project could study this choice
process concerning the operations of accounting and computer services.
Acknowledgement. The support of the Catholic University Nijmegen, Department of Geography,
is gratefully acknowledged.
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