The (New) Geography of International Trade and Investment: Exploring the extent to which 'distance' matters in the establishment of economic relations

It is a widely held view among economics and business scholars that the regional trade agreements such as NAFTA and EU have provided benefits to member countries, including Canada and the UK, and that these might be threatened by renegotiation of the NAFTA agreement (Caliendo and Parro, 2015), and BREXIT (Dingra et al, 2018). Thus, both Canada and the UK seek to diversity their trade and investment partners to include more distant countries. In response to such concerns, our knowledge synthesis project will identify the impact of distance on the ability of countries to establish strong trade and investment ties with more distant partners. It responds to the theme of "Technological and digital transformations, cross-border trade in services, and geography." It represents an international initiative devoted to synthesizing knowledge about the roles of Canada and the UK in global trade leadership. This project is timely because Canada-UK trade relationships have profound sociocultural, political, and economic implications for both countries and global markets.

A significant literature in economic geography and business has long provided strong evidence that
'distance' matters, where distance includes not only physical distance, but also cultural and institutional distance. For example, there is evidence that bilateral trade and investment flows are greater when countries share a common border, a common language, and common institutional structures. These stylized facts provide the underlying context for trade and investment agreements and explain why so many of them are 'regional'. At the same time, these commonalities may facilitate and enhance the potential benefits of both trade and foreign direct investment (FDI) as knowledge spills over across borders.

The question we will address is whether these stylized facts about the relevance of distance have
changed in a more globalized world, and in particular one where technology may make all forms of
distance less relevant. A particular manifestation of this possibility is the rise of cities and the tendency for knowledge-based firms to (co) locate in a relatively small number of large and diverse cities. We therefore intend to survey the recent literature on trade and investment flows in knowledge-based industries (which includes services) to examine whether and how distance matters. We will also survey the evidence on the impact of cities on these flows.

Our Canada -UK collaboration will 1) make research accessible to national and regional/city governmental organizations, including Ministries concerned with trade, innovation, employment and urban authorities seeking to promote FDI and technological innovation; 2) engage with major companies interested in location strategies for internationalization and innovation as well as consultancy groups advising firms and governments on these matters; 3) disseminate our principal findings to the academic community of international business scholars as well as think-tanks and the policy community in the UK and Canada.

This project will interest a large number of political and business leaders, as well as an academic audience in Canada and the UK and beyond. The objectives of the knowledge mobilization activities include (1) engaging cross-sectoral stakeholders, including government policy-makers, throughout the project to mobilize knowledge related to promising policies and practices; and (2) undertaking effective knowledge mobilization methods to facilitate the sharing of research findings with multisectoral stakeholders in the academic, public, private and not-for-profit sectors. Specifically we aim to (i) make research accessible to national and regional/city governmental organizations, including Ministries concerned with trade, innovation, employment and urban authorities seeking to promote FDI and technological innovation; (ii) engage with major companies interested in location strategies for internationalization and innovation as well as consultancy groups advising firms and governments on these matters; and (iii) disseminate our principal findings to the academic community of international business scholars as well as think-tanks and the policy community in the UK and Canada.

Strategy, Targets and Timeline

Given these three distinct audiences, we will follow a variety of knowledge mobilization strategies: (Sep. to Oct. 2018) We will produce by the end of the project in both Canada and the UK a series of policy briefs summarising the key policy implications of our work. Their impact will be enhanced by workshops and presentations held at SFU, Ivey and LSE; the LSE is especially well placed for leading such policy based exchanges. We propose at least one workshop or presentation in each University. Anticipated audience will be policy makers in trade and investment and business executives.

(Nov. to Dec. 2018) We will use our networks to organise at SFU, Ivey and LSE a series of executive workshops targeting business leaders, scholars, and students about the implications of our completed work for firms making strategic decisions about FDI or export and considering how to analyse alternative locations. All five researchers are highly experienced in executive education and their Universities are closely connected with the corporate world in both Canada and the UK. We propose at least one executive workshop in each University to be held once our research is finished.

(Jun. 2019) Our synthesized research findings will be disseminated through the Academy of International Business (AIB), of which Meyer is a Managing Fellow, Shapiro an Honorary Fellow and Estrin a Fellow. We will present findings at the international annual conference, and at the relevant regional meetings, for example the North American and UK chapters of the Association. We anticipate our presentations will attract about 50-100 delegates each session.

We also intend to develop a website where data, working papers and blog-type discussion pieces will be shared, to actively contribute to the many relevant blogs that already exist at our three universities and to involve the Universities' Press Offices for contacts with mass media.