The spatial extent of producer service markets: Hierarchical models of interaction revisited

The traditional view of interaction in spatial markets has been challenged by recent studies of producer service trade in the space economy. These studies find that although city-size and distance influence the direction and spatial extent of interaction, patterns of trade oftentimes counter expectations as trade flows up the urban hierarchy and across large distances. This paper seeks to determine whether the ownership structure of establishments contributes to deviations from the traditional model of hierarchical interaction. Using trade data obtained from surveys of 547 producer service establishments, patterns of trade originating from a five-tier urban hierarchy are examined empirically and evaluated using spatial survivor functions and legit models. The results indicate that the ownership structure of establishments contributes significantly to deviations from expected patterns of interaction. Independently owned establishments have smaller spatial markets and interact more often with smaller sized cities. Nonindependently owned establishments, in contrast, trade down and up the urban hierarchy in a manner much less sensitive to distance.