Financial Centers Between Centralization and Virtualization



The chapter examines the current and future role of European financial centers. The “virtualization” of space leads to the weakening of the benefits from agglomeration through the widespread use of information and communication technology. Virtualization works well, however, only for standardized information, like stock prices, but not for complex information requiring constant interpretation. For the latter, face-to-face contacts cannot be substituted, and thus, financial centers are here to stay.

Nevertheless, it is not clear how many financial centers will survive. The chapter finds strong competition between Europe’s first-tier financial center London and second-tier centers, such as Frankfurt and Paris. Due again to the nature of information, national centers will remain serving opaque domestic businesses. Thus, there is little competition between second-tier centers which are caught in between centralization – toward London – and regionalization toward the most opaque businesses within their respective countries.


Stock Exchange Spatial Proximity Complex Information Foreign Bank Agglomeration Economy 


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Copyright information

© Springer Science+Business Media, LLC 2009

Authors and Affiliations

  1. 1.Frankfurt Institute for Private Equity and M&A, Frankfurt School of Finance & ManagementGermany

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