The spatial organization of contact, ties and investment flows: Customer relationships and credit access in commercial banking

Recent research on such diverse topics as financial globalization, suburban sprawl and interpersonal relationships suggests that the development of increasingly advanced transportation, communication and information technologies and infrastructures has dramatically reduced the significance of space and place in social and economic life. In the US commercial banking industry, geographic deregulation and consolidation have enabled large financial-services organizations to expand into local, small-firm financial markets throughout the nation. Analyses of these developments by financial economists and legal scholars appear to provide a clear, specific illustration of this purportedly more general trend toward the declining significance of spatial organization. Drawing on a small sample of in-depth interviews with commercial bankers and two large surveys of non-financial firms based in large metropolitan regions, this dissertation shows that the spatial division of labor in large commercial banks continues to influence where these organizations focus their direct marketing activities, where they develop market relationships with small and medium-sized companies and where they provide capital access to entrepreneurs serving local and regional markets. More specifically, the dissertation presents a series of logit models showing that interactions between metropolitan fragmentation and the location of commercial banks' branch offices, subsidiaries and corporate headquarters shape both the social structure of local financial markets and the spatial distribution of commercial investments. The dissertation thus suggests that the consequences of geographic deregulation and consolidation for local commercial financial markets are complicated by the socio-spatial organization of large metropolitan regions. The spatial organization of the large commercial banks that have emerged from industry consolidation is less consequential for where they establish customer relationships with local firms than is the case among smaller, regionally oriented financial institutions. Yet the consequences for capital access depend on both the specific organizational form taken by consolidated banks and the physical location of customer firms. Commercial banks that rely on local subsidiaries to compete in specific regional financial markets are more likely to provide capital access to firms based in the fragmented metropolitan periphery than those based in large metropolitan cities.