Will COVID-19 Make Companies Rethink Cities?

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MIT SMR Strategy Forum

Each month, we pose a question about business, management, technology, or public policy to our panel of academic experts. Here you can see what they think and why.
Learn more about this series

The COVID-19 pandemic is affecting businesses in seismic ways. Government lockdowns and stay-at-home orders have forced companies across the globe to quickly switch to remote models, with millions of workers now working from home. As remote work becomes more normalized, a question becomes whether a great migration is on the horizon for companies moving out of dense urban locations.

For this month’s poll we surveyed our experts on the following statement:

The COVID-19 pandemic will lead companies to relocate infrastructure and employees away from dense urban locations.
RAW RESPONSES
WEIGHTED BY CONFIDENCE

Raw Responses

Responses weighted by panelists’ level of confidence

Panelists

Panelist Vote Confidence Comments

Richard Holden

University of New South Wales
Profile
Disagree 8 “The positive effect of access to high-human-capital workers is likely to dominate the benefits of being in a less dense location in the event of a pandemic. Firms may well respond to the current crisis by pushing governments toward better response planning and prevention.”

Olav Sorenson

Yale University
Profile
Agree 6 “I would expect companies to create more redundancy across locations in their operations. But global cities remain attractive in terms of the amenities that they offer and may become relatively more attractive in terms of transportation centrality. So, companies will probably continue to keep many employees in those places.”

John Van Reenen

Massachusetts Institute of Technology
Profile
Agree 4

Richard Florida

University of Toronto
Profile
Disagree 9 “Key industries and clusters like finance, entertainment, and high tech will continue to cluster in leading urban centers. Even as some employees with families and children retreat to suburbs, the young, ambitious talent that powers these industries will be drawn to cities, as has been the case in the wake of pandemics throughout history. Most suburban office relocations will be short-lived.”

Rajshree Agarwal

University of Maryland
Profile
Disagree 5

Joshua Gans

University of Toronto
Profile
Agree 8 “COVID-19 and future pandemics make cities unsafe. To the extent that the benefits of being located in a denser place are marginal, we would expect relocation to be seriously entertained, especially as companies become more familiar with online interactions.”

Ashish Arora

Duke University
Profile
Disagree 7

Barry Nalebuff

Yale University
Profile
Disagree 5 “In businesses where being close to other firms matters, this remains true. Unless employees want to relocate from cities, migration won’t happen. Larger forces seem to be leading to higher density.”

R. Preston McAfee

Economist
Profile
Disagree 5 “Cities are more productive and efficient, and the great urbanization of the past 50 years is unlikely to reverse. Moreover, Asian countries show that cities can manage infectious diseases. Companies will be more alert to the resilience of their supply chains, at least temporarily. Business travel is unlikely to recover to its 2019 peak.”

Meghan Busse

Northwestern University
Profile
Neither Agree nor Disagree 7 “There is a lot of heterogeneity among companies in how important physical infrastructure is, in whether workers have to be on-site, and in how valuable it is to be in an urban area. Google, in a very dense urban area, can send its workers home and still be quite productive. Meanwhile, there is a large COVID-19 outbreak in a meatpacking plant in South Dakota, in a town of fewer than 200,000 people.”

Steve Tadelis

University of California, Berkeley
Profile
Disagree 7 “Humans are resilient. Lessons will be learned. The benefits from agglomeration will likely exceed any benefits that relocating would provide.”

Rebecca Henderson

Harvard University
Profile
Disagree 7

Petra Moser

New York University
Profile
Disagree 8 “Whether companies decide to flee a large city will depend on that city’s response to the pandemic. The quality of hospitals and transportation infrastructure will be more important. There may (sadly) even be a shift away from cities that rely heavily on public transportation. If we are lucky, some cities will invest in public amenities like green spaces and bike paths (not concert halls).”

Anita McGahan

University of Toronto
Profile
Disagree 9 “COVID-19 will eventually be everywhere. One shift will be toward replacement of jobs with AI, analytics, and new processes — regardless of location. Another will be continuing work-from-home both in urban and nonurban areas.”

Timothy Simcoe

Boston University
Profile
Disagree 7 “It could happen a bit at the margins, but I don’t think COVID-19 is going to completely reshuffle the geographic deck. There is a lot of sunk investment in large cities and plenty of evidence that economies of density are substantial. The stronger imperative is to build redundancies into international supply chains.”

Yael Hochberg

Rice University
Profile
Disagree 9

Scott Stern

Massachusetts Institute of Technology
Profile
Agree 3 “High uncertainty — but likely to reduce tendency toward agglomeration at least in the medium term.”

Melissa Schilling

New York University
Profile
Strongly Agree 10 “Many companies and their employees have experienced significant loss and disruption from COVID-19; some portion of those will make major changes to lessen the likelihood of that happening again.”

Shane Greenstein

Harvard University
Profile
Agree 9 “Many companies, big and small, have engaged in large-scale experiments with working from home. Even places where resistance used to be high. Some of that — certainly not all of it — will remain in place after this pandemic passes.”

Lori Rosenkopf

University of Pennsylvania
Profile
Agree 9 “Current imperatives for remote work have made the potential cost savings more salient for knowledge work, particularly in tech. One caution: Though incumbent employees may be managing well while working from anywhere, the challenges of attracting and/or onboarding new employees will remain.”

Jennifer Brown

University of Utah
Profile
Disagree 7 “Management of a public health crisis depends on demand and supply — the tension between the need for testing, treatment, and care and the availability of equipment, doctors, and hospital beds. Urban centers may be harder hit but have more local resources. Rural locations (if hit) may not have the infrastructure to contain a crisis.”

Erik Brynjolfsson

Massachusetts Institute of Technology
Profile
Agree 8 “Companies have discovered that a lot of the work they do can be done remotely. Digital tools and infrastructure have been put to the test and mostly passed.”

Raffaella Sadun

Harvard Business School
Profile
Agree “The COVID-19 crisis has shown that remote working is possible, even for firms and organizations that had resisted this transition for a long time. The effect of this sudden transition on productivity and workers’ well-being is probably going to vary tremendously across firms, but it is likely to spur a serious reflection on the cost and benefits of concentrating activities in cities.”

Topics

MIT SMR Strategy Forum

Each month, we pose a question about business, management, technology, or public policy to our panel of academic experts. Here you can see what they think and why.
Learn more about this series

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