Cities with strong direct air connectivity attract significantly more multinational firm activity than those dependent on multi-stop routes, according to a new study by researchers at the Massachusetts Institute of Technology.
Analysing air travel patterns and multinational firm expansion across 142 countries over a 30-year period from 1993 to 2023, the study finds that firms are far more likely to establish subsidiaries in cities that can be reached via direct flights. The effect is especially strong in knowledge-intensive sectors such as finance and professional services.
The research shows that city pairs connected only through one stopover had about 20 percent fewer multinational subsidiaries compared to those with direct flights. Where two stopovers were required, the number dropped by 34 percent. In annual terms, this translates into 1.8 percent and 3 percent fewer new firms, respectively.
Beyond direct routes, the broader position of a city within the global air network also matters. Cities that are well embedded in high-traffic international flight networks see faster subsidiary growth than those with limited or peripheral connections.
The study examined data from around 7.5 million multinational firms operating in nearly 800 cities with airports, covering more than 400,000 international flight routes. Only international flights were considered, excluding domestic travel in large countries. Firm locations were defined as being within 60 kilometres of an airport, with city size and other economic factors accounted for in the analysis.
Researchers used flight data from the International Civil Aviation Organization and firm-level data from the Orbis database, which tracks ownership links between companies globally. This allowed the team to map relationships between parent companies and their overseas subsidiaries in detail.
Industry-wise analysis revealed that air connectivity plays a much larger role in sectors that rely on regular face-to-face interaction. In contrast, manufacturing firms were found to depend more on road networks and maritime shipping than on air links.
One key measure used in the study was “degree centrality”, which reflects how many cities are directly connected by flights. A 10 percent increase in this measure over a decade was associated with a 4.3 percent rise in the number of multinational subsidiaries in a city. An even stronger predictor was the connectivity of a city’s connected partners — indicating that being linked to major global hubs matters more than the sheer number of routes.
Notably, the relationship between air connectivity and firm expansion remained consistent throughout the three decades studied, despite advances in digital communication, the Covid-19 pandemic, and shifting global trade conditions.
The findings have been published in the journal Nature Cities and highlight the continued importance of physical connectivity in shaping global business decisions, even in an increasingly digital economy.
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