“Being there” and the continued importance of the local in finance

Abstract We examine the role of tacit knowledge and the need for proximity in shaping the geography of the sell-side equity research, as one of the most knowledge intensive parts of the financial sector, which forecasts the value of firms, and as such has major significance for the whole economy. We use a unique combination of professional experience, a purpose-built quantitative dataset on analysts’ coverage, and extensive expert interview material. Our analysis, focused on three highly globalised sectors (metals & mining, oil & gas, and semiconductors), documents the leading positions of Toronto, Calgary & Houston, and Taipei & San Francisco, respectively, as sell-side equity research centers, matching or exceeding the role of New York or London as global financial centers. We argue that this geography reflects the continued significance of specialised and localised tacit knowledge, which is crucial to sell-side equity analysts for three inter-related reasons: the need for preferential access to local information and knowledge networks in the forecasting process; the importance of individual interpretative and analytical expertise; and the growing pressure for rapid analysis and response to new information. In short, equity analysts have to ‘be there’, at the sources of industry-specific information and knowledge.