Dash through a crowded terminal to make a connecting flight, and you experience the friction directly. That same friction, researchers at MIT now reveal, subtly influences the expansion choices of multinational corporations. Cities that require even a single layover attract 20 percent fewer foreign subsidiaries compared to those with direct international connections. When a second layover is added, the disparity increases to 34 percent.
These insights stem from an examination of 7.5 million companies and 400,000 flight routes across 800 cities in 142 countries from 1993 to 2023. Published in Nature Cities, the research indicates that air connectivity continues to be a significant predictor of business location choices, a trend that has remained constant despite the rise of video conferencing, changing trade policies, and the pandemic.
Physical travel serves as a key infrastructure for coordination. Multinational operations rely on relationships between parent companies and overseas branches, connections often established and nurtured through face-to-face meetings. Direct flights facilitate these meetings by making them cheaper, quicker, and more frequent. The data indicates that this accessibility has a direct impact on investment choices. A 10 percent rise in a city’s connectivity to other well-linked hubs aligns with approximately a 4 percent increase in new subsidiaries over the next decade.
Trust and Tacit Knowledge Still Require Handshakes
What makes physical presence vital when screens can link offices instantly? The researchers cite “know-how” and “know-who,” types of intricate information that are hard to digitize. Establishing trust, transferring knowledge, and addressing cultural differences all gain from in-person interaction. This is particularly important in knowledge-intensive industries where relationships have significant value.
“What we discovered is the importance of a city being integrated into the global air transport network, and we emphasize its significance for knowledge-oriented business sectors,” says Ambra Amico, an MIT researcher and co-author.
The study assessed not only how many destinations a city could reach but also how strategically it connected to the wider network. Cities connected to other major hubs received a cumulative advantage. It’s not only about who you can connect with, but also about who your connections can connect to. This “eigenvector centrality” proved to be a stronger indicator of subsidiary growth compared to mere flight volume.
The researchers leveraged the 1995 formation of the World Trade Organization as a natural experiment, showing that connectivity fosters growth rather than just mirroring it. Even when controlling for city size and local wealth, the trend continued. Airports act less like simple infrastructure and more like economic gateways.
Finance Needs Flights More Than Factories Do
Not all sectors react the same way. Finance, professional services, and technology exhibited a high responsiveness to flight networks. These industries are oriented towards the movement of people and ideas, rather than goods. In contrast, manufacturing firms are more dependent on shipping routes and road access. A textile factory prioritizes the delivery of products to market, whereas a venture capital firm focuses on bringing partners into meeting rooms.
The consistency observed over three decades indicates that technological progress hasn’t eliminated the need for physical closeness. Companies continue to coordinate, negotiate, and resolve issues face-to-face. The airport lounge remains a precursor to deals that screens alone cannot finalize.
For cities vying for global investment, the message is unmistakable. Flight networks are not mere amenities; they are economic tools. A direct flight can determine whether a location becomes a business hub or is completely overlooked. As the global economy shifts further toward services and knowledge-based work, being easily accessible becomes increasingly valuable.
[Link to Nature Cities](https://doi.org/10.1038/s44284-025-00361-4)