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Billund is aUSCEOYour browser does not support the element. small town in Denmark with a population that stands at a little over 7,000 people. It is also the birthplace and headquarters of the world’s largest toy company. If you live in Billund, there is a decent chance you or one of your family works for Lego. If you visit for work, you are probably going to Lego’s offices (passing a sign near the entrance that instructs “Play on the grass”). If you go there as a tourist, you are almost certainly going to a Lego-themed attraction. The noun you hear most often is “brick”.Corning is a small town in upstate New York, with a population of around 10,000 people. There, the noun you hear most often is “glass”. The town bestowed its name on one of the world’s leading glass companies, which moved there in 1868 and still has its headquarters in Corning. The “Little Joe” tower, where glass was once stretched into long, thin tubes to be cut into thermometers, is the town’s most obvious landmark. If you visit for work, you are probably there to see a Corning employee. If you are going for fun, you are doubtless headed for the Corning Museum of Glass.Company towns conjure up a bygone era: the textile hub of Lowell in Massachusetts, built by the Boston Manufacturing Company in the 19th century, or the faded coal town of Gary in West Virginia, named for the then chairman of Steel, the company that built it. They are out of whack with prevailing economic wisdom. Cities are where “agglomeration” spurs innovation: a larger population means that more people come together to swap ideas. A bigger labour pool makes it easier for managers to hire people. For employees, too, there are obvious risks in living in a place that is dependent on a single firm.But as the examples of Billund and Corning show, company towns are not just relics of the industrial past. Hershey, in Pennsylvania, is still the home of the chocolate firm that created it. In Germany Wolfsburg is dominated by Volkswagen. Bentonville, the town in Arkansas where Sam Walton opened his first store, is synonymous with Walmart. Elon Musk is reportedly building a town in Texas to house employees of his various firms.And even if theory suggests that company towns have downsides, they also have some advantages. Firms can easily draw on their heritage to instil a sense of culture among workers: Lego’s corporate museum in Billund is located in the old family home of the company’s founder. Employees in company towns have fewer alternatives. Low rates of attrition do not just lessen the costs and disruption that stem from replacing people. They also lead to deeper institutional memories and stronger relationships: retired Corning scientists act as mentors to current ones, for example. Confidentiality is also easier to maintain in comparatively remote places. Bill Gates’s decision to base Microsoft in Seattle rather than Silicon Valley was partly because it was easier to keep secrets there.Company towns seem to favour a more insular type of innovation as a result. A paper published in 2009 by Ajay Agrawal of the University of Toronto and his co-authors looked at North America’s most inventive locations. By examining citations of prior patents, the researchers found that large firms in company towns drew disproportionately on their own previous work to make breakthroughs. New patents were in turn more likely to be cited by other inventors within the same firm than were patents filed in more diverse locations.Being the boss of a big firm in a small town is likely to change the way that decisions are made. If the consequences of corporate decisions affect your neighbours, friends and family members, the incentives to make more considered choices are sharper. There is proxy evidence for this in research into the decision-making of hometown s, who are likely to have a greater attachment to the place where their company is located and more concern for their local reputation. Studies show that hometown bosses are less likely to cut research-and-development budgets in response to short-term pressures or to take corporate risks in the form of, say, greater leverage. Whether that sounds like long-termism or timidity depends partly on your point of view.Company towns can seem strange—cultish, even—to outsiders. God only knows what it is like to live in Billund if you don’t like Lego or Corning if you’re not a fan of glass. But their persistence is not just an accident of history. They have qualities that are worth reflecting on.
