Cluster theory: what makes a successful hub?

Cluster theory: what makes a successful hub?

Policy makers often spend a lot of time deliberating how to develop a successful cluster capable of delivering economic impact for the city, region, or nation. But how are such clusters or hubs developed? The UK innovation agency Nesta carried out some research recently to better understand the interconnectivity between government, academia and industry, and what drives local growth and incentivises innovation.

In its blog written by senior policy researcher George Windsor, ‘Building bridges: Understanding the organisations behind the UK’s creative tech clusters’, it presents a summary of results from the study of three creative tech clusters in the UK – Cardiff, Bristol and Media City, Salford.

Windsor says, “This exploratory research may have significant implications for policy makers, particularly in light of government interest in promoting creative cluster development through industrial strategy. By developing an empirical understanding of inter-organizational connections in creative tech clusters, we argue that policy makers can learn lessons from practice in specific places, and experiment with their application in others.”

He adds, “Clearly there should not be a cookie cutter approach to thinking about cluster development. But, building on the strengths and challenges that make a place unique, we can apply good practice to promote inclusive growth.”

Here we present its key reasoning and findings with extracts from George Windsor’s article:

A renewed focus on clusters creates important new agendas for local organisations

Cluster thinking suggests that companies have a tangible and important stake in the business environments where they are located. Performance of the business, and indeed the cluster as a whole, is intricately tied into the relationships companies have with one another alongside their links with non-commercial stakeholders.

Historically, companies thinking about competition and strategy have focused on what goes on inside their organization. But much of the research on clusters suggests that a good deal of competitive advantage lies outside companies. As such, some (like Michael Porter) have suggested that the unit of analysis has changed, from the company to the locations at which they are based.

As such, the health of the cluster is important to the health of the company. This makes sense – in its simplest sense, the more vibrant (economically, socially and culturally) a local area is, the more the area attracts new companies, investment and consumers. Therefore, other organizations, alongside companies, are increasingly important in providing an ecosystem of support to ensure sustainable and resilient economic growth.

A large – and growing – number of organizations representing the needs of companies and individuals are offering access to services like information and funding. Collectively, they form a powerful political and cultural force, and their activity is having an influence on the places they are based.

But to date there has been little work to understand how they interact with each other, government and companies at a local scale. In part, this is due to the difficulty in capturing what these organizations do. So this research focuses on one aspect: the networks they create.

To explore what connections look like in places across the UK, a summary of the findings is presented as a series of case studies. These case studies focus on insight from participants on connections and networks that they were aware of. These networks are viewed as structures that enable the flow of resources (such as knowledge, or capital) through organizations.

The diagrams used to illustrate how organizations fit together in these clusters are conceptual, and they’re intended to represent the shape and type of connections within networks, rather than the importance of connections, or the scale of the resources that flow from one body to another.

These network diagrams should be useful to 1) cluster stakeholders looking to understand potential for making connections with nearby organizations, and also to highlight unknown types of activity within their cluster; and 2) policymakers, both in the case study clusters and in other clusters, seeking to understand mechanisms used in other places to promote (or enable) networking and grow organizational connections.

Key bullet points from case studies:

Bristol

  • Organizations at different scales are pooling their resources to lead urban cluster development, a good example of this is collaboration through Watershed (a local invention and talent development program).
  • Informal meetups occur between stakeholders in Bristol as a result of formal organizational structures.
  • Inter-cluster connections, particularly with Cardiff, are leading to new relationships between universities and creative/ tech businesses. The role of third sector organizations is critical in brokering these connections.

Cardiff

  • Universities in the cluster are acting as knowledge hubs and convenors of peer based networks.
  • Cardiff’s peer based networks are international, but rooted in informal networking activities that happen in the city-region.
  • Welsh Government is acting as an incubator and experimenter, bringing together organizations for innovation in the creative and tech industries.
  • Local government is taking the role of a seed funder in place of developed startup funding for commercial and non-commercial projects.
  • New institutions are being formed through government/ university/ industry collaboration (such as the National Software Academy).

Media City, Salford

  • A small number of large broadcasting and education organisations are acting as anchors (such as the BBC) – they tend to have a digital tech focus, large and complex supply chains, and they connect the cluster with organizations across the North of England.
  • Salford City Council is acting as a public sector ‘digital entrepreneur’ – experimenting and testing new technologies to embed the digital agenda into schools, public services and engagement with business.
  • Informal meetups are ‘building’ cluster culture, they take a different form to Cardiff and Bristol – where these informal activities tended to mirror local organizational structures.

For the detailed descriptions of the three case studies and diagrams, read George Windsor’s article here.

[Main photo: Media City, Salford]

Share This Post