The nested structure of urban business clusters

Clémentine Cottineau,Elsa Arcaute

doi:10.1007/s41109-019-0246-9

Abstract

Although the cluster theory literature is bountiful in economics and regional science, there is still a lack of understanding of how the geographical scales of analysis (neighbourhood, city, region) relate to one another and impact the observed phenomenon, and to which extent the clusters are industrially coherent or geographically consistent. In this paper, we cluster spatial economic activities through a multi-scalar approach making use of percolation theory. We consider both the industrial similarity and the geographical proximity between firms, through their joint probability function which is constructed as a copula. This gives rise to an emergent nested hierarchy of geoindustrial clusters, which enables us to analyse the relationships between the different scales, and specific industrial sectors. Using longitudinal business microdata from the Office for National Statistics, we look at the evolution of clusters which spans from very local groups of businesses to the metropolitan level, in 2007 and in 2014, so that the changes stemming from the financial crisis can be observed.

Highlights

According to (Malmberg and Maskell (2002), p.430-1), "there are several reasons to take the issue of spatial clusters seriously
One is that spatial clustering is at the very core of what research in economic geography is all about. [...] There is a lot to learn about the role of proximity and place in economic processes by trying to pinpoint the driving forces that make for the agglomeration in space of similar and related economic activities [...] Second, this task has obvious policy relevance today"
The Business Structure Database7 (BSD) "is derived primarily from the Inter-Departmental Business Register (IDBR), which is a live register of data collected by HM Revenue and Customs via VAT and Pay As You Earn (PAYE) records. [...] In 2004 it was estimated that the businesses listed on the IDBR accounted for almost 99 per cent of economic activity in the UK"8

Summary

Introduction

According to (Malmberg and Maskell (2002), p.430-1), "there are several reasons to take the issue of spatial clusters seriously. If the "current vitality emerges from the risky experimentation across co-located sectors in which hitherto unrelated knowledge and activities (for example, software and advertising) are being combined" (Foord (2013), p.52), it suggests that any successful sectoral combination at present might not be so successful in the future, which instead should benefit newer risky combinations. This highlights the need for a better understanding of the inner (industrial and spatial) dynamics of clusters and the overarching organisation of urban economies driving individual firms’ relocation strategies, for analytic purposes as well as for policy efficiency

Methods

Results

Conclusion