by Georgina Peters

Cambridge University, one of the world’s oldest and most august seats of learning, is now at the heart of what is, arguably, Europe’s most significant high-tech cluster. Today, there are reckoned to be around 1500 knowledge-based companies in a 20-mile radius of Cambridge city centre.

Cambridge is not alone. A new generation of high-tech clusters is emerging throughout Europe. In the far north there is Finland’s Oulu. On the edge of the Arctic, Oulu was home to the first science park in the Nordic countries. Technopolis, founded in 1982 as the Oulu Technology Park, now has over 140 companies in its group employing 3,500 people. Then there is Kista, just outside Stockholm, and the star in the Swedish new economic firmament.

In addition to Silicon Fen, the UK boasts Silicon Ditch (the M4 corridor); Cwm Silicon – the Welsh version of the Valley based around Newport, Gwent – and a variety of other permutations. Elsewhere, fast growing Ireland has Silicon Bog and, in the far south of France, there is the technology park at Sophia Antipolis. In Germany the power of the cluster can be seen in the development of a multimedia and communications industry cluster in North Rhine-Westphalian – its showpiece include the Magic Media Coloneum, built on an old airfield in a Cologne suburb and which now has 20 film studios.

Clusters remain a potent economic force. We may be armed to the teeth with the latest technology, but geographic proximity is still important. The logic of clusters remains persuasive. Indeed, clusters have been a fact of business life for centuries. Red light districts are clusters, as are financial districts such as the City of London.

The continuing power of clusters is backed by hard data. In the mid-1990s, 380 local clusters in the United States were reputedly responsible for around 60 per cent of the nation’s output. Italian research suggests that being located in a cluster increases a company’s profitability by an average of 2 to 4 per cent.

Lilach Nachum and David Keeble of Cambridge University have examined the film industry cluster in London’s Soho. They found that over 65 per cent of foreign-owned film producers and distributors operating in the UK are Soho-based. The lure is common to many other clusters – "The fragmented nature of film production, in which many people with different skills are involved, requires co-operation of many different activities," conclude Nachum and Keeble. "Personal connections play an important part in an on-going process of selection of service providers and freelance employees, put together for the creation of a single film. There is a need to become insiders to the cluster in order to acquire the knowledge and build the trust necessary for the successful establishment of these ties."

Of course, the mother of high-tech clusters is Silicon Valley. "Silicon Valley is the most innovative industrial centre in the world. But it still needs to be measured against the standards of industrial clusters. If you look at history, clusters often disappear. Some, like Hollywood, survive," say John Micklethwait and Adrian Wooldridge in their book A Future Perfect. "There are industrial reasons why Silicon Valley will lose ground. The Valley has a fascination with cool ideas rather than products. And, over time, more suits will move in. Some elements of the social divide in Silicon Valley are not acknowledged. There are also infrastructure problems which will not be solved by the next cool idea. While Silicon Valley is good at creating wealth, it is less good at doing something with this wealth."

For Europe, the fact that clusters grow old poses both a warning and an opportunity. The opportunity lies in learning from the experience of Silicon Valley and creating genuinely powerful high-tech clusters.
"I've heard endless discussions about how we can make Europe’s Silicon Valley here. But we shouldn't try to imitate Silicon Valley. We have to figure out how to make it work here in Europe," says Suzie Gilbert of Cambridge-based jumpleads.com.

In practice, European clusters have proved more than willing to learn from the best. Cambridge’s Innovation Centre is based on an equivalent in Salt Lake City; its Science Park is inspired by that at Stanford; its Entrepreneurial Centre comparable to that at the Massachusetts Institute of Technology; and the Cambridge Network akin to an initiative called San Diego Connect.

There is also talk of Cambridge linking up with Oxford to create a high-tech and intellectual powerhouse. Oxford has its own high-tech centre on the outskirts of the city. Oxford Science Park, being developed by Magdalen College and Prudential Assurance, is now home to over 50 companies. It is still at a fledgling stage. Academic politics, however, remain rooted in the eighteenth-century. Oxford is still in the throes of building a business school which was roundly opposed. A golden high-tech arc appears unlikely.

Indeed, the Cambridge researchers Nachum and Keeble argue, paradoxically, that a critical factor affecting the success of clusters is their ability to establish linkages that go beyond geographic confines of the cluster. Their work suggests that policy makers should not only be occupied with strengthening the local linkages of firms, but also with drawing them into a global network of linkages.

Governments can lend a helping hand. France’s Sophia Antipolis has benefited from billions of francs from the French government. But, artificial cluster-creation only gets you so far. Entrepreneurial dynamism is rarely inspired by government diktat. The trouble with clusters is that tend to occur naturally rather than being created. They gather momentum mysteriously. Ultimately, market forces are what drives the competitive strength of companies within a cluster and, as everyone in business knows, markets are fickle forces.

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Georgina Peters writes for Business Life, Mastering Management Review and contributed to The Financial Times Handbook of Management.