GaWC Research Bulletin 184

(A)

Cluster Dynamics, Cluster Development and Innovation: Insights from Broadcasting in Three UK City-Regions

G. Cook* and N. Pandit**

Abstract

This paper provides insights from two major studies of the broadcasting industry. The first was a two-year comparative case study of three important city-regions in the broadcasting industry in the UK, based on the cities of London, Bristol, and Glasgow. The first drew on 72 semi-structured interviews with industry practitioners and policy-makers. The second was an in-depth questionnaire survey of broadcasting and related media activities in London drawing some 204 usable responses. Both studies clearly indicate that the sources of advantage firms in these strong media clusters gain are typical of those found in leading manufacturing clusters. Above all, personal relationships are easier to build and maintain in a compact space and help both knowledge flows and also the close cooperation of many specialized suppliers, underpinned by trust, to deliver complex products and services to demanding customers. In each case the size and reputation of the major broadcasters is a powerful contributor to the health of the cluster. The behaviour of these major broadcasters is more amenable to national than local regulation. London as headquarters to the BBC and so many other broadcasters is on a completely different scale to other regional broadcasting centres in the UK. The research does show that persistent, joined-up policy can make a difference as it undoubtedly has in the case of Glasgow.

Keywords: Clusters, broadcasting, city-regions, innovation

INTRODUCTION

Geographical clustering is an important characteristic of economic activity and has recently become the subject of intense interest in academic (see Clark et al., 2000), business practitioner (The Economist, 1999, Owen, 1999) and government policy (DTI White Paper, 1998) circles. In the UK and more widely, the promotion of industry clusters, typically based on Porter’s (1990, 1998) conception and explicit policy recommendations, has become a centrepiece of regional development policy. Developing an understanding of variable performance among cultural industries in different city regions is important given the prominence now given to culture-led development strategies (Bayliss, 2004, Kong, 2000) and in particular to basing such strategies around “clusters” of creative industries (DCMS, 2001). The basis, if any, for such policies requires critical review in the light of Martin & Sunley’s (2003) recent trenchant criticism of the idea of clusters as an adequate basis for local economic development, namely its vacuuousness as a concept and the lack of any evidence or logical argument that cluster based policy will lead to superior results to more conventional and non-cluster specific business support and regional policy.

This paper provides insights from two major studies of the broadcasting industry. The first was a two-year comparative case study of three important city-regions in the broadcasting industry in the UK, based on the cities of London, Bristol, and Glasgow. These three are among the most successful city-regions in broadcasting in the post-deregulation era. London is highly dominant and despite being of approximately equal size Bristol has been more dynamic and successful in international trade in television programmes than Glasgow. The second was an in-depth questionnaire survey of broadcasting and related media activities in London drawing some 204 usable responses.

ALTERNATIVE EXPLANATIONS OF RELATIVE CLUSTER SUCCESS

As an analytical device, differences in the success of particular clusters might be attributed to three possible sources: the nature of the city/city-region in which it is located; the nature of the cluster itself; the connectivity of the city/region/cluster at wider spatial scales. Clearly there is a considerable overlap between characterizations of the city and the cluster and important elements of one may be important elements of the other. Nevertheless, this division reflects particular focuses taken in the literature.

City-Based Differences

Cultural industries are highly concentrated in urban locations (Hall, 2000, Power, 2002, Scott, 2000). A distinction has long been made in the literature ( Hoover, 1948) between two potential sources of city dynamism, urbanisation economies, which refer to the benefits of size and diversity within a city, and localisation economies which refer to the benefits of large scale in a particular industry in a particular location. Localisation economies essentially relate to the classic Marshallian (1920, 1927) externalities of an extensive labour pool, the formation of specialised inputs including suppliers, specialised education and training and physical infrastructure and finally technological spillovers. A leading and long-time advocate of urbanisation economies is Jane Jacobs (1972, 1985). Jacobs identifies innovation as a “master economic process” which lies behind the growth of dynamic cities. These dynamic processes are supported by competition, diversity and scale within the city and openness to external flows of goods and services. There is no clear cut evidence either way regarding the relative empirical importance of these two types (Ciccone, 2002, Ciccone & Hall, 1990, Glaeser et al., 1992, Henderson, 1986, Henderson et al., 1995, Viladecans-Marsal, 2004).

Scott & Storper (2003) suggest that the superior economic dynamism of cities rests on the coexistence of four key factors: economies of scale in capital intensive infrastructure; dynamic forward and backward linkages among firms; dense local labour markets; and localised relational assets promoting learning and innovation. Cooke & Morgan (1998), in an influential work, put emphasis on regional governance as a key influence on regional development and in particular innovation, particularly in the fostering of the localised relational assets to which Scott & Storper refer. The volume and sophistication of demand within the city may be critical (Kitson et al., 2004, Porter, 1990). In Porter’s conception sophisticated, demanding customers will drive quality standards and innovation (von Hippel, 1988). The existence of concentrated demand for specialised services also provides an incentive for workers to invest in specialised skills and competencies (Scott & Storper, 2003), which is another dynamic of cumulative causation. Entrepreneurship is also important to regional prosperity (Camagni, 2002), however it is not clear to what extent this is determined by purely local factors as Camagni suggests. National level institutions are generally held to be influential (Acs et al., 2005). There is nevertheless evidence of a link between creativity and entrepreneurship at the regional level (Lee et al., 2004). Coe & Townsend (1998) argue that the greater “entrepreneurial culture” of the South East has been an important factor in the dynamism and growth of the region.

An important city-specific factor is “quality of life”, which is a very important consideration in terms of the ability of a city to attract the highest quality and most creative labour (ODPM, 2004). This has a variety of dimensions such as quality of schools, cultural amenities (Turok, 2004), tolerant social milieu, availability of good housing at an affordable price. Florida (2002) places considerable emphasis on tolerance and a lively cultural and creative milieu. Important features of environments which are attractive to creative people are that new members may be quickly assimilated into networks but also not too tightly bound in as such people value the flexibility to move freely between projects and employments. In common with others Florida notes an empirical connection between places which have high concentrations of creativity broadly defined and those with high rates of high technological innovation.

Cluster Type

The literature abounds with different typologies of geographic concentrations of economic activity (McCann & Sheppard, 2003). Markusen (1996) argues that these different types have different implications for the success, variously defined, of the cluster and for its sustainability. One might go further and argue that what matter in addition are: the “mass” of the cluster; the extent to which the processes indicative of the cluster type are formed; and the “fit” between cluster type and line of activity. Gordon & McCann (2000) characterise three ideal types. Their pure agglomeration type is akin to a Marshallian Industrial District and is characterised by minimal interaction and co-operation among firms, yet reaps the classic Marshallian advantages of labour market poling, specialised inputs shared among firms and technological spillovers (Marshall 1920, 1927). Non-traded inputs may include rivalry, sophisticated customers and a favourable supply of finance. Their industrial complex type is based around highly interdependent groups of firms typically in the context of a high volume manufacturing process, into which entry by new firms is essentially foreclosed. Their third type, the social network, is one where interpersonal relationships and trust underpin co-operation in pursuit of mutually beneficial goals. In such a network there is apt to be a cumulative development of social capital which is an important dynamic of growth. The formation and reproduction of social capital is held to be easier with a higher degree of physical propinquity.

Boggs & Rantisi (2003) have argued that while there is a growing appreciation of the importance of relations between economic actors for economic performance much remains to be learned about the nature of these relationships and how they influenced by spatial scale. Some arguments exist in the literature as to why proximity matters. Malmberg & Maskel (2002) and Bathelt & Taylor (2002) argue, akin to Porter (1990), that collocation promotes benchmarking and competitive rivalry that may be a stimulus to dynamic efficiency, including differentiation. Horizontal disintegration is important as it creates multiple avenues along which experimentation takes place, providing a more fertile environment for innovation. Thus horizontal relationships among firms are argued to be on a par with the vertical relationships which are more usually given primacy. Malmberg and Maskell hypothesise how vertical processes in agglomerations assist knowledge and learning. Drawing from Adam Smith (1776), they maintain that the high level of demand that exists within agglomerations allows for a fine division of labour and so very specialised suppliers will spot opportunities to innovate and will have greater incentive to exploit those opportunities than more generalist firms. Bathelt et al. (2004) concur and go on to emphasise that the generation of new knowledge by highly specialised firms provides a self-reinforcing dynamic, providing multiple opportunities for the combination of different strands of knowledge to formulate further innovations, akin to the innovation processes in cities described by Jacobs (1985).

The concept that underlies both horizontal and vertical mechanisms is tacit knowledge which Gertler (2003, p. 79) argues is “… the most important basis for innovation-based value creation.” Tacit knowledge is sticky in geographical space because its acquisition can only occur through social interaction (observation, demonstration, imitation, correction, repetition etc.) which is greatly aided by geographical proximity especially when such proximity is coupled with the contextual homogeneity or ‘common culture’ that exists within agglomerations (Morgan 2004, Pinch et al. 2003). One important feature of Gertler’s argument is the emphasis placed on the creation and use of tacit knowledge in production, rather than simply dreaming up ideas, which is the impression conveyed in some of the literature on learning regions and innovative milieux (Camagni, 1991, Capello, 1999).

Very recent work in economic geography has elaborated on the generation and diffusion of tacit knowledge by focusing on the role of face-to-face contact. Storper and Venables (2004) unpack four main knowledge and learning benefits of face-to-face contact: (1) that it can be an efficient communication technology; (2) that it can enhance trust and incentives in relationships; (3) that it can improve screening; and (4) that it can motivate extra effort. When important knowledge is tacit, face-to-face contact works well as a communication technology as it allows uniquely rich exchange. With respect to the second benefit, the better observation and interpretation of another person’s behaviour that face-to-face contact allows reduces information asymmetry with the result that parties are more likely to be honest and trustworthy and less likely to free-ride. This is particularly important when teamwork between firms is necessary. With respect to the third benefit, face-to-face contact improves screening because it involves loss of anonymity, allows judging and being-judged and facilitates the acquisition of shared values. Successfully screened individuals are admitted to ‘the loop’ in which certain tacit knowledge is shared. Storper and Venables (2004) collectively label the four benefits of face-to-face contact as “buzz” and conclude that, “To be able to reap these benefits in full almost invariably requires co-location, rather than occasional interludes of face-to-face contact.” (p. 365, emphasis added).

Networks of Cities and Firms

Jacobs’ analysis clearly lays considerable importance on the nature of external linkages a city has, a point also emphasised by Hall (2000) as a powerful contributor to periods of creative flourishing in cities. This view has been articulated even more strongly in Pred’s (1977) theory of city-systems, wherein the fortunes of particular cities are bound together by flows of goods, services, capital and information such that what affects one will affect all. An important corollary is that the spillovers will be stronger to other cities in the system than to the immediate hinterland of any particular city in the system. What is particularly important in Pred’s view is the flow of information spread through face-to-face contact. In one important dimension this information will relate to factors pertinent to location decisions, both expansions and new start-ups. The second important dimension is innovation, with other cities in the system being more likely to hear about and adopt innovations arising in other cities in the system before those outside the system do.

Much emphasis is placed in Pred’s analysis on the importance of multilocational organisations (which may or may not be multinationals) as they will tend to be particularly wide conduits through which flows of goods, services, capital and information may flow (Cumbers & McKinnon, 2004). In a seminal article, which while it does not build explicitly on Pred adds some important flesh to the idea of linkages between cities, Amin and Thrift (1992) argue persuasively that the emphasis on local production complexes is overdone for several reasons. Models which are locally based do not recognise the importance of emerging global corporate networks and interconnected global city regions (Scott et al., 2001). They argue that centres are needed within which to generate and disseminate discourses, collective beliefs, stories about what world production filieres are like and to develop, track and test innovations. Within such centres they need contacts with numerous knowledgeable people to help spot gaps and find new uses for technologies.

Bathelt et al. (2004) suggest that multinationals provide important “pipelines” within which tacit knowledge (among other types) can flow in a way which would be less easy between third parties at equivalent distance. Nachum & Keeble (2003a, 2003b) point out that there is comparatively little known about the relationship between internal MNE advantages and external cluster advantages, the latter to some degree attracts the former but multinationals themselves may create some of those cluster advantages not least by bringing external knowledge and ideas into a particular cluster. In respect of being nodes in global innovation systems which can attract leading multinationals, Cantwell and Iammarino (2000) suggest that a necessary condition for a particular location being a “principal actor” is a “minimum threshold stock of technological competence” (p319) (although it is not clear how this could be objectively measured). To stay in the game a region must have the ability constantly to upgrade the quality of the local competence.

LONDON , BRISTOL AND GLASGOW COMPARED

Before turning to a consideration of the broadcasting industry per se, attention will be given to the general context provided by each city and its governance. Sweeting et al. (2004) identify that each city has a different mode of governance. London is characterised as having designed and focused leadership centered on the mayor and the Greater London Authority. Clearly this regime is of very recent origin (Haywood, 1998) and essentially the shape of the broadcasting sector in London was established before such a degree of coordination came into being. Westminster Council which has responsibility for Soho, the heart of the broadcasting cluster in London, does little bar collect the business rates. Bristol is characterised as having implicit and fragmented leadership, which echoes other studies which have concluded that Bristol has had unhelpful governance in at least two respects. Firstly, Bristol has suffered from fragmented and uncoordinated policy control across the functional city region. Secondly, Bristol has essentially seen a laissez-faire policy approach which is perhaps a polite way of saying there has been no coherent policy, especially as concerns the cultural industries. Glasgow is characterised as having emergent and formative leadership which is typified by reasonable cooperation among agencies and a practical approach to getting the job done. Whilst Sweeting et al. base this characterization on an analysis of policy in health, it seems accurate as a portrayal of policy towards the cultural industries, identified as a priority by Scottish Enterprise, and television specifically. Glasgow has had the most concerted policy of supporting the creative industries. Essentially, although the focus on creative industries has gone under the banner of a “cluster” strategy, in reality it has been a classic business support strategy centred on developing the capabilities and strategies of individual companies rather than pursuing some more nebulous end such as “greater networking”. This comes in the context of what is viewed as being generally effective support for SMEs in the city. Companies have improved on their business planning in conjunction with private consultants, facilitated by Scottish Enterprise and the Glasgow Film Office. The emphasis now is more on market development and exploiting their intellectual property more fully.

Glasgow has been identified by Turok et al. (2004) as possessing a number of general advantages, some of which weigh more heavily than others in terms of supporting the creative industries. Glasgow has effected an impressive transformation from an image of heavy industry and decline through initiatives such as “ Glasgow’s Miles Better” and the European City of Culture, helping provide a focus for a culture-led regeneration strategy (Garcia, 2005). It is now an important retail, leisure and cultural centre and particularly in creative circles is seen as a favourable milieu. Glasgow also boasts both cheap labour and readily available graduate labour. In addition to its many cultural and leisure amenities, Glasgow offers attractive housing in its fashionable West End to tempt highly skilled and educated labour. Boddy et al. (2004) identify three particular advantages which Bristol enjoys as a business location. Firstly, it has excellent transport connections to London and Heathrow airport, therefore is well connected nationally and internationally. Secondly, it has access via the M4 to a wide labour catchment area, including a wealth of technical and professional staff. Thirdly, the cultural and physical attractions of the city and its environs supports inward migration and retention of high calibre labour.

The following table illustrates how the cities compare across a range of factors considered in a recent government report on the competitiveness of UK cities (ODPM, 2004) report across its six “critical” characteristics of urban competitiveness (* indicates that Bristol is the highest ranked of the English core cities, i.e. not including London). Edinburgh is included as at the beginning of the 1990s it was a broadcasting centre of roughly equal status to Glasgow, the latter succeeding in attracting almost all Edinburgh’s broadcasting activity over the last decade. Bristol emerges as also having a relatively strong performance in terms of the percentage of population with third level education, the percentage of employees working in high tech services and to a somewhat lesser extent knowledge intensive services. London also has a considerable advantage in terms of early stage and expansion venture capital and also business start-ups per 10,000 of population, however in both respects the South West comfortably outperforms Scotland. In sum, in almost every respect London eclipses the other two cities under consideration, understandable given its position at the apex of the hierarchy of world cities (Beaverstock, et al., 1999, Taylor et al., 2002). What is more, Bristol is seen to have some important advantages over Glasgow in terms of connectivity to London, innovation and entrepreneurship.

Table 1. Ranking within top 61 Cities in Europe

Source: ODPM (2004)

CLUSTER TYPES IN BROADCASTING

The characteristics of some of the key regions in the broadcasting industry are shown in tables 2 to 4. Table 2 illustrates two important facts. Firstly, London dwarves all other regions in terms of employment. West London is dominated by the headquarters of the BBC. This dominance is reinforced by similar dominance in allied industries such as publishing, music and entertainment (Turok, 2003). Secondly, there is a highly skewed pattern of employment. Table 3 provides a set of standard location quotients, focusing more narrowly on broadcast and broadcast related activity. Again this underscores the dominance of London, which is especially marked in film distribution, cable and satellite broadcasting, post production and special effects and commercials production. The South West stands out in particular for its relative strength in animation. Table 4 shows what proportion of the total labour force is freelance. Three important features emerge. Firstly, the audio visual industries in general have a high proportion of freelance labour relative to the overall national average. Secondly, there is a high degree of variation among lines of activity in the proportions of freelance labour. Thirdly, one thing which distinguishes Scotland is the very low proportion of freelance labour in post production (the true proportion is above zero but appears as zero in the table due to rounding). London has by far the largest absolute amount of freelance workers. There are some other important differences among these three broadcasting centres which it is important to bear in mind. London has a very well-developed independent production sector across all genres. Glasgow is on a much smaller scale but also has its independent activity more spread across different genres than Bristol which has a notable emphasis on natural history programme making, factual programmes and animation. Glasgow, as distinct from Bristol, is a national capital.

Relational Assets

An important section of the questionnaire asked about why it was important to have close proximity to other firms in London. Collectively these factors achieved the highest ratings, with prime importance being placed on face-to-face contact and interpersonal relationships, providing three of the top ten benefits of a London location. Face-to-face contact is significantly more highly rated than maintaining personal contacts and emerges as the pre-eminent factor. Maintaining personal contacts in turn is significantly more highly rated than building relationships of trust. Why should these two things be so important? Here the interview evidence across all three cities was strong and consistent. In large part it is due to the fact that what is being created is most importantly an image and sound which will convey meaning. These are cultural artifacts whose most important qualities are the extent to which they convey meaning, emotion and information. This makes it of paramount importance that those who are engaged in their production understand the meaning which is to be conveyed. In order to come to that understanding, communication with the maximum “bandwidth” is required, i.e. face-to-face contact. A network of personal contacts smoothes the path of creative production in a variety of ways. It allows teams to be assembled quickly in order to carry out what by most industry standards is a short-term project with the assurance that those engaged will be able to understand and produce what is required (Sydow & Staber, 2002). Producers and editors in both broadcast, film and advertising media often work hand in glove as the final product is fashioned during post production. Here there can long, intense days where by a process of verbal and nonverbal communication the end result that is desired is fashioned. It is also important for allowing a frank exchange of views to take place without lasting offence or a breakdown in relations occurring.

Table 2. Numbers Employed In the Audio Visual Industries By Sector and Region

Source: Skillset

Table 3. Location Quotients in Selected Regions in Broadcasting-Related Industries

Source: Skillset; ONS

Table 4. Percentage of Employment Which is Freelance By Line of Activity and Region

Source: Skillset; ONS

Note: blank cells indicate the region has no or minimal employment in a particular line of activity, 0 indicates no freelance employment in a particular line of activity

It is commonplace for those working in the industry in London to talk about the importance of "the buzz" (Storper & Venables, 2004). This refers to the constant flow of ideas, gossip and rumour which inform people about the latest thinking on what are considered to be commercially viable ideas. This element of buzz in cities is seen as being especially important in respect of information-rich industries like the cultural industries (Turok, 2003). Soho is renowned for its clubs, bars and restaurants which provide important social spaces where those in the industry can meet and talk. One aspect of this is that the “buzz” of London creates a constant flow of ideas which can contribute to the alchemy of a novel idea. As one respondent put it “It’s like sitting under a waterfall.” A second important aspect of that buzz underpins the reputation system, with much gossip devoted to who is currently doing good or bad work. Bristol and Glasgow do not benefit to the same extent since their broadcasting and wider cultural industries clusters are so much smaller and less connected to international flows of people and ideas. Glasgow also has a lower degree of interaction among individuals and firms, in part due to a lower degree of physical propinquity.

Tacit knowledge is an important element throughout the industry. In broadcasting and production a feel for what the audience wants and how to deliver it is not codifiable knowledge. Similarly, the craft of acting or performing stunts is not something which can be learned from a book. Access to the relevant craft community is granted by certain rites of passage. This ensures appropriate socialisation, imbuing the individual with attitudes, norms of behaviour and linguistic competence. A strong theme in the important literature of innovative milieux is that one of the keys to superior innovation in regional innovation systems is the ability for firms who may do quite different things, to share ideas through the ability to talk a common, or at least common enough, language. What goes for innovation also goes for production. Membership of the appropriate community is an important foundation of trust. Among the important norms which are characteristic of creative people is value of individuality and creativity, hard work, challenge and the acquisition of a favourable reputation among peers. Underpinning these is the high value placed upon the intrinsic rewards of plying one’s craft in the best possible way (Caves, 2000, Florida, 2002). Adherence to these norms and reliability in a crisis are important dimensions of personal reputation in creative communities.

Close proximity is important not only to be in touch with the flow of ideas from which innovation may spring but also to work out how ideas may be translated into products which ultimately relies on pooling the know-how of a diverse set of (economic) agents. There is perceived to be something of an "alchemist’s art" in programme making with the success of the end result perceived as being uncertain and unpredictable. This inherent uncertainty redounds to the importance of trust and reputation which permeates the production system in broadcasting. An independent production company may get a commission on the basis of the reputation of a key producer. The producer may then bring in a trusted director. The director will bring in a trusted cameraman. The cameraman will bring in trusted assistants. Each is being brought in on the basis of an established reputation which they put on the line with each project and which they must at all times defend. The dread prospect of being associated with a “turkey” hangs over all and is the broadcasting equivalent of receiving the black spot.

The Labour Market

The labour market is of undoubted importance in broadcasting clusters. From the employer's point of view, London is an attractive location, despite the obvious congestion, because it offers such an exceptional pool of creative talent relative to other areas of Britain. There is clearly a dynamic at work where the reputation of particular regional centres, above all London, attracts talent which makes the centre a more desirable place to do business and so on (David & Rosenbloom, 1990, Nachum and Keeble, 1999). The strong pull of London on highly skilled labour is indicative of a much wider trend (Dorling & Thomas, 2004, Treasury, 2001). Most recruitment is done from the local labour market, although specialist skills may be sourced from much wider afield. In this regard London’s labour market has far more extensive and powerful spatial reach than either Bristol or Glasgow. London enjoys this privileged position because it offers the highest financial rewards and the most prestigious projects. An important counter-example is Bristol, which is the premier location for natural history producers, based around the Natural History Unit of the BBC (Bassett et al., 2002). Here anyone who aspires to work at the highest level in this genre has to operate in this location.

The fine-grained division of labour which has been achieved in London has several benefits. Firstly, it multiplies the range of possibilities for production in London. Related to this it is a source of advantage to the London cluster as it can provide specialised services which are not available elsewhere in the UK and possibly at very few locations globally. Thirdly, it contributes to innovation. Finally, it is likely to lead to higher levels of skills within particular occupations or crafts within the industry. The latter two points are partly related to the fact there are denser “craft communities” within London where ideas can be exchanged to mutual benefit. Glasgow was generally described as having a “maturing” labour market. As the independent sector has grown so this has encouraged a process of labour market formation, one aided by a fair degree of mobility between film and television. Both Glasgow and Bristol suffer from the drain of talent to London, although this appears to be somewhat more troublesome for Glasgow. The reason is that Bristol is higher up the pecking order in its three main genres of natural history, factual and animation than Glasgow is in any of its, lessening the relative attractiveness of London. Both also suffer from not having the critical mass to ensure year round working for many staff. Again in this regard Bristol benefits from its focus on a small number of genres as skills, e.g. as producer or director, are typically genre specific.

Dynamic Vertical and Horizontal Linkages

All three cities benefit from the complementarities between broadcasting, film and advertising, London to the greatest extent due to vastly greater scale and specialisation. Glasgow suffers somewhat from the fact that much advertising activity is centred in Edinburgh. London benefits from the presence of a major concentration of advertising activity in a variety of ways. Advertising requires a sophisticated and innovative post production sector and this has beneficial spillovers for broadcasting, although chiefly for higher end programmes. The creative dynamism of post production feeds into the creative dynamism of programme production. The existence of high budget advertising clients in London also allows some post production companies to price discriminate and therefore cross-subsidise work done for television production companies who are typically working to much tighter budgets. These linkages are far weaker in Glasgow. The greater abundance of post production houses, facilities and studios in London enabled the growth of a diverse independent production sector as it lowered entry barriers. Capital costs could be avoided as requisite equipment was readily available for hire, including highly specialist equipment. Indeed, the two have grown in a symbiotic relationship. What is noticeable about Bristol, relative to Glasgow is the extent to which it has developed a leading edge independent post production and graphic design sector, such as Films@59, Burrell Durrant Hifle and 4:2:2, all spin outs from the BBC. London also benefits from a plentiful supply of studios of various types, infrastructure chiefly conspicuous by its absence in Glasgow.

Aspects of an industrial district type of cluster in production and post production are the result of two events which changed the nature of the broadcasting industry. The first was the establishment of Channel 4 in 1982 as a broadcaster without its own in-house production capability. Almost immediately a comparatively large number of independent production companies emerged, many choosing to locate in the vicinity of Channel 4’s original headquarters in Charlotte Street (Allen and Miller, 1994, Lambert, 1982). The second major change was the Broadcasting Act 1990 which inter alia brought in competitive tendering for ITV contracts and obliged the BBC and ITV companies to commission 25% of most types of new programmes. Both of these gave a further impetus to independent production ( Renton, 1994). The radical shake up of the industry led to downsizing on a substantial scale on the part of both the BBC and the ITV companies. Spin-offs from the major broadcasters appear to enjoy some of the benefits which spin-off firms are seen to profit from in the literature on clusters more generally. Those with backgrounds in the major broadcasters are imbued with knowledge about their organisational routines and so are easier for the major broadcasters to work with in the first instance because they understand the norms and rules which govern how business should be conducted, underscoring the importance of social institutions supporting efficient production in a decentralised system (Sydow & Staber, 2002). Spin-offs in London are much better placed than those in Bristol and Glasgow in so far as London allows the classic cluster benefits to new firms of density of demand and a specialised supply infrastructure to tap into. This interplays with London’s palpable lead as a centre for entrepreneurship over Bristol and Glasgow.

The size of the London cluster allows considerable specialisation, with firms offering high quality at low prices due to the fact that the cluster is large enough to allow specialisation to coexist with effective competition (Nachum and Keeble, 1999). There is constant innovation in terms of an incessant search for new products and also the ability to exploit new technologies to improve quality and lower cost. The new independent production companies are entrepreneurial and innovative. Innovation in programme production all hinges on coming up with successful series or formats. The trade association for production companies, PACT (1998) reports that since 1992 almost 40% of new television formats have come from the independent sector, which at the same time was responsible for about 17% of new output. Between 1990 and 1998 23 of the 32 Golden Rose awards at the Montreux Festival awarded to British firms were won by independent companies. Similarly, between 1992 and 1998 49% of Royal Television Society awards went to independent companies. They are successful because they can encourage creative talent to express itself in a way large organisations cannot. Independent companies, including distribution companies, also contribute to growth dynamics by their aggressive pursuit of international sales. In respect of the latter Bristol is privileged relative to Glasgow by the presence of the BBC’s Natural History Unit, the world’s most important maker of natural history programmes and also by the fact that natural history programmes and animation two of its three key genres are typified by a relatively low “cultural discount” in international sales.

There does appear to be a balance of competition and co-operation in the industry, yet it is more nuanced than some of the leading literature (Porter, 1990, Saxenian, 1994) implies. Companies do benchmark against each other in a way entirely consistent with the account of Porter (1990). Particularly in London, there is fierce rivalry between some of the leading independent production and post production houses and, in a less personal way, between the major broadcasters. This rivalry is most acute at board level (the word hatred was occasionally used), yet even in these instances can be tempered by past relationships either working at a major broadcaster or even being together in the Footlights society at Oxford University. Rivalry appears to be less acute in the regional centres, in part due to the persistence of “lifestyle businesses” where the primary motivations of the proprietors are artistic and cultural rather than commercial. This rivalry breaks down, however, lower down the organisation where craft technicians, production managers and above all engineers, co-operate with each other. They do so for two chief reasons. Firstly, it is important to getting the job done – they help today because they may need help tomorrow. Secondly, they have a professional allegiance to their craft which transcends their personal allegiance to their company. There are norms of sharing information provided it does not directly compromise commercial interests.

Hub Firms

The strength of the broadcasters at the hub of the cluster is critical. Bristol and Glasgow are on a roughly comparable scale as broadcasting centres and both are dwarfed by London. London is the headquarters of the BBC, ITN, Channel 4, Channel 5 and now ITV. It also hosts the headquarters of all the significant satellite and cable broadcasters. These broadcasters are particularly important as they act in an important way as financiers of much of the independent programme production sector. They absorb risk by offering cost plus contracts and also provide stage payments which help cash flow. The major broadcasters in London control far more financial resources than do their satellite operations in the regions, reflecting the historical centrality of London in programming (Crissell, 1997). What is more, specialist venture capitalists and other forms of “patient capital”, while not of enormous significance, are better developed in London than in the regions.

London is also home to some powerful multinationals such as AOL-Time Warner, Paramount, Disney, Liberty Media and also in equipment supply such as Phillips and Sony. The development of global production and distribution networks by media multinationals has been of growing importance in recent years (Langdale, 1997). Such multinationals are of great importance as they represent important sources of demand as well as possessing extensive know-how in terms of leading edge technology, demand forecasting and marketing and distribution. Overseas media multinationals are overwhelmingly attracted to London for four key reasons. Firstly, London is a major cultural metropolis and therefore a vital node in the global industry. Secondly, the UK is an important market, especially for film and television exports from the United States. It is also a very convenient location from which to base sales to continental Europe. Thirdly London is a very important global hub of production in both film and television, second only, albeit a distant second, to Hollywood and is a prime site for “runaway” production from Hollywood itself (Scott, 2002). Finally, London is immensely important as a centre of creative and technological innovation in the industry, in ways the next section will elaborate upon.

Demand is a fundamental in location decisions. In the UK system much depends on the personal judgment of the commissioning editor about what will work and what won’t. This places a premium on proximity for two main reasons. Firstly it economises on transaction costs as it is important to meet regularly with commissioning editors and others in the industry to keep up to date with the latest thinking on what types of programme are being sought. Secondly, personal relationships with commissioning editors can be important in getting a hearing in which the opportunity may arise to convince them that the company has a viable idea. From the broadcaster’s point of view being located in London has distinct advantages, particularly in terms of trying to make sense of where consumer preferences are heading. Within the cluster generally, there is constant discussion of what works and does not work in television programmes and commissioning editors in London tap a rich vein of ideas regarding what types of programme to make next to appeal best to the vagaries of consumer tastes.

In general the broad features of why proximity matters from the demand side are common to all three cities. Several things differentiate them, however. Firstly the concentration of demand both domestic and international in London is massive compared to Bristol and Glasgow. Bristol is, however, a focus of demand for natural history programmes and to a lesser extent animation. Demand for natural history in particular lends itself to export sales as it is less culture-specific than other genres such as comedy.

Innovation in the London Cluster – A Vignette

Technological spillovers are particularly important between suppliers of specialist equipment, broadcasters, programme makers and providers of production services. As documented by Dominick et al. (1993) and Inglis (1990) there has been, from the inception of the industry, a close link between technological advance and the growth and development of broadcasting, a connection which is still powerfully present, most obviously in the advent of satellite and digital systems (Weymouth and Lamizet, 1996). Technological change enhances the range of possibilities in terms of both quality and the type of programme production. Yet there is a chicken and egg problem in so far as technological innovations are worthless without appropriate creative input to produce programmes people want to watch. Thus it is vital for successful innovation that there be a link between broadcasters, equipment manufacturers and programme producers to generate improvements which lead to programmes which are successful in the marketplace. There was no ambiguity in either questionnaire or interview evidence that it is vertical relationships rather than horizontal which are the more important in terms of the innovation process, although horizontal disintegration and proximity do provide the type of benefits indicated by Malmberg & Maskell (2002).

The interplay between local and global scales is particularly well illustrated by the relationship between innovation in the post production and equipment sectors. Similar comments could be made with respect to broadcasting and programme production. Competition in both sectors is driven by innovation. Being first to be able to offer a new innovation allows a post production company, and indeed in turn the manufacturer, the ability to earn what is typically a short-lived innovation rent. Imitation inevitably follows quickly and what was once fresh and striking very quickly becomes passé and clichéd. Innovation depends on both having the right equipment and the personnel who can operate it. Very often staff moves are linked with the acquisition of new equipment and software or major upgrades and flurries of staff moves often accompany waves of adoption of new technologies. The technology is worthless without the creative talent to exploit it and the top creative talent will only be attracted if it has the best and latest equipment with which to work. London is able to attract top talent from around the world, which means there is a very well developed labour pool of talented and energetic creative people who are willing to experiment and drive innovation forward. These people are attracted by the ability to do the most demanding and creative work using the latest technology. What is more there is competition among these creative people for reputations which provides a further competitive impulse to innovation. Labour mobility via spin-outs, often to exploit a new innovation, is also a distinctive feature of the industry (Cook & Pandit, 2005).

Both Soho post-production and the Thames Valley manufacturing clusters have the common distinction of being important nodes in a global industry, between which there is considerable interaction, not least via their respective engineers. Both have in abundance, and reproduce, the technological competence of which Cantwell & Iammarino (2000) speak. Bristol has only a very small, if sophisticated, post production and graphic design sector. Glasgow simply does not register on the global radar. Indeed the entire broadcasting complex forms a neo-Marshallian node in Amin and Thrift's (1992) sense. The way in which the local node interacts with the global network can be illustrated by a sketch of an actual innovation which is discussed in very general terms for reasons of confidentiality. An R&D facility in the UK was pursuing a particular line of R&D effort. In the process it was interacting with post-production in London to get feedback on whether the developments in progress were meeting the requirements of the market. In this dialogue a need was established for which the UK facility had no ready solution. This fact was fed back to the corporate HQ which then relayed the problem to all its other R&D facilities around the world. These facilities then contributed something to the solution which was ultimately pooled by the UK R&D lab which worked up the prototype which was then referred back to the engineering department at corporate HQ to translate the design into production which was done in the multinational’s home country. This provides a simple and sketchy example of how intensive knowledge flows within the node interacted with extensive knowledge flows within a global network to produce an innovation.

CONCLUSIONS

Contrary to the conclusions of multi-city study which did include London, Bristol and Glasgow (Boddy & Parkinson, 2004a), this study did find evidence of cluster benefits of trust, cooperation and non-market relations, above all in London, but to a significant extent also in Bristol. An assessment has not been possible regarding whether urbanisation or localisation economies are the more important, yet London realises both to a far greater extent than Bristol or Glasgow. Both London and Bristol may be characterised as social network type clusters rather than mere agglomerations. Both studies clearly indicate that the sources of advantage firms gain, to a greater extent by an order of magnitude in London, are typical of those found in Saxenian’s (1994) account of Silicon Valley. Above all, personal relationships are easier to build and maintain in a compact space and help both knowledge flows, tacit and codified, and also the close cooperation of many specialized suppliers, underpinned by trust, to deliver complex products and services to demanding customers. London strongly benefits from a large, specialized and highly talented labour pool. Not only does this give firms enormous flexibility and access to highly skilled and able individuals but it also acts as a magnet to the best new talent. Once there, individuals have strong incentives to invest in highly specific human capital by the density and sophistication of demand which might call for their highly specialised services and which also strongly drives innovation more generally. This illustrates the self-sustaining nature of cluster success. London benefits strongly from its status as a world city, drawing the best creative talent and powerful multinationals which both exploit and reinforce the city’s advantages. Very little of London’s advantage trickles down to cities lower down the national hierarchy, rather there is more symbiosis with Hollywood and New York, corroborating Pred and Amin & Thrift’s arguments. London benefits from far more powerful hub firms than either Bristol or Glasgow.

Innovation in broadcasting clusters is a beguiling mix of high technology and artistic creativity and is driven not only by the stock of knowledge in the labour pool but also by rivalry, demanding customers, specialised suppliers and the ready flow of knowledge within a tightly bounded geographical space. This interplay between technological and artistic creativity accords with the findings of Florida (2002). As has become increasingly understood in the literature more generally, it is vertical relationship linking firms with customers and suppliers which are a highly important contributor to innovation. Vertical transactions are dense, highly localized and more important then horizontal relationships among firms, against the claim of Malmberg & Maskell (2002). Whilst broadly similar in type to London, both Bristol and Glasgow lack the scale, strength of demand and global connectivity to come close to creating a node with the strength and sophistication of London. Bristol does better than Glasgow pound for pound in part because its activities are concentrated on a small number of genres, allowing the formation of more specialised craft communities. Glasgow in particular appears to suffer what Bathelt (2005) calls the “distanced neighbour” syndrome, lacking both dense internal interaction and strong external connectivity. Bristol is also distinct from Glasgow in that there is evidence of a higher degree of collective identity and interaction among the firms there. Thus the scale of the cluster and the extent to which its characteristic processes are developed are highly influential on the degree of cluster dynamism.

The massive advantages of London seriously call into question the wisdom of placing as much emphasis on “cultural clusters” as a mode of regional development as has been the case in the UK. In addition, the limited perceived importance of local government, academic institutions and professional bodies is a challenge to some of the received wisdom in the literature regarding the importance of such organisations, particularly in the context of innovation. Nevertheless it would be wrong to draw too hasty a conclusion that these organisations are of peripheral importance or that policies which entail action on their part are doomed to be impotent. Some of the most pressing problems confronting the London region in particular are amenable to action by both local and regional government, for example the perceived weaknesses of the education and transportation systems and the dearth of affordable business premises, particularly for start-ups. There is likely to be an increasing opportunity for all three to address emerging skills gaps in the industry as large broadcasters abrogate their traditional role as the trainers of skilled labour in all categories. As evidenced by the case of Glasgow, a sustained policy of support for business development within the cluster underpinned by joined up thinking between the Scottish Executive and local agencies has yielded long-term benefits. The relative success of Bristol and London despite weaknesses in governance is consistent with Boddy and Parkinson’s (2004b) view that policy has typically but a marginal influence on the relative success of particular urban centres, albeit a marginal influence which can tip the balance. The contrasting policies and fortunes of the three cities lends strong support to Martin & Sunley’s (2003) critique that Porter-style “cluster policy” is a pre-requisite for effective regional development. There is little evidence that regional governance plays as strong a role in this industry as Cooke & Morgan (1998) suggest. National policy in terms of enforcing the requirement on broadcasters to commission at least 25% of new production and quotas for regional commissioning, as well as granting political devolution to Scotland and Wales, has been far more influential in promoting the development of independent production and post production clusters.

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ACKNOWLEDGEMENTS

The authors acknowledge the support of the ESRC, award number R000223258, the British Academy, award number SG-36816 and Skillset who provided employment census data.

NOTES

^*Gary A. S. Cook, Senior Lecturer in Applied Economics, University of Liverpool Management School, Chatham Street, Liverpool L69 7ZH, UK , tel. +44 (0)151 795 3708, fax. +44 (0)151 795 3001, e-mail: g.cook@liv.ac.uk

^**Naresh R. Pandit, Senior Lecturer in Economics, Manchester Business School, Booth Street West, Manchester M15 6PB, UK,tel. +44 (0)161 275 6492, fax. +44 (0)161 275 7143, e-mail: n.pandit@mbs.ac.uk

Edited and posted on the web on 23^rd November 2005