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Agglomerative & Deglomerative Processes & Small Firms Development in Business & Professional Services

Aims & objectives

This project investigated the importance of geographically-localised functional linkages for the competitive performance and growth of small professional business service (PBS) enterprises in Britain. A key part of this work, conducted in association with the Economic Enabling Unit of Westminster City Council, used 80 face-to-face interviews in relation to networking and localisation processes in film, TV and related post-production business service firms which are clustered in the Soho/Covent Garden area of central London. It was found that the Soho area contains a distinctive, Marshallian-type, specialised cluster of small media and related service firms engaged in film and TV production: this includes film producers and distributors, post-production services, photographers, design agencies, advertising agencies, and music and recording studios.

This distinctive cluster is characterised by a remarkable degree of localised networking and vertically disintegrated linkages, which were charted by this study for the first time. These linkages have developed historically because of local environmental advantages associated with Soho’s central location, the availability of appropriate premises, and cosmopolitan and vibrant culture. The Soho media cluster also however exhibits numerous global linkages and networks, especially reflecting the key role in its activities of foreign-owned and British transnational corporations, the former dominating film distribution and, to a lesser extent, film financing. The undoubted benefits to these TNCs of operating in the Soho cluster vary markedly between film producing and distributing companies, but characterise strong as well as weak firms: different TNC ownership advantages are affected by these benefits to different degrees: some foreign TNCs have become strongly embedded in the local cluster and derive benefits from this embeddedness which are not available to their parent (overseas) firms.

This project investigated the importance of geographically localised functional linkages for the competitive performance and growth of small professional business service (PBS) enterprises in Britain. Most previous work in this area had focused on manufacturing industries and was dominated by manufacturing paradigms. Geographic clusters of small firms also exist in PBS, usually explained simply by the need for proximity to clients. This explanation ignored possible other influences, such as inter-firm networking, collaboration and labour market factors.

This research sought explanations for two apparently contradictory phenomena related to the location of PBS firms. The first was the existence of geographical clusters of PBS SMEs in large metropolitan centres such as London. The second was the deglomeration of PBS SMEs to the extent that these, since the 1970s, had been locating in smaller towns and even rural areas of England away from the main geographical clusters. The research was designed to acknowledge the unique characteristics of these industries, such as short value added chains, limited potential for economies of scale, competitive advantage based on embodied expertise, which differentiated them from manufacturing and other services.

The data set contains information regarding four aspects of firms activities and operations. First, general characteristics of the firms - the specific service they provide, size and magnitude of activity, time and manner of establishment, characteristics of the founders. Second, the nature of their clients - their location, way of obtaining business from clients, the value of relationships with the clients for the development of the firm's own competitive advantages. Third, competition, networking and collaboration - identifying the firm's major collaborators, their location, extent and nature of linkages with them, the value of these linkages for the development of the firm's own advantages. Fourth, employment - recruitment procedures, previous experience of the employees etc. Fifth, location - reasons for the choice of location and the perceived advantages and disadvantages associated with it. 

Dates of survey: The survey was carried out in 1998.

Number of responses: The database consists of replies from 304 respondents in Central London, Eastern England and South West England.

Publication: Keeble, D. and. Nachum, L. (2001) 'Why do business service firms cluster? Small consultancies, clustering and decentralisation in London and Southern England' Cambridge University, Centre for Business Research Working Paper 194. 

Working Papers

Nachum, L. (1999) Measuring the Productivity of Professional Services: A Case Study of Swedish Management Consulting Firms Centre for Business Research Working Paper 120.

The CBR has produced a number of surveys on Small and Medium-Sized Enterprises. Find out more

Principal investigators

David Keeble
Lilach Nachum

Project status

Completed