‘Industry clusters’ and similar phrases have become popular buzzwords in the popular lexicon of business and politics in recent years. Specially built research parks, city districts packed full with incubators and accelerators, bands of open plan office space heaving with technology professionals spreading across modern cities like an unstoppable tidal wave of steel, glass and modern art.

 

New Napp Pharmaceutical Group buildings at Cambridge Science Park

New Napp Pharmaceutical Group buildings at Cambridge Science Park

It almost seems that every other day I come across a story making reference to a new dynamic university spin-out company, or a legacy tech company setting up shop in a newly recognised area of expertise, or reports of Google adding yet another asset to its already mind-bogglingly diverse portfolio of businesses. So many of these stories originate from the same places: California, (especially the Bay Area and the southern portions of the state), New England and the American northeast; the ‘Golden Triangle’ of Oxford, Cambridge and London; Eastern and Southern China. The list could go on, but what is increasingly clear is the importance of geography to business. ‘Clusters’, convenient buzzword or not, have a very definite impact.

But how new is this idea? The answer may surprise you. In fact, the concept was first popularised in 1990 in a work composed by Harvard academic Michael Porter called: The Competitive Advantage of Nations. The concept was then further expanded upon by Paul Krugman, a graduate of both Princeton and the London School of Economics (and now professor at the former) the following year in his own work: Geography and Trade.

The underlying concept to these more modern ideas dates back much further than that, however. The idea of ‘economies of agglomeration’ dates back to 1890 and the work of the neoclassical economist Alfred Marshall: The Principles of Economics (chapter X of book IV for those interested). But even if the academic literature is left aside, there are clear historical examples. Certain areas have long been known for their expertise in certain industries, be they ancient or more modern examples.  Specialised banking and financial districts have existed for centuries.  Manufacturing districts, while they may have lost some of their lustre in recent decades, are also still recognised. Detroit in the US, the British Midlands and certain areas of Germany are particularly well known for car manufacture (each with its respective auto show). Another, perhaps lesser case, is the recognition of the global fashion cities of London, Paris, and Milan. Again each with their own respective trade shows in the form of ‘fashion weeks’.

Alfred Marshall (1842-1924) circa 1921

Alfred Marshall (1842-1924) circa 1921

It is here that I come to the crux of the matter.  Many older industries have followed the idea of holding their trade shows near to or in the areas where the expertise already exists. This model is starting to be emulated on a small scale with newer industries, with one example being the BioAsia conference being held in Hyderabad, a recognised biotech hub, every year since 1999. If industries recognise the importance of geography in the development of their business, surely so should the meetings industry.  IntellectualCapitals.com was founded on the principle of putting expertise ahead of amenities, or ‘brains not beaches.’  Every day the importance of that idea becomes ever clearer and while we may be dealing with new industries, the ideas behind their successes are tried and tested.

 

 

 

Featured image: Google’s offices in New York City (Public domain)

Insert image: Napp Pharmaceutical Group new buildings By Cmglee (Own work) [CC BY-SA 3.0], via Wikimedia Commons

Insert Image: Alfrred Marshall circa 1921 (Public domain)