Agglomeration and Growth: A Study of the Cambridge Hi-Tech Cluster

This chapter is an empirical study of growth and change in the Cambridge hi-technology cluster, and the mechanisms that underlie this growth. Despite high rates of new firm formation that explain the sustained growth of employment in the region, this growth has not been spectacular. Further, these high levels of entrepreneurship are motivated more by inertia of founders and quality of life factors than agglomeration advantages. The chapter highlights some significant changes that have taken place in the area's economy, their impact on firm growth and explores the importance of traditional sources of agglomeration economies. It finds that the main mechanisms creating knowledge spillovers are the movement of personnel between firms and the spinout of new firms from parent firms, rather than dense and proximate local links. We explore the role of the University in this process, and draw attention to the importance of a small group of individuals who have been instrumental in various kinds of information transfer and the creation of institutions that encourage the transfer of knowledge from the university to firms. We conclude that though Cambridge displays cluster like characteristics it is not an example of a classic cluster and shows evidence of different mechanisms that achieve collective efficiency.