Cluster Dynamics : New Evidence and Projections for Computing Services in Great Britain

This study tests the hypothesis that the level of horizontal clustering has a positive impact on the subsequent employment growth of small- and medium-sized enterprises (SMEs) in computing services in Britain. Another purpose is to determine whether negative impacts on employment growth take place above a certain level of horizontal clustering. Following an overview of theoretical issues, data on the spatial distribution and employment performance of the computing services sector are analyzed. These data cover the period from 1991 to 2000 and are analyzed at the level of the 408 unitary and local authority districts (UALADs) of Great Britain. An initial model of employment growth in SMEs is presented. Spatial econometric models are estimated to isolate the effect of initial cluster intensity. Regression estimates indicate that employment change is significantly linked to the initial intensity of horizontal clustering. Finally, a fitted model is used to project cluster development. This model reveals that clusters are likely to emerge, intensify, and then decline as negative externalities take effect. In short, the study's principal hypotheses are supported. A de-clustering mechanism designed to counter congestion effects is proposed. (SAA)