Employment Growth of Small High-Technology Firms and the Role of Horizontal Clustering : Evidence from Computing Services and R&D in Great Britain, 1991-2000

European researchers and governments have begun to pay particular attention to the emergence of local economies based on technology and to the role of small- and medium-sized enterprises (SMEs) in providing employment opportunities.To better understand these trends, the clustering of British SMEs in two high-technology sectors of computing services and research and development (R&D) is investigated. The data for this study were collected from the Annual Business Enquiry of the Office for National Statistics, choosing SMEs with fewer than 200 employees; the data were sorted by region, county, and Unitary Authority and Local Authority District (UALAD). Using these data, general trends in employment growth performance and geographical concentration of high-technology sectors are reported. The data were analyzed using a spatial econometric analysis model. The findings indicate that local and neighboring supply and demand conditions play an important role in controlling changes in computing services employment and support the role attributed to both clustering and human capital as proxied by university importance. The results further indicate that external effects do spill over to neighboring areas. Limitations of this research are discussed, including neglecting to account for other influential variables that may impact the findings. The implications of this study are presented as are areas for future research. (AKP)