Skip to content

Connecting clusters to broadcasting

Updated Thursday 12th November 2009

Like-minded companies cluster their offices around each other, while families cluster around the television on a Saturday night. What’s the connection?

A number of years ago, the sociologist Richard Sennett pondered on why it was, that in a so-called digital or virtual age, global financial and business services still crowded into the world’s leading cities. The answer to his question and that of why firms cluster near each other is rooted in the concept of agglomeration economies, of which there are three types:

  • Localisation economies: which refer to the advantages accruing to firms in the same activity which result from their joint location;

  • Urbanisation economies: which are concerned with the range of advantages to the individual firm which result from the joint location of firms in different and unrelated activities;

  • Activity-complex economies: these refer to economies that emerge from the joint location of unalike activities which have substantial trading links with one another. In the case of manufacturing, such economies typically occur within industrial complexes.

Businesses in London's Docklands Copyrighted image Icon Copyright: Jupiter Images
Businesses in London's Docklands.

The City of London is a classic example of activity-complex economies at play. Financial firms and associated business services crowd together in the Square Mile and its environs in order to benefit from external and internal economies of scale and scope. Economies of scale that are internal to the firm include spreading a larger output over existing productive capacity, and differentiation of products or services from existing production platforms.

External economies of scale and scope include the ability of firms to draw on specialised pools of local labour; and, to exploit different markets because of transport and technology infrastructure. Agglomeration economies are thus at the heart of the dreaded ‘c’ word – clusters – one of the topics of the latest BBC/Open University broadcast of The Bottom Line. The other topic is the future of television.

It’s reasonable to ask, “What on earth has the clustering of firms in the same locale got to do with the future of television?” Well, for many commentators the future of broadcast media is multi-platform. The advantage of multi-platform production, as in any industry, is the ability to exploit external and internal economies of scale and scope; in other words, the capacity to create activity-complex economies.

Whether they’re in Euclidean space, cloud computing or cloud cuckoo land makes no difference; clustering concerns the co-location of business activities. The paradox is that in this supposed age of the ‘death of distance’, the dominance of clustering in real geographical space prevails.

The most frequently cited example of a cluster is Silicon Valley in California, the heartland of web-based companies and venture capitalists from where two of the guests of the current programme were drawn.

In the 1980s, it was ‘Third Italy’, the region of Emilia Romagna in which small textile firms co-located and gave rise to the Benneton phenomenon, among others. Clusters are nothing new and the academic literature is informed by reference to the work on ‘industrial districts’ of the economist Alfred Marshall, who examined the characteristics of industries in 19th Century England, in particular their locational advantages.

The conflating of clusters with industrial districts does a serious disservice to Marshall and his disciples. The celebrity academics and management consultants who have been significantly advantaged by their promotion of an increasingly elastic concept overlook one key fact. Many firms in the same sector are often blithely unaware of the immediate location of competitors, as countless surveys have demonstrated.

This is especially true of small and medium sized enterprises: the basis of Marshall’s original ‘industrial districts’. It is the very elasticity of the concept of clusters and the lack of empirical evidence that weakens its claims as the universal panacea for economic development, as the economic geographers, Ron Martin and Peter Sunley perceptively note, “The cluster literature is a patchy constellation of ideas, some of which are important to contemporary economic development some of which are either banal or misleading.”

One important issue that’s overlooked in the discussions of clusters is the bounty of nature. London became a global financial centre because its topography allowed it to be become a port; Hollywood initially attracted film makers because of its natural light. Similarly, the bounty of technology has created the television and Internet ages, but what sustains different forms of clusters is their underwriting by the state.

The question of the future of the televisual age is an important one, but one that can lead to debates that are both banal and misleading. Almost since the day John Logie Baird first demonstrated his new device, the television has been the hearth in the home that families cluster around.

Whether that connected cluster we commonly know as the Web will change the locale of our emotional and social hearths and heimats is a future question but one that has contemporary resonance. For many, the Internet will replace television as the dominant medium of choice, but as the Chief Executive of the UK-based Channel 5, the other guest of the programme, pointed out, the two are complements and not substitutes.

The most ubiquitous contemporary technology is the mobile phone, which has a visual function that allows the user to access television programmes. The Internet and associated technologies may be the medium of transmission but they are not the message.

In the present day, television has become a product and a process that generates its own cluster of activities because technology and social (and business) practices create external and internal economies of scale and scope: a basic condition for the development of clusters. The multi-platform of broadcast media has joined the pantheon of activity-complex economies and agglomeration around a hearth is no longer restricted to family viewing of the Billy Cotton Band Show or Strictly Come Dancing on a Saturday evening.

In 1979, the Tubes sang “I really love my television” on the track ‘TV is King’ and, like geography, reports of its death have been very premature. Clusters have been around much longer than television but the future of these connected and networked phenomena is still assured as their natural and technological bounties lead us through the millennium.

Find out more

These Open University courses will help you explore these subjects in greater depth:

Managing 1: Organisations and People

Understanding Cities

Understanding Media

Film and Television History

 

For further information, take a look at our frequently asked questions which may give you the support you need.

Have a question?

Other content you may like

A view from left field: Death of the pub Creative commons image Icon phill.d under CC-BY-NC-ND licence under Creative-Commons license article icon

Money & Business 

A view from left field: Death of the pub

Steve Godrich explores the pub trade - why some pubs are thriving while at the same time a number have shut.

Article
Securing your brand Copyrighted image Icon Copyright: BBC article icon

Money & Business 

Securing your brand

How do you build value into a brand? More to the point, how do you preserve that value?

Article
Hot in the kitchen: The economics of eating out Copyrighted image Icon Copyright: photos.com video icon

Money & Business 

Hot in the kitchen: The economics of eating out

Finance Director of Deloitte Jon Lake discusses the future of restaurants and eating out in the UK

Video
5 mins
How is Italy reinventing the co-op? Creative commons image Icon moz278 under Creative Commons BY-NC-ND 4.0 license article icon

Money & Business 

How is Italy reinventing the co-op?

One hundred million people are part of some sort of co-op around the world. A change in the law in 1991 has powered their development in Italy. It's a model worth investigating, explains onthecommons' Jay Walljasper.

Article
Building relationships with donors Copyrighted image Icon Copyright: Used with permission free course icon Level 3 icon

Money & Business 

Building relationships with donors

Legacy fundraising and big-gift seeking are part of the professional fundraiser's role. This free course, Building relationships with donors, will help you to gain the skills necessary to persuade individuals to become donors. How do you change people's ideas about methods of giving, moving them from casual street donations to regular direct debit giving?

Free course
6 hrs
How we can treat clothing more sustainably Copyrighted image Icon Copyright: © Brooke Becker | Dreamstime.com article icon

Money & Business 

How we can treat clothing more sustainably

Why some of the most effective ways to behave more sustainably may not be quite what you’d expect.

Article
Getting to the heart of the family business Copyright free image Icon Copyright free: John Pinkerton [Public domain], via Wikimedia Commons article icon

Money & Business 

Getting to the heart of the family business

Meet John and Elizabeth Shaw. For them, their 19th Century firm was all about the family.

Article
What's the difference between a tall organisation and a flat organisation? The one-minute guide Copyright free image Icon Copyright free: Puravida_fotagrifie article icon

Money & Business 

What's the difference between a tall organisation and a flat organisation? The one-minute guide

Tall organisations have many layers of hierarchies; flat ones have fewer. But what is the advantage of each approach?

Article
Investment risk Copyrighted image Icon Copyright: Used with permission free course icon Level 3 icon

Money & Business 

Investment risk

Risk, in a financial context, is a synonym for uncertainty. This free course will allow those with some background knowledge of the area to explore investment risk. You will examine how and why investors are risk-averse and look at the risk factors involved in making a decision to invest.

Free course
6 hrs