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Creative Clusters and Universities

Terry Flew

To be published in Daniel Araya and Michael Peters

(eds.), Education in the Creative Economy, Peter Lang

Publishers, 2010 (forthcoming).

The Cluster Concept in Economics and Geography

For much of its history, economics as a discipline has tended to work with a limited

understanding to the significance of space. Models of economic equilibrium have very

often assumed that markets operate, as the geographer Doreen Massey put it, like angels

dancing, on the head of a pin (Massey, 1984: 52). Where the question of where economic

activity takes place, the focus was commonly on the economic development of nations,

most famously articulated by Adam Smith in The Wealth of Nations. The macroeconomic

revolution that followed the publication of John Maynard Keynes General Theory in

1936 was focused upon the flows of goods, services, people and money between nations,

in line with the orientation towards the nation-state that came to characterize the social

sciences from the late 19th century onwards (Taylor, 1996).

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One of the few major economists to have given explicit attention to questions of where

economic activity takes place was Alfred Marshall. In his Principles of Economics, first

published in 1890, Marshall addressed this question with particular reference to the

changing industrial geography of 19th century Britain. In the first instance, industries

locate near those parts of the country where the physical raw materials are most available

(such as steel mills near coal mines), but the patronage of wealthy individuals and

governments could also attract skilled people to a city or region, as with artisans and

tailors moving to be near particular courts. He observed that the concentration of a

particular region on a single industry had advantages and disadvantages. The advantages

are that labor markets develop in such places and what we today term tacit knowledge is

fostered by the clustering of a particular group of workers in a region. As Marshall put it:

When an industry has chosen a locality for itself, it is likely to stay there long: so

great are the advantages which people following the same skilled trade get from

near neighborhood to one another. The mysteries of the trade become no

mysteries; but are as it were in the air, and children learn many of them

unconsciously. Good work is rightly appreciated, inventions and improvements in

machinery, in processes and the general organization of the business have their

merits promptly discussed: if one man starts a new idea, it is taken up by others

and combined with suggestions of their own; and thus it becomes the source of

new ideas. And presently subsidiary trades grow up in the neighborhood,

supplying it with implements and materials, organizing its traffic, and in many

ways conducing to the economy of its material (Marshall, 1990 [1890]: 225).

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The obvious disadvantage is that the economic fortunes of the region are very much

hostage to developments in that industry. Over time, cities tend to develop a more diverse

range of activities, and improvements in transport and communication further this trend,

because even though they make it easier to move goods from one place to another

(thereby promoting regional specialization), they also make it easier for people to move

from one place to another. What Marshall observed in 19 th century Britain was not so

much the movement of the population from agriculture to manufacturing, as the use of

large-scale machinery meant that growth in output was steadily less dependent upon

additional supplies of labor, but rather the growth of service occupations and industries,

that cluster around growth centers. The rise of services, for Marshall, tended to increase

the specialization and localization of industries (Marshall, 1990[1890]: 230), as they can

make a region less vulnerable to the cyclical fluctuations and the rise and fall of

particular manufacturing industries.

Marshall observations on regional specialization were not widely taken up by

economists, partly because they opened up the thorny question of what happens to

equilibrium economic models if we allow for falling costs and increasing returns to scale,

which would make monopolies more prevalent and challenge assumptions that the price

mechanism operates primarily to ration scarce goods and services (Warsh, 2006). The

French economist Francois Perroux developed the concept ofgrowth poles to assist

policy-makers to understand how particular regions developed economic dynamism

based upon industrial specialization, and Swedish economist Gunnar Myrdal developed

the concept ofcumulative causation to explain why particular regions could experience

eon-going growth based upon the agglomeration of industries and skilled labour, which

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could occur at the expense of other regions. For the most part, however, these insights

were not taken up in the Anglo-American economic mainstream, and they were also at

the margins of economic geography until the 1970s, which became more interested in

developing a science of the spatial that could make the sorts of universal claims that

characterized economics, rather than studies of regional differentiation, which came to be

seen as limited and parochial (Barnes, 2003).

The rise ofclusters as a stand-alone concept emerges out of the business management

literature, and particularly with the work of Michael Porter from the Harvard Business

School (Porter, 1990). In extending his competitive advantage model from firms to

nations, Porter observed that understanding the dynamic and sustainable sources of

competitive advantage required a shift of thinking away from costs and production

efficiencies towards those elements that promote productivity growth over time and

innovation, and in particular the spillover benefits that can emerge from being in

particular locations, including the presence of related and supporting industries. Porter

argued that location within particular clusters are able provide three sources of

competitive advantage to the firms that are a part of them:

1. Productivity gains, deriving from access to specialist inputs and skilled labour,

access to specialized information and industry knowledge, the development of

complementary relationships among firms (e.g. hotels, restaurants etc. based

around tourism centers), and access to institutions providing public or quasi-

public goods, such as universities and training institutions;

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2. Innovation opportunities, derived from proximity to buyers and suppliers, on-

going face-to-face contact with others in the industry, and the presence of

competitors which stimulates pressures to innovate in circumstances where cost

factors are similar;

3. New business formation, as there is better information about opportunities, better

access to resources required by business start-ups (e.g. venture capitalists, skilled

workforce), and reduced barriers to exit from existing businesses as takeovers and

mergers are more readily facilitated due to shared informational resources.

Localization, Urbanization and Creative Clusters

Cluster theories bring together two dynamic trends in economic geography. The first is

the tendency towards localization, or the clustering of firms in similar or related

industries in a particular city or region, and the positive externalities that can arise from

such co-location. Marshalls pioneering analysis of such externalities pointed to the

benefits in terms of labor market specialization, tacit knowledge and institutional

specialization, and was developed in three directions in the 1980s and 1990s. First, there

was a growing interest in the significance of industrial districts, or those cities and

regions that appeared to defy trends towards de-industrialization and the shifting of

manufacturing industry towards lower cost centers in the developing world. Work on

manufacturing districts in the Third Italy, to take one example, pointed to an evolving

historical nexus between clusters of small and medium-sized enterprises (SMEs),

embedded trust relations that acted as a positive stimulus to innovation, and the

production of quality goods that retained global market demand even in the face of lower-

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cost alternatives from countries such as China (Piore and Sabel, 1984; Asheim, 2000).

Second, there were those regions where conspicuous value adding to a primary product

had occurred through cluster developments that had a global impact, such as in the wine-

making regions of California and South Australia. Finally, there was the focus on

developing new high-technology districts that could become the next Silicon Valley

(Castells and Hall, 1994; Kenney and von Burg, 2000). The costliness and lack of results

associated with many of the ventures, combined with the realization that the lessons of

Silicon Valley were hard to generalize to other locations (Leslie and Kargon, 1996), has

generated skepticism among economic geographers about the cluster concept, with

Martin and Sunley observing that it is being applied so widely that its explanation of

causality and determination becomes overly stretched, thin and fractured (Martin and

Sunley, 2003: 29).

Urbanization is generally understood as involving the large-scale movement of people to

cities, whether through migration from the countryside or from other parts of the world.

Amin (2003) observes that, historically, the Western city was the factory and the center

of commercial life, in short, the engine of capital accumulation the city became the

source of immobile resources and agglomeration economies for competitive advantage

(Amin, 2003: 115). While the disadvantages of cities such as pollution, overcrowding

and high land rents have seen large parts of industry leave cities to take advantage of

locational advantages elsewhere, cities remain central to post-industrial or knowledge-

based economies on the basis of factors such as the benefits of proximity for diverse

businesses, concentrated consumer demand for services, culture and entertainment,

diversity of populations, the concentration of business, professional and legal services in

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cities, and ther location of corporate headquarters in global cities. Lorenzen and

Frederiksen (2008) differentiate urbanization economics from those associated with

localization on the basis of the place itself attracting a diverse range of industries and

types of employment, in contrast to the concentration of a particular industry coming to

define the location. The positive externalities that cities develop include their diversity of

industries, the sharing of knowledge among unrelated firms and industries, the diversity

of labor, skills, knowledge and ideas that act as stimuli to innovation and

entrepreneurship, and the range and diversity of institutions and infrastructures (Lorenzen

and Frederiksen, 2008: 159-160). Surveying the literature from economics, geography

and sociology, Amin concludes:

There appears little evidence to support the claim that cities are becoming less

important in an economy marked by increasing geographical dispersal. [They]

assert, in one way or another, the powers of agglomeration, proximity, and

density, now perhaps less significant for the production of mass manufactures

than for the production of knowledge, information and innovation, as well as

specialized inputs (Amin, 2003: 120).

It is insufficient, however, to simply understand the continuing growth of cities as the

result of economic forces. In his epic Cities in Civilization, Peter Hall (1998) observes

that because the city continues to attract the talented and the ambitious it remains a

unique crucible of creativity (Hall, 1998: 7). Through his historical account of great

cities, Hall argues that while no one kind of city, or any one size of city, has a monopoly

on creativity or the good life the biggest and most cosmopolitan cities, for all their

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evident disadvantages and obvious problems, have throughout history been the places

that ignited the sacred flame of human intelligence and the human imagination (Hall,

1998: 7). The need to think about cultural and economic factors together has, for Hall,

become even more imperative in the advanced industrial or post-industrial nations, as

their cities have become more and more preoccupied by the notion that cultural

industries may provide the basis for economic regeneration, filling the gap left by

vanishing factories and warehouses, and creating an urban image that would make them

more attractive to mobile capital and mobile professional workers (Hall, 1998: 8).

The Rise of Creative Clusters

The notion that city cultures could constitute a key source of location-based competitive

advantage became one of the big ideas of urban economic geography in the 2000s.

Landry (2000) drew attention to the role played by creative cities in catalyzing economic

and social innovation, particularly through the formation of a creative milieu, who

generate what he terms asoft infrastructure of social networks, connections and human

interactions, that underpins and encourages the flow of ideas between individuals and

institutions (Landry, 2000: 133). Florida (2002, 2008) has widely proclaimed that cities

with a reputation for tolerance, diversity, openness to new ideas and cultural buzz act as

talent magnets for what he terms the creative class of ideas-generators who are central to

the knowledge-based and creative industries and are, for Florida, the fastest growing

segment of the U.S. economy, as creativity becomes the decisive source of competitive

advantage in 21st century global knowledge economies (Florida, 2002: 5).

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The growing interest in creative cities has arisen in part out of the awareness that, in the

21st century, cities have become more important. This was despite forces emerging since

the 1970s, such as economic globalization, the suburbanization of major cities, the

movement of large-scale manufacturing to the developing world, and the rise of the

Internet and globally networked information and communication technologies (ICTs),

which could have promoted population dispersal and the decline of cities. Scott (2008)

links the resurgence of cities to the rise of what he terms the cognitive-cultural economy,

and others term the rise of the creative industries (Hartley, 2005) or the creative economy

(UNCTAD, 2008). Scott links the centrality of cities, or what have also been termed

global city-regions (Scott, 2002), to three core elements of this new economy:

1. The contractual and transactional nature of production in knowledge-intensive

and creative industries, which involve ongoing relationships between shifting

networks of specialized but complementary firms. Geographical proximity

reduces the transaction costs of joining and maintaining such networks across

projects and over time;

2. Specialist workers engaged in these industries are drawn to such urban

agglomerations as the centre of activity, thereby reducing job search costs, and as

talent magnets for those aspiring to work in such industries ;

3. The resulting local system of production, employment and social life in turn

generates learning and innovation, and a creative field or a structured set of

interrelationships that stimulate and channel various kinds of creative energies

(Scott, 2008: 313). This is further promoted by the existence of complementary

forms of social overhead capital that includes the role played by universities,

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research centers, design centers and other sites that generate specialist knowledge

capital able to be applied in these sectors.

Alongside the resurgence of cities has been a rethinking of the role of culture, from a set

of activities defined by their distance from the economy (the non-commercial arts),

towards culture as a resource. Landry argued that cultural resources are the raw

materials of a city and its value base Culture, therefore, should shape the technicalities

of urban planning rather than be seen as a marginal add-on to be considered once the

important planning questions like housing, transport and land-use have been dealt with

(Landry, 2000: 7). In a similar vein, Venturelli identified culture as the gold of the

global information economy:

Culture can be seen as the key to success in the Information Economy, because

for the very first time in the modern age, the ability to create new ideas and new

forms of expression forms a valuable resource base of a society and not merely

mineral, agricultural and manufacturing assets. Cultural wealth can no longer be

regarded in the legacy and industrial terms of our common understanding, as

something fixed, inherited, and mass-distributed, but as a measure of the vitality,

knowledge, energy, and dynamism in the production of ideas that pervades a

given community the greater cultural concern should be for forging the right

environment (policy, legal, institutional, educational, infrastructure, access, etc.)

that contributes to this dynamism and not solely for the defence of a cultural

legacy or industrial base (Venturelli, 2005: 396).

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In terms of urban policy, thinking about culture as an economic resource and as an asset

generating competitive advantage has given rise to what Stevenson refers to as a new

civic gold rush in urban planning and cultural policy alike, promoting strategies aimed at

fostering strategically the cultures of cities and regions [where] culture and creativity

have become forms of capital traded in an international marketplace comprised of

cities eager to compete with each other on the basis of imager, amenity, liveability and

visitability (Stevenson, 2004: 119-120).

The creative cities debate can be understood at two levels (Stevenson, 2004; Mommaas,

2004; Cooke, 2008; Costa, 2008). First, there are debates about whether whole cities are

creative, and whether some cities are more creative than others. Such claims have been

made about cities such as London (Landry, 2005), New York (Currid, 2007), Los Angeles

and Paris (Scott, 2000). Creative city indices inspired by the work of Florida and

Landry have generated league tables designed to address such questions. Is San

Francisco more creative than Los Angeles? Is Dublin more creative than Glasgow? Is

Barcelona more creative than Madrid? Is Melbourne more creative than Sydney? Storper

and Scott (2009) observe that aside from problems arising from the metrics used for such

exercises, they are premised upon assumptions that urban growth and the capacity to

attract creative and knowledge-intensive industries is primarily driven by supply

factors, or the ability of local authorities or cultural elites to generate the right settings

to attract creative workers, and systematically downplay the role played by global macro-

economic forces in driving the location of such industries. It is not surprising, then, that

cities such as New York, London, Los Angeles and Paris feature in such discussions, as

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these are global cities and centers of global information and service industries more

generally.

A second approach focuses upon creative clusters and the capacity of local authorities to

incubate creative industries growth in particular parts of major cities, sometimes referred

to as cultural quarters (Bassett et. al., 2005; Cooke, 2008). Such strategies are closer to

the Marshall-Porter tradition of cluster development, as they are premised upon the

spatial agglomeration of related activities more than a hard-to-define creative ethos

residing in some sections of an urban population. In an evaluation of creative cluster

initiatives in four cities in The Netherlands (Amsterdam, Rotterdam, Tilburg and

Utrecht), Mommaas (2004) observed that strategies have been driven by a heterogeneous

mix of policy priorities including:

Attracting globally mobile capital and skilled labour to particular locations;

Stimulating a more entrepreneurial and demand-oriented approach to arts and

cultural policy;

Promoting innovation and creativity in the society more generally, through

opening up possibilities for greater interaction between culturally vibrant locales

and innovation in other sectors of the economy;

Finding new uses for derelict industrial-era sites such as warehouses, power plants

etc. as sites for post-industrial activities, such as residential apartments, arts

centers and business incubators;

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Promoting cultural diversity and cultural democratization, and being more

inclusive of the cultural practices of hitherto marginalized social groups and

communities.

Given such an eclectic mix of motivations, it is not surprising that the scorecard for the

new creative urban cultural policies is mixed. In an overview of such developments in

European cities, Bassett et. al. (2005: 150-153) argue that some of the benefits have

included:

Moving questions of culture from the margins to the centre of urban development

strategies;

Broadening understandings of culture from elite arts and formally defined arts

centers to the wider spectrum of informal arts practices, popular culture and

cultural consumption in urban spaces;

More integrated approaches to urban planning and zoning that recognize the

significance of lifestyle and consumption activities as well as production;

Development of new cultural infrastructures that have acted as catalysts for urban

regeneration and given cities more of a cultural image that also acts as an attractor

for tourism and possibly investment.

Problems with these policies have included:

Blurring of the distinctiveness of arts and culture, and absorption into civic

boosterism and strategies primarily focused upon real estate development;

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describe the grounds of Princeton University in New Jersey, refers to a field, and has

implied a space located outside of the city grounds (Haila, 2008: 31).

The literature on universities and clusters has been overwhelmingly focused upon the

high-technology sectors, with the relationship between the Massachusetts Institute of

Technology (MIT) and the Route 128 high-tech cluster outside of Boston, and the

relationship between Stanford University and Silicon Valley south of San Francisco,

providing key case studies. Both cases have proved difficult to replicate in other contexts,

despite various attempts worldwide to do so. In the case of MIT, it is important to

understand not only its relationship to proximate ICT companies, but also to nearby

Harvard University and a range of prestigious universities also located around Boston

(Northeastern University, Boston University, Brandeis, Tufts University, and University

of Massachusetts), which make the Boston area one of the most research-intensive

regions in the world. Hulsinket. al. (2007) find that the ICT companies around Route 128

have not been particularly strong on knowledge sharing, and that much of the research

intensity of the region derives from relations among the universities and colleges

themselves, rather than knowledge transfer with industry. The Stanford University/Silicon

Valley link is a more successful example of knowledge transfer through clustering of a

research university with knowledge-intensive industries, although Leslie and Kargon

(1996) note that most attempts to replicate the Silicon Valley model have failed, and

suggest that one reason for this is that both the university and the start-up businesses

emerged together. Interestingly, they observe that attempts to replicate the model in

countries such as South Korea, with the Korean Advanced Institute of Science and

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Technology (KAIST) have been more successful than the various attempts to reproduce it

in the United States.

Seeking to align universities more closely to industry and policy agendas is consistent

with what Gibbons et. al. (1994) referred to as Mode 2 of knowledge production,

differentiated from Mode 1, or the traditional university model, on the basis of the

following criteria:

MODE 1 MODE 2

Conditions of knowledgeproduction

Grounded within rules andpractices of an academicdiscipline

Grounded in context ofapplication andexpectations of externalclients

Conditions of knowledgevalorisation

Academic discipline as asingle collectivestakeholder

Multiple stakeholders, bothwithin and outside theacademy

Purpose of knowledge Advancement ofdisciplinary knowledge

Solving of practicalproblems as they arise insocial context

Mode of knowledge

production

Individuals or discipline-

based groups

Trans-disciplinary, project-

based teamsWhere knowledge isproduced

Traditional sites:universities and researchcenters

Multiple sites: universities,corporations, governmentagencies, think tanks,activist organizations,consultants etc.

Quality controlmechanisms

Internal mechanisms (e.g.academic peer review)

Multiple criteria(contribution to economicproductivity, socialcohesion etc.)

Source: Gibbons et. al., 1994.

Although this debate has largely occurred in the science and technology areas, Ang

(2004) has noted its relevance to the humanities in general, and cultural studies in

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particular, where knowledge production has become much more widely distributed, taking

place in many more types of social settings, and involving many different types of individuals

and organizations [and] to the extent that universities continue to provide quality

graduates, they undermine their monopoly as knowledge producers (Ang 2004: 479). Hartley

(2005) also identifies its particular significance in the context of the rise of creative

industries, and for universities based in cities where there is also a large number of people

who are trend-conscious, early adopters, curious about the new, and relatively unencumbered

by family commitments Universities are not just destinations, but hubs, and young people

with time on their hands who are just hanging around are just as important to the creative

sector as more traditional forms of investment (Hartley, 2005: 24-25).

In discussing the possible relationship of universities to creative clusters, we need to be

aware of three endemic questions that arise with the clusters concept itself:

1. Is it primarily about mapping existing centers of cultural development and

leadership, or about policy-driven strategies to create such sites? Storper and

Scott (2009) observe a sleight of hand in existing creative cities literature,

which downplays the role of macro-trends in the global creative economy in

promoting certain sites as creative cities vis--vis the enabling role of supply-

driven or atmospheric factors such as a thriving arts scene or a tolerant and

diverse culture. The result is that every city is presented as having the potential to

become a creative city, even though in practice there are strong correlations

between those cities that are leaders in global financial, service and entertainment

industries and those deemed to have a strong creative infrastructure;

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2. Is the focus upon bottom-up, grassroots initiatives to cultivate the soft

infrastructure of cultural development, or on the top-down initiatives of

government authorities to bring together cultural and educational activities in

designated cultural quarters? There is considerable evidence that the two can be

in conflict, particularly insofar as creative cluster initiatives come to be more

associated with urban branding and real estate development than with questions

of cultural access and cultural diversity;

3. Are creative clusters seen as primarily sites of cultural production or cultural

consumption? Pratt (2009) has observed that considerably more attention has

been given to the latter than the former, and there tends to be an implicit

assumption that consumption-led urban cultural regeneration will in itself provide

the basis for attracting cultural producers and sustaining cultural infrastructures.

There are also major issues that arise from the characteristically hourglass

structure of the creative industries, with a small number of large employers and a

very large number of individual providers and small-medium enterprises (SMEs),

which means that employment structures in these industries can be highly volatile

(Cunningham, 2005).

When we bring universities into the mix, we need to note a further range of questions that

arise:

Does the university have a range of teaching activities, and associated student

recruitment strategies, that link to the activities associated with a creative cluster?

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Does the university prioritize research that links in with the firms, industries and

activities associated with a creative cluster?

Does the university see itself as having a role in developing the local cultural

infrastructure, and enabling its graduates to pursue careers linked to this creative

cluster?

Does the university see its graduates as being primarily employed in and around

its local catchment area, or are they expected to move elsewhere upon graduation?

What this would indicate is that the relationship of universities to creative clusters is

likely to be very contingent. For those universities that have been located outside of

major urban centers, there would not appear to be much point in seeking to re-badge local

cultural activities as part of a cultural quarter or creative cluster in the hope that this will

be part of redefining the local area as a creative city. Universities located in parts of cities

that are hubs of cultural activity will need to make some strategic decisions. First, there

are arguments against going down the path of being a more applied Mode 2 university.

Marginson (2006) has argued that globalization and the rise of global league tables for

universities mean that those institutions aspiring to global research university status

should not go down the path of applied, locality-based and industry-focused research, as

global research indicators remain largely driven by what can be termed Mode 1

priorities.

Second, there is a great deal of fluidity within urban spaces for the emergence of creative

clusters, which policy-makers and university administrators will find it difficult to

respond to. If we take one of the better known recent collaborations between a university

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and a creative movement the role played by Goldsmiths, University of London in the

rise of the Young British Artists of the 1990s and 2000s (Damian Hirst, Tracey Emin

etc.) it is not apparent that this played much of a role in the development of the South

London area of which Goldsmiths is a part, as the dynamics of developing cultural sites

in London were far more contingent in their nature (Pratt, 2009).

Finally, universities that see their future development as being linked to creative clusters

will need to make serious commitments to the individuals and sectors involved. There is a

need to think about curriculum, resourcing, student recruitment, research activities,

cultural development and community engagement, and graduate destinations as a

package, and a will to make genuine changes to institutional practice as required. It will

not simply be enough to point to evidence of co-location as proof of a cluster, since the

clusters literature points to real and substantive differences between simple co-location of

activities and the development of dynamic synergies.

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