Technology and Knowledge Based Business in the Cambridge Area: A Review of Evidence

Abstract

The area around the city of Cambridge (the Cambridge Sub-Region) was the first centre of hightech activity to emerge around a university in Europe and remains one of the most active. It is seen both as a model for others to follow and as a source of increasing prosperity for the region and country as a whole. From a handful of technology-based firms in the 1970s, by 2000 there were around 1200 firms that can be described as 'high tech' employing over 38,000 people with a combined turnover of £3.7bn. In March 2002, following the recent stock market correction, those companies with UK public company status had a combined market capitalisation of £4.3bn.

Growth had eased somewhat by the end of the 1990s, though firm numbers grew by 14% and employment by 26% over the decade. Beneath the aggregate figures, however, there was significant churn as new firms were created while others were closed, acquired or moved out of the area. There are also significant differences between sectors.

Survival rates were generally better than the national average, and better than those commonly quoted in the literature, typically 55% survived the first 10 years. Despite this, there are few large firms in the area to act as hubs for development, though there are a number of globally significant firms and some industrial clusters.

The development of high-tech activity in the Cambridge area was largely self-organising. However, congestion effects such as skills shortages, house prices and excess pressure on the local infrastructure, point to the need for improved co-ordination between central and local government and between the university, civic and business communities if the success of the last two decades is to be sustained.

Keywords: Cambridge Phenomenon, technology-based firms, growth, employment, turnover, market capitalisation, regional development, clusters

JEL Classification: L23, M13, O18