As the world shrinks and economic barriers fall, it is often smaller industries that are lost behind headlines singing the praises of globalisation.

So, in response to the new array of challenges that face them, many of these industries are clubbing together, taking the decision that co-operation is healthy for competition.

Though this sounds unlikely in the cut-throat world of competitive business, the benefits of standing shoulder-to-shoulder appear to be outweighing the advantages of going solo.
Tracing the ‘family tree’ of modern clusters – the basic concept of clusters has existed for over a century – many commentators cite US examples such as ‘silicon valley’ as the template for European models.

In his 1998 work, The Dynamics of Industrial Clustering, which focused on the US cluster phenomenon, Peter Swann concluded that “companies in clusters tend to grow faster than average; clusters attract a disproportionate amount of new entry; and companies in clusters tend to be more innovative”.

The Department of Trade and Industry (DTI) defines these unlikely alliances as “concentrations of competing, collaborating and interdependent companies and institutions that are connected by a system of market and non-market links”.

In layman’s language, companies are being encouraged to work alongside each other in the spirit of pooling resources and sharing expertise. It’s a simple premise – shared brainpower, spending power and skills means individual companies are in better shape to bid for larger pieces of work. The spirit of teamwork is the name of the game here – formal or informal ties can spread knowledge, resources and best practice. The point is made clearly by the ‘Scottish forest industries cluster’, which describes itself as a “group of inter-related industries and organisations whose links with each other improve their overall competitiveness... they can be each other’s customers, suppliers, researchers, partners or competitors”.

Responding to market forces and individual conditions, clusters often form naturally, but they were also highlighted as a driver of economic growth in the government’s 1998 competitiveness white paper.

The white paper noted that business development was often strongest when “firms cluster together, creating a critical mass of growth, collaboration, competition and opportunities for investment and knowledge-sharing”.

The cluster baton was then handed to science minister Lord Sainsbury, who in 1999 took up the chairmanship of a steering group looking at how to develop clusters and facilitate their formation. By 2003 the group was considered to have completed its task, with the DTI’s remit set as creating “the conditions that encourage the formation and growth of clusters, but not to artificially create clusters”.

Nearly three years on, and clusters remain very much the vogue. One example is the so-called ‘silicon glen’ area of Scotland. Styled on ‘silicon valley’, Scotland’s ‘California with rain’ has spawned a host of next-generation clusters like ‘silicon fen’ and the M4 corridor.

Now clusters are working to strengthen or develop ties with higher education institutions – a policy aimed at further embedding clusters within local communities. A look at the UK’s most historic seats of learning shows the theory is becoming fact. After a science park was established at Cambridge University in 1970, the number of clusters in the area has risen to over 1,500. This exponential growth has been labelled the ‘Cambridge phenomenon’.

Meanwhile, Oxford has seen clusters blossom around its dreaming spires. At the forefront is the area’s ‘motorsport valley’, which is home to over 700 specialist motorsport companies, including a number of Formula 1 teams.

This is just the tip of the cluster iceberg. Before the formation of the steering group, critics said that not all clusters were destined for success, and that large swathes of northern England were not benefiting from cluster growth. But ties with educational institutions have largely halted cases of ‘cluster unravel’, meaning, more often than not, that to cluster and to co-operate is to compete with clout.