Cambridge: what’s in the chemistry of Europe’s leading high tech cluster?

It perhaps says something about the Cambridge Cluster that the first result the phrase turns up in a Google search is all about exotic chemistry. Apt no doubt, but what is the formula behind this chemistry?

The cluster, also at times labelled the Cambridge Phenomenon, Silicon Fen or the Cambridge Technopole, is famous globally as one of the UK’s first and most successful innovation hubs. It is the home base of a surprising number of high-tech start-ups, more than a few of which have nothing to do with the region’s famous university.

Politicians extol the Cambridge Cluster; policy wonks pick over its entrails and write reports by the shelf load as they try to fathom its success; local real estate developers rub their hands in glee at the premium that comes with a CB2 postcode. Regions throughout the UK, not to mention the rest of the world, try to clone the cluster, to replicate the phenomenon.

One regular assessment of what makes Cambridge tick comes in ‘Cambridge Technopole Report – an overview of the UK’s leading high–technology business cluster’.

Written by Walter Herriot of the St John’s Innovation Centre and Tim Minshall of Cambridge’s Institute for Manufacturing, this annual review of the state of play in Cambridge describes the technopole as, “A geographic area of intense high-technology innovation activity encompassing the City of Cambridge at its heart and the sub-regional Greater Cambridge hinterland of approximately 25 miles radius. It sits in the wider region of the East of England, one of the fastest growing regions in the UK. Much of this growth has been fuelled by the dynamism of the Cambridge Technopole area.”

Sowing the first seeds

The first visible seeds of Cambridge cluster were sown in the 1970s, with setting up of one of the UK’s first science parks. It has since grown to include an array of incubators and business parks of various flavours.

In their report, Herriot and Minshall put some numbers on the phenomenon. In 1978, they say, “there were around 20 high-tech companies in the area”. By 1985 this had reached “around 360”. Now there are “over 1,400 high technology ventures employing around 43,000 people”.

Never famous for humility, when comparing itself with other clusters, Cambridge turns to countries such as Israel, or regions such as Bangalore or Beijing.

One recent analysis describes Cambridge as, “the 6th most significant cluster in Europe, lagging behind London, Paris, Tel Aviv, Stockholm and Copenhagen. Even so, say Herriot and Minshall, Cambridge “punches above its weight”, especially when it comes to being a money magnet.

Growth despite shortcomings

Unlike smaller and younger clusters, Cambridge has successfully nurtured businesses that became large enough to go public. In 1990, there was just one publicly quoted company in the cluster, by 2006 this had reached 70.

Some of that growth has come despite local shortcomings. Herriot and Minshall point out that the region has problems, warning that “it is unlikely that [it] will attract or create individual businesses employing tens of thousands of people locally, if only because the physical infrastructure is not in place, nor could be made available in time frames acceptable to rapidly growing businesses”.

Transport and telecoms have all come up as “challenges” for anyone doing business in and around Cambridge, with Herriot and Minshall pointing to the need for road improvements – they could have added convenient parking – and warning that, “Affordable housing is a real issue”. History suggests that their solution to the latter problem – a new town in the region – is guaranteed to provoke severe local opposition.

Another regular observer of the region, the analyst firm Library House, has reported on the Cambridge Cluster Report since 2003. In ‘Flight to Quality: The Cambridge Cluster Report 2004’ they found that, “In the first half of 2004, the Cambridge Cluster secured more than 25 percent of the UK’s venture capital investments and more than 8 percent of the European total by value.”

When Library House looked at the technology transfer activities of 20 universities in the UK, in ‘An Analysis of UK University Technology and Knowledge Transfer Activities,’ Cambridge University came out streets ahead of the rest of the pack, including having the highest income from technology transfer

In its most recent, and fourth, dissection of Cambridge, ‘Looking Inwards, Reaching Outwards: The Cambridge Cluster Report – 2007,’ Library House reported that spin-outs from the University of Cambridge attracted GBP 140 million in investment between 2001 and 2006. This is “more than any other UK and US university studied, except for Stanford University.”

Clouds gather as others catch up

There are, though, clouds on the horizon. Other clusters are catching up. There are also gaps in Cambridge’s knowledge portfolio.

The report says that, “looking at the relative performance over time, Cambridge’s share of deals made by the top 20 European clusters has shown a marked reduction, from 9.3 percent in 2005 to just 5.6 percent in the first half of 2007, suggesting it has been losing out to European counterparts in recent years.”

Another indicator of change is the fact that deal activity in Berlin the first half of 2007 matched that in Cambridge for the first time.

As much as anything, Library House puts this relative decline down to shortcomings in what it terms soft innovation, in particular in the Service and Retail sector, which are be closely related to the emergence of Web-enabled products and Mediatech. “The Cambridge Cluster has shown very limited activity in these sectors, whilst other major European Clusters have shown a significant increase.”

New Centre for Entrepreneurship

Library House notes that it takes time to create a cluster. “Of all European innovation centres, the Cambridge Cluster has the most mature ecosystem,” it said back in 2004. Since then, Cambridge has piled on the pressure.

One of the leading lights of the Cambridge Cluster is Hermann Hauser. At the beginning of 2008 he announced that the Hauser-Raspe Foundation, set up by Hauser and his wife Pamela Raspe, is to provide GBP 8 million to establish The Centre for Entrepreneurship as a major new focal point for the promotion of entrepreneurship.

Cambridge Enterprise, the university’s science and technology commercialisation office, will be among the beneficiaries of the centre, which will also provide offices, incubation spaces and a seminar centre. In the 1970s, when Hauser first started to turn Cambridge’s research into profits, the university’s support for commercialisation was little more than an enthusiastic retired academic working from a desk in one of the many old buildings given over to the university’s peripheral support activities.

So what makes Cambridge tick?

Over the years there have been various attempts to divine just what makes Cambridge tick. One recent analysis suggests that a lot is down to the individuals.

Yin Mon Myint and Shailendra Vyakarnam, of the Centre for Entrepreneurial Learning in the University of Cambridge, who have looked at start-up companies and the people behind them believe that, “to understand entrepreneurship and to stimulate the birth rate of new companies, policy makers must consider the individual as the unit of analysis.”

The individuals who have stoked innovation around Cambridge include not just technical people but angel investors who, “expect to be involved actively in the ventures in which they invest, as informal consultants or board members.” The analysis also shows that “Cambridge entrepreneurs tend to work together in different organisations repeatedly over time.”

Professor William Webb, Head of R&D at Ofcom, the UK’s telecommunications regulator, also highlights the role of individuals in the success of the Cambridge Cluster “It was not due to central planning by, for example, a regional administration, but through the uncoordinated actions of a number of key individuals.” His view is that success is due to, “the presence of a few key individuals who establish successful companies; help in the forming of local networks; the provision of angel funding; and the presence of the right environment in terms of academic and consulting opportunities”.

The bad news for would be ‘clusterers’ is that, “There is little evidence that it is possible to proactively start a successful cluster, especially given that it gets increasingly hard to succeed after the first successful cluster is established.”

Webb also provides a reality check on the impact of the cluster on the region. “Although the Cambridge Cluster is widely admired,” he says, “it generates relatively little wealth and employment for the region.” Put another way, “The successes in Cambridge have generated substantial wealth for their founders but have had little overall effect on, say, employment or the average salary in a region.”