In the Cambridge phenomenon (Segal 1985), Segal Quince & Partners argue that the growth of high technology industries around Cambridge came from informal contacts, modest locally arranged financing and organic growth from existing small independent companies. This report can be difficult to find (it predates the web), so this summary was prepared.
The report argues that an ethos of self-confidence of the University of Cambridge inspired start-up companies around the University. The ability to retain intellectual property rights allowed University people to try exploiting their ideas with new firms. The Cambridge Science Park was established to cater to the demand from firms, rather than create that demand. It initially provided low cost short-term facilities to already established small companies.
Segal Quince & Partners (Segal 1985) looked at four policy issues:
- The role of small new technology based firms
- Links between industry and higher educational and research institutions
- The contributions and roles of the public and private sectors in stimulating technological change and economic development. What is the impact of the allocation of allocation of public research funds?
- The spatial distribution of high technology industry. Will there be a trend away from established industrial and urban areas to attractive rural areas?
Historical perspectiveCambridgeshire, Cambridge's region, is located in the south east of the UK. Until around 1960, it was a prosperous agricultural region, with a small dispersed population and poor transport links to the rest of the UK. Around 1960 people began to move from the congested London region, with a 28% population increase by 1981.
In the 1960s small factories moved to Cambridgeshire to escape London's congestion and for the low wages and unionisation of the region.
During the 1970s new enterprises were formed, closest to London transport links and large towns. Improved transport followed development.
Cambridge Scientific Instruments Company (now Cambridge Instruments) in 1881 and The Pye Group (1896) were significant in early days, working closely with University researchers to produce scientific instruments for the University and then industrial products for world markets.
Planning controls in the mid to late 1960s limited industry development and a University report in 1969 recommended a science park for science based industry, accessible to the University. In 1979 an informal Cambridge Computer Group promoted the interests of computing companies in the centre of Cambridge and drew the attention of locals and Barclays' Bank to stimulating hi-tech companies.
Computer Aided Design CentreIn the 1960s, the UK Government funded a CADCenter at Cambridge, managed under contract by ICL.
The government-university-company arrangement did not work well, with conflicting objectives of R&D, technology transfer and aims of eventual self-funding. In the 1970s essential staff left and set up a successful company. The centre was privatised in 1983 and is successful commercially, being owned by IT, engineering companies, the University, Trinity and St John's Colleges.
Lessons of History
- There is a long history (100 years) of high technology companies in Cambridge, due to the University.
- The University is dominant in the city of Cambridge and is strong in scientific fields.
- The region was already growing before the latest hi-tech developments.
- Planning which limited large industrialisation may have helped small hi-tech firms.
- Problems of preservation v development remain.
Statistical PictureSegal Quince & Partners interviewed 261 firms around mid-1984 and estimated these comprised 85% of the relevant firms in Cambridge, employing 13,700 people. There was a significant increase of firms in the 1960s followed by an explosion in the early-mid 1970s, with 60% of firms established after 1978. For the decade, an average of 1.5 firms started up per month and a failure of only 7% of firms over five years.
Most firms were independent, with only 25% subsidiaries of larger companies. The companies were small, with 30% having at most five employees and 75% having at most 30 people. The dominant industry was electronics, instrument engineering and computing, turning over 230,000 Pounds per employee. Segal Quince & Partners attribute the high productivity to design being done in Cambridge and volume production elsewhere.
Cambridge had 50% of firms and 80% clustered around the initial start-up companies and the science park. Segal Quince & Partners provide a complex ``family tree'' of companies. They suggest two kinds of company links:
- People forming new start-ups from existing companies, the University, or research laboratories
- Subsidiaries of existing companies in the area created, but operating essentially as independent companies
The major reason for locating the firm in Cambridge was that the principles already lived there. Local contacts, market opportunities and a prestigious address were also factors.
Cambridge was a good place to recruit staff from and attract staff to. One third of staff were graduates in older firms and 60% in newer.
Two thirds of firms spent 5% or more of turnover on R&D, with one eight spending more than 50%.
Links with the Local Research ComplexSegal Quince & Partners argue that informal links between companies and the University/Research organisations were important. They argue these links have been understated by previous studies.
Very small (three person) precision engineering sub-contractors, spin-offs from University workshops, were essential to the high technology companies.
New market niches in high technology were continually opening and being filled by new firms, partly as subcontractors to larger local firms.
Many firms concentrated on exports to the USA and increasingly Asia.
Financial Aspects, Premises, Business Services & CommunicationsSegal Quince & Partners conclude that the availability of finance was not a limiting factor for high technology firms. Companies minimised the need for external finance until better established. The local office of Barclays' Bank was supportive with overdraft facilities, term loans and business advice. The bank also provided the secretariat for the Cambridge Computer Group. At the same time, some venture capital became available for second and later round financing. A central government guarantee scheme on bank loans was also used by over 50% of firms started after mid 1981.
Complex government innovation schemes were less clearly of value, due to the short product development periods for high technology.
Availability of suitable premises was not a constraint. The science park was slow to develop for the first seven years. Later expansion was due to ``nursery units''. Differences to later technology parks were:
- The park was developed in response to demand, not to encourage it,
- Private sector development was dominant,
- The buildings were not especially high technology in design or facilities.
Cambridge contrasts with high technology developments in Scotland, which attracted electronics plants of large established foreign companies. Indigenous companies are comparatively less significant, as is the role of universities (apart from providing graduates for employment).
In comparison to Silicon Valley USA, Cambridge's high technology industry is several orders of magnitude smaller, expanded more recently, diversity and more quickly. Cambridge remains focused on research, design and development, Silicon Valley on high volume production.
Factors Shaping the Cambridge Phenomenon
Definition of the Phenomenon
- Large numbers of high technology companies around Cambridge for computer hardware, software scientific instruments, electronics and biotechnology
- Young, small, independent and indigenous companies
- Decades of high technology company start ups
- Research, design and development activities or small volume high value production
- Links between firms, the university and research organisations
FactorsCambridge University provides a research organisation with a record of academic excellence, good supply of research students, public sector research funds and an ethos of self-confidence. 49% of teaching and research staff have no tenure and are on short fixed-term contracts. These people want to stay in Cambridge, but do not see long term careers with the University and so start new businesses. Around 2500 postgraduate students provide skilled part time staff for businesses.
Academic staff has relative freedom to have links to industry and retain intellectual property rights to work.
Local Research and Technological InstitutesResearch bodies around Cambridge University became attractive to large organisations around the time of Segal Quince & Partners study (1985). They provided a source of staff, particularly with cutbacks on publicly funded research. Trends were for overseas firms setting up marketing/distribution activities [note: marketing to who?], limited production and R&D. They also monitored developments in Cambridge laboratories, while contributing to the laboratories.
Public expenditure on research was a factor in development of computing and biotechnology firms, but there was lead-time of a decade.
The science park provided small cheap short-term accommodation for already established firms. It also provided high cost, high quality property for prestige projects of international firms, with the prestige rubbing off on smaller tenants.
Cambridge Technology Association
The Cambridge Technology Association (previously Cambridge Computer Group) grew out of a meeting in July 1979 to encourage co-operation and support amongst new computer companies. The group provided moral support for new small companies, financial and business service firms were able to identify opportunities from the start-up computer companies and local authorities could see a new industry to encourage.
- Segal (1985) The Cambridge phenomenon : the growth of high technology industry in a university town, Segal Quince & Partners, Hall Keeper's House, 42 Castle Street, Cambridge CB3 0AJ, England, 1985, ISBN 095102020X (copy in ANU HANCOCK Library)
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Copyright © Tom Worthington 1999.