Posts Tagged ‘manchester’

New article: ethnic diversity, firm performance and cities

August 8, 2016

Paul Klee, Harmony of Northern Fauna, 1927

I’ve got a new paper published in Environment and Planning A. There’s an open access version here.

The research looks at the links between ethnic diversity in firms’ top teams (owners, partners and directors) and the performance of those firms (specifically, how much revenue they make).

I also look at how those linkages  vary across different types of firms, and how different types of urban environment may help or may not.

There’s now a decent diversity literature (see this academic review, or this great Andy Haldane speech). But we know much less about these gnarlier issues.

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I find positive diversity-links – but only for certain kinds of companies. The strongest links are for a group of large,  knowledge-intensive businesses who comprise about 16% of my sample. The role of cities is also complex. For this first group, being in  London amplifies the diversity ‘effects’.

But for a second, smaller group of younger companies, diversity channels seem to be swamped by London’s higher costs and greater competition. These firms perform better when in smaller, cheaper cities like Manchester or Birmingham.  In turn, that suggests policies to promote ethnic diversity in firms need to be quite carefully tailored to industry and local conditions.

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Here’s the abstract:

A growing literature examines how ethnic diversity influences economic outcomes in cities and inside firms. However, firm–city interactions remain more or less unexplored. Ethnic diversity may help firm performance by introducing a wider range of ideas,  improving scrutiny or improving international market access. Urban locations may amplify in-firm processes via agglomeration economies, externalities from urban demography or both. These firm–city effects may be more beneficial for knowledge-intensive firms, and  for young firms with a greater dependence on their environment. However, firm–city interactions could be negative for cost and  competition-sensitive younger firms, or for firms operating in poorer, segregated urban markets. I deploy English cross-sectional data to explore these issues within firms’ ‘top teams’, using latent class analysis to tackle firm-level heterogeneity. I find positive diversity–performance links for larger, knowledge-intensive firms, and positive firm–city interactions both for larger, knowledge-intensive firms in London and for younger, smaller firms in second-tier metros.

Read the article here. Or here’s the ungated version.

Can ‘Tech North’ take off?

October 27, 2014

Rory Cellan-Jones has a nice article on the BBC website on the prospects for the Government’s ‘Tech North’ initiative, building extensively from my work with Emma Vandore on Tech City in London. Here’s some further thoughts.

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Tech North was launched by Nick Clegg last week: it’s one of the products of the DPM’s recent Northern Futures initiative. The idea is to promote tech clusters in Liverpool, Manchester, Sheffield, Leeds and Newcastle: Clegg has put £2m/year on the table to support local firms, and to attract FDI to the area.

Politically this is a no brainer. It meshes with the government’s ‘rebalancing’ rhetoric. And it fits the new mission of TechCity UK, which has expanded its remit from just East London to cover the whole country. TCUK is publishing work next month looking at digital clusters, which will put some new numbers behind the policy.

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So will it work? Rory is fairly sceptical in his piece. I’m still unclear what the programme will actually do: so here are five issues policymakers should be thinking about.

1/ Real geographies – Tech North connects five big cities with over 150 miles between them. In the real world, urban tech is in very tight microclusters: neighbourhood scale scenes which allow for lots of face to face contact. In Liverpool, for example, a lot of the action is in Ropewalks or the Baltic Triangle.

In London, Ministers originally hoped to ‘connect’ the Shoreditch cluster to the Olympic Park a few miles away. That hasn’t proved possible, not least because Old Street firms didn’t want to move there and saw no connection between the two.

So the chances of creating a single super hub across the Pennines are slim at best. There are worrying echoes of the Thames Gateway here: a planning concept, not a real place. On the other hand, as we found in London, the area branding might prove a helpful way to raise the profile of these local scenes.

2/ Who’s in and who’s out? The DPM seems to have focused his attention on the five Northern core cities. Fair enough, in that these are the economic powerhouses of their wider regions. But the real geography of tech activity is a little different. But cities like York and Sunderland also have quite a lot of tech firms. So why aren’t they included?

3/ FDI versus growing our own – firms cluster because co-location makes sense: they can tap into new ideas and pools of skilled workers and can share useful inputs (like fast broadband or VC investors). On the other hand, clusters have tensions built in. As more firms enter, pressures on space build up, so rents rise. And competition rises, for staff and for market share.

Given all this, it’s risky to base cluster development policies on foreign investment. If FDI simply brings in big multinationals, these might displace smaller, younger UK businesses. I doubt that’s what Government or cities want. Agencies like UKTI typically try and maximise the count and size of foreign investments. A different approach is needed here, which is to focus on the type of foreign inputs.

4/ Infrastructure – FDI programmes should try and enrich the rest of the ecosystem, especially specialist services tech firms need: finance, lawyers, accountants and workspaces. This stuff is only just starting to appear in London at scale, and is likely to be a priority for other UK cities. Certainly, the UK’s VC scene is pretty weak outside the capital.

Equally, fast internet (and fast connection to it) is a basic need. For me, this is now a public utility, so it’s disappointing that the Superconnected Cities scheme has retreated from rolling out faster systems to everyone, to simply providing vouchers to SMEs. The CORE programme in York, Peterborough and Derby is an interesting exception (thanks to Tom Forth for the link).

5/ Policy architecture (and whether it really matters) – cluster policy advocates like Michael Porter assume that cluster development has to be local, since clusters are local phenomena. But this doesn’t follow.

First, Tech North has little cash on the table: its five-city budget is about the same as the original budget for Shoreditch. Second, a lot of the relevant policy levers are held at national level: tax breaks for investors, crowdfunding regulation, immigration and skills. That still leaves some local levers: branding, networking, planning and any local investment pots. But it’s limited stuff.

Arguably some of these national levers should be devolved: that’s started to happen through City Deals and Local Growth Deals. But we’re at the very start of this process, and though the post-Scotland moment may yet shake things up further, what Ministers are handing over in powers they’re currently taking away in cuts.

But perhaps that’s too pessimistic. As Emma and I found in the East London research, the Old St scene grew quietly for years without policymakers really noticing. That could well be the likely trajectory for the many clusters under the Tech North umbrella.

High Speed Two, cities and the North-South divide

January 28, 2013

(c) The Guardian 2013

The Government has just unveiled the route map for the UK’s high speed rail network. So will HS2 help the cities on the line? Will it narrow the North-South divide, as some Ministers claim? And what about places left out?

Here’s what I wrote back in 2010, when the detailed modelling was done, and drawing on the international evidence. The punchlines are:

So what does HS2 mean for cities? Urban firms and travellers are the big winners, which is good news for cities if more productive businesses raise wages or employment. Some cities get the kudos of being on the line, and may get a regeneration boost from new stations – although that could turn into a windfall gain for developers. But fairly few firms will relocate, and agglomeration impacts will be pretty small.

On this basis, HS2 isn’t likely to fundamentally change the UK’s economic geography. Rather, it will speed up the economic geography we already have.

… Those who gain from HS2 (business, core cities, those in ‘the North’) are strongly in favour; those who lose (communities and homeowners along the line) are vehemently against. Local opponents of HS2 are hardly irrational – quite the opposite. So rather than handing a windfall gain to business by pegging HS2 fares to conventional fares, HS2 tickets should be pricier – at least in first class.  That provides another way for taxpayers to recoup some of the initial outlay. … The agglomeration benefits for Phase 2 (Manchester and Leeds) seem much larger than Phase 1 (London to Birmingham). Why? Rather than connecting two relatively distant cities, Phase 2 links a lot of nearby places (e.g. Sheffield/Meadowhall to Leeds in 20 mins), and provides indirect access to big cities not on the line (e.g. from Manchester to Liverpool). The fact of HS2 thus strengthens the case for complementary investments like the Northern Hub, which will bring Liverpool, Manchester, Sheffield and Leeds closer together.

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Two other points. First, as John Tomaney argued on radio 4 this morning, the evidence suggests HS2’s economic impacts are pretty complex, and the net effect isn’t clear. Like him and others, I’m basically an agnostic.

Second,  to repeat – it’s crucial to spend money on better links between Northern cities and more London-centric high speed lines. As Richard Leese suggested in the same piece, for policymakers this is not an either/or. Thankfully Ministers agree, and are feeding cash into boring but important investments like the Northern Hub, as well as the bigger and shinier HS2.

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Update, May 2013: The National Audit Office has published its own report, which echoes many of these points.

City Deals: The Second Wave

October 30, 2012

Some thoughts from yesterday’s City Deals workshop, fronted up by Nick Clegg and Greg Clark, and ably compered by Alex.

The major announcement was that 20 cities and city-regions get the chance to bid for a ‘Wave 2’ deal. It’s a competition – the Cabinet Office sift bids around the turn of the year. Successful pitches will get a ‘core package’ plus local options, then go live sometime in 2013.

There was also lots of reflection on the wider Deals process – now almost a year old.  I got quite excited about all this back in December. Some real challenges are now emerging.

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Some immediate points on the Wave 2 proposals. First, we need more detail on the sift criteria, and a sense of how many cities will get through. I suspect the Cabinet Office and HMT may have different views on this. Officials are also working on core package specifics. I’d expect skills, transport and finance to feature – and perhaps, Earnback-type arrangements for everyone?

Second, not all the 20 are city-regions. Ministers say local groups should self-organise. But the evidence says fitting the right policy asks to the appropriate scales is crucial. Relying on local political coalitions may not result in genuine functional economic areas.

Some wider issues:

1/ What can we expect? Ministers were very confident that City Deals will achieve substantive economic change: ‘the leadership of cities is incredibly important to their success’, said one. But the evidence is ambiguous on whether these direct effects actually exist. There may be indirect links from empowered leadership to growth – say, if this helps secure investment, or produces innovative policies. City Deals will help test that argument.

2/ It’s the process, stupid – as I’ve said, this is a long game. Getting the systems right is crucial – on negotiation and sift in the short term, and delivering culture change in the longer term. Like industrial strategy, the Deals system has to be flexible, and allow for failure.

As Dani Rodrik argues, in some ways process is more important than content in these situations. City Deals are basically experiments, and some won’t work out. The right institutional setting and rules are fundamental – not least to identify failure quickly. So it’s good that Core Cities will get a chance to renegotiate Deals in future, for example. Wave 2 cities should also get this.

3/ Whitehall as blockage – Clegg, Clark and others were very open about problems persuading some parts of Whitehall to engage (shades of Blair’s ‘scars on my back’ speech?).

Some of these blockages were already emerging last year, and Ministers and the Cities Policy Unit have done well to minimise these. But I guess one reason for the Wave 2 announcement is to keep the pressure up, co-opt city leaders in the cause, and build a critical mass of devolutionary pressure.  There will be severe tests of political leadership ahead, especially on welfare and benefits.

4/ Peer support and mentoring – Central government is investing in mentoring for cities – each gets a Cities Unit ‘partner’, alongside a senior ‘sherpa’ for each LEP. The Core Cities group also says it’s interested in peer support advising Wave 2. This is welcome stuff, which will be essential for some of the candidate cities. However …

5/ Too far, too fast? – Central government capacity is now getting very stretched. The officials are good, but there’s only so many of them. Even if over half the Wave 2 candidates are sifted out, this still doubles the workload. And there was some talk yesterday of a Wave 3, covering rural areas, before 2015.

This rapid roll-out has already drawn some fire from New Economy Manchester. There’s clearly  a political argument for acceleration. But Ministers should be very careful it doesn’t come at the expense of effective delivery. Official capacity needs beefing up. And again, process is key. Individual Deals should move forward at different speeds; some will be renegotiated; some may need a pause.

Speaking in Manchester

October 31, 2010

I’m presenting a couple of papers at a Regional Studies Association Conference at Manchester University on Tuesday 2 November. The conference is titled Regions in a Shifting Global Landscape, and both my presentations will look at connections between cultural diversity, innovation and urban/regional economic development.

The first is work in progress, and looks at the role of ‘ethnic inventors’ in the UK. It’s the first UK work of its kind, so I’m excited to be doing it. In the US, ethnic Indian and Chinese communities play a huge role in the science and technology sectors, especially in places like Silicon Valley. I’m interested in whether anything similar is going on here – in cities like Manchester, or our own Silicon Fen. My initial results suggest we may have a similar diaspora of British-Indian high-tech inventors emerging. More on that on the day …

The second paper, done with Neil Lee, looks at whether London’s cosmopolitanism helps the capital’s firms to innovate. We find small but pretty robust ‘diversity effects’ for London businesses. That raises the question of whether other big and diverse British cities – like Manchester or Birmingham – might benefit in the same way. We hope to crunch some more data on this in the coming months.

Here are the conference details. Hope to see you some of you there.

ps. I realise the picture is only loosely related to diversity, innovation or Manchester. But I like it, so it’s going up.

High Speed Two: what’s in it for cities?

March 16, 2010

Originally posted March 2010, updates Jan 2012 and Jan 2013.

It won’t be here for another 15 years, but HS2 has triggered a mass outbreak of trainspottery enthusiasm. The Guardian even live-blogged Andrew Adonis and Sadiq Khan’s announcements, for goodness’ sake.   The big issues last week were route, timing and cost – so I want to focus on impacts, particularly for cities. I’m not sure these will be all they’re cracked to be.

Dermot has helpfully summarised HS2 and the Conservatives’ plans, and R&R round up the reaction here. It’s all fairly positive (although the headline numbers don’t add up – £30bn over 20 years is £1.5bn per year, not the £2bn quoted by DfT). All the positivity explains why the Conservatives feel they need separate proposals – more on those later.

Let’s take environmental impacts first. HS2 is being pushed as green infrastructure. But as Henry points out, the CO2 impact of the line isn’t at all clear: it could take reduce emissions by -0.41m tonnes, or raise them by about the same amount. This is a pretty small fraction of total UK emissions, and doesn’t seem to significantly change the overall cost-benefit ratio. However, the lack of certainty is a worry – and dents the line’s green image.

There’s more detail on the economic impacts (summarised above). The bulk of the benefits accrue to individual travellers and firms via time savings, which feed into productivity gains at the national level. Time savings also help increase competition between firms.  Labour market impacts are much smaller – it’s unlikely HS2 will dramatically change commuting patterns, for example.

In theory transport improvements boost urban agglomeration – and thus productivity – by improving linkages between firms, and between firms and workers. By bringing agents closer together, we improve cities’ ‘effective density’. HS2 modelling suggests that for North-South high speed rail, these impacts are pretty small – £3.6bn over 60 years, just over 10% of the overall benefits of the line.

This is partly because HS2 doesn’t connect anywhere that’s not already on the rail network. By contrast, SERC’s research suggests that plugging new cities into high-speed infrastructure delivers a bigger charge to output.

So what does HS2 mean for cities? Urban firms and travellers are the big winners, which is good news for cities if more productive businesses raise wages or employment. Some cities get the kudos of being on the line, and may get a regeneration boost from new stations – although that could turn into a windfall gain for developers. But fairly few firms will relocate, and agglomeration impacts will be pretty small.

On this basis, HS2 isn’t likely to fundamentally change the UK’s economic geography. Rather, it will speed up the economic geography we already have.

Two final points. First, for Northern cities, the big agglomeration gains will come from speeding up links into urban cores, or bntter connections between nearby cities like Manchester and Leeds. This is the message of the Eddington Report, and it’s important it doesn’t get lost.

Second, the final shape of HS2 may look quite different. Last week’s report also did some preliminary modelling of high speed lines to Scotland – much closer to the Conservative proposals. While there’s a ‘good case’ for a high speed link to Manchester, the early numbers suggest a ‘particularly strong’ case for lines to Leeds and the East Coast of Scotland. That implies a cash-strapped future government might want to choose between two halves of the Y – a very tough political choice indeed.

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Update, Jan 2012: the Coalition has now given HS2 the green light. It’s also published some updated cost-benefit modelling. Three things stand out from this.

First, my analysis holds. The overall shape of benefits and costs is the same, although the recession and higher building costs have changed some of the numbers slightly. See page 10 for the new figures.

Second, the modelling almost perfectly explains the politics. Those who gain from HS2 (business, core cities, those in ‘the North’) are strongly in favour; those who lose (communities and homeowners along the line) are vehemently against. Local opponents of HS2 are hardly irrational – quite the opposite. This also suggests that rather than handing a windfall gain to business by pegging HS2 fares to conventional fares, HS2 tickets should be pricier – at least in first class.  That provides another way for taxpayers to recoup some of the initial outlay.

Third, the agglomeration benefits for Phase 2 (Manchester and Leeds) seem much larger than Phase 1 (London to Birmingham). Why? Rather than connecting two relatively distant cities, Phase 2 links a lot of nearby places (e.g. Sheffield/Meadowhall to Leeds in 20 mins), and provides indirect access to big cities not on the line (e.g. from Manchester to Liverpool). The fact of HS2 thus strengthens the case for complementary investments like the Northern Hub, which will bring Liverpool, Manchester, Sheffield and Leeds closer together.

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Update, Jan 2013: we now have the detailed route maps for the full Y network. Note that these are ‘preferred routes’ – a lot of other cities (e.g. Liverpool, Warrington) are now going to push hard to be included. And it’s still possible that the two legal challenges may change the network shape, as well as slow down implementation.

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