What Makes a Successful Science and Tech Cluster?

So what makes a successful science and tech cluster?

The obvious answer is a world class university which acts as a nursery for spin-outs and is a magnet for established companies who wish to collaborate with leading academics. Oxford ranks first in The Times Higher Education World University Rankings and Cambridge third. Furthermore, Silicon Valley is home to both Stanford (5^th) and Berkeley (9^th) and Boston has MIT (2^nd) and Harvard (5^th). There is a significant correlation (0.7) between the two rankings.

However, a world class university is not a guarantee that a city will also have a thriving science and tech cluster. Both Princeton and Yale in the USA are top universities, but neither feature in the WIPO rankings. That suggests that other ingredients are also required.

One important additional factor is the presence of a culture of starting businesses and risk taking.

Historically, that was frowned upon by UK universities, but attitudes have changed over the last 20 years as UK universities have looked to diversify their income and emulate their US counterparts which earn significant royalties from intellectual property. Part of the reason why Stockholm scores highly in the WIPO rankings is the so-called professor’s privilege. Unlike in other countries, Swedish academics own the intellectual property they create, rather than it being assigned to their university.

It follows that another important element for a successful science and tech cluster is venture capital.

Initially most university spin-outs have no revenue, so they cannot borrow from banks to fund their product development. Instead, they have to rely upon angel investors and venture capital funds. Both Oxford and Cambridge universities have set up their own venture capital funds which take stakes in spin-outs and their global reputation means that they have been able attract investment from international as well as domestic investors.

This has also created a virtuous circle whereby local entrepreneurs who have been successful have then become mentors to later spin-outs and re-invested their profits. The ecosystem has attracted further venture funds expanding the enterprise potential of the location.

By contrast, it is much more difficult for spin-outs elsewhere in the UK to raise money.