CRIEFF Discussion Paper Number 0804

Firms in Scottish High Technology Clusters: software, life sciences, microelectronics, optoelectronics and digital media – preliminary evidence and analysis on firm size, growth and optimality

Gavin C. Reid (University of St. Andrews), Vandana Ujjual (SPRU, University of Sussex).

Abstract

This paper reports on: (a) new primary source evidence on; and (b) statistical and econometric analysis of high technology clusters in Scotland. It focuses on the following sectors: software, life sciences, microelectronics, optoelectronics, and digital media. Evidence on a postal and e-mailed questionnaire is presented and discussed under the headings of: performance, resources, collaboration & cooperation, embeddedness, and innovation. The sampled firms are characterised as being small (viz. micro-firms and SMEs), knowledge intensive (largely graduate staff), research intensive (mean spend on R&D GBP 842k), and internationalised (mainly selling to markets beyond Europe).

Preliminary statistical evidence is presented on Gibrat’s Law (independence of growth and size) and the Schumpeterian Hypothesis (scale economies in R&D). Estimates suggest a short-run equilibrium size of just 100 employees, but a long-run equilibrium size of 1000 employees. Further, to achieve the Schumpeterian effect (of marked scale economies in R&D), estimates suggest that firms have to grow to very much larger sizes of beyond 3,000 employees. We argue that the principal way of achieving the latter scale may need to be by takeovers and mergers, rather than by internally driven growth

JEL codes: O18, O31, O34, O38

Keywords: High technology, Scottish firms, Gibrat’s Law, the Schumpeterian Hypothesis.

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