Clustering of Economic Activities in Polycentric Urban Regions: The Case of the Randstad

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  • Studies online version of this article can be found at:

    DOI: 10.1080/00420980120035303

    2001 38: 717Urban StudRobert C. Kloosterman and Bart Lambregts

    the RandstadClustering of Economic Activities in Polycentric Urban Regions: The Case of

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  • Urban Studies, Vol. 38, No. 4, 717732, 2001

    Clustering of Economic Activities in PolycentricUrban Regions: The Case of the Randstad

    Robert C. Kloosterman and Bart Lambregts

    [Paper received in nal form, October 2000]

    Summary. Local contexts are becoming more important as the impact of the process ofglobalisation on the spatial distribution of economic activities seems to generate not so muchprocesses of homogenisation as of heterogenisation between regions in advanced economies. Thecombination of specialisation and spatial concentration of economic activity in advanced econom-ies has attracted much attention from economists and geographers. Here, we explore at what levelof spatial aggregation contemporary tendencies of clustering of economic activities articulatethemselves within the archetypal polycentric urban region of the Dutch Randstad. To examinethis question, we look at pro les of business start-ups in the individual cities of the Randstad. Ourfocus is on business start-ups as they respond most directly to the changes taking place in theeconomic environment and especially those regarding the supply of labour. Our ndings point tothe direction of cluster formation at a supraurban level. The pro les of business start-ups areclearly converging. A process of intraregionali.e. at the level of the polycentric urban regionhomogenisation with respect to new economic activities is taking place. Within the Randstad,notably a decreasing divide between a north wing and a south wing is revealed.

    1. Introduction

    Globalisation is a structural process wherebythe economically relevant spatial arena be-comes ever larger. This process involves thecreation of complex world-wide webs inwhich economic actors such as producers,consumers, workers and investors are linkedtogether in both physical and virtual ways.Globalisation is, of course, by de nition, aglobal process, but its impact will affectspeci c localities in rather different ways.Socioeconomic changes that are supposedlyglobal in character are superimposed uponindividual spaces that have their own speci c

    legacies. These historical legacies may bevery palpable, as in the case of an urbanmorphology captured in concrete and stone,but they may also be more abstract in thesense of institutions or durable practices thatregulate all kinds of aspects of life (such asdoing business). Globalisation impingesupon these local legacies, and they in turn lter and shape this quasi-omnipresent pro-cess of socioeconomic change.The strongly intertwined processes of

    technology-driven changes in transport andcommunication, on the one hand, and of the

    Robert C.Kloosterman is in the Department of Geography and Planning, Faculty of Social and Behavioural Sciences, AMEAmsterdamStudy Centre for the Metropolitan Environment, University of Amsterdam, Nieuwe Prinsengracht 130, NL-1018 VZ Amsterdam, TheNetherlands. Fax: 20 525 4051. E-mail: Bart Lambregts is with the OTB Research Institute for Housing,Urban and Mobility Studies, Delft University of Technology, PO Box 5030, NL-2600 GADelft, The Netherlands. Fax: 1 15 278 3450.E-mail: The authors wish to thank the NWO for funding this research under the ESR programme, GastonHilkhuysen for his help with the statistical part of the paper and Sjoerd Hiethaar for providing the map of the Randstad.

    0042-0980 Print/1360-063X On-line/01/040717-16 2001 The Editors of Urban StudiesDOI: 10.1080/00420980120035303

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    erosion of trade barriers between individualcountries on the other, have enabled a hith-erto unknown intensity of cross-bordermovements of goods, services, capital andpeople. This process of globalisation hasbroadened the scope of many markets andthus intensi ed competition. The erosion ofnational markets has also been stimulatedby the gradual fading away of differences inmacroeconomic policies between advancedeconomies. As they commit themselves tothe economic and monetary frameworks oflarger supranational bodies such as the Eu-ropean Union and the North American FreeTrade Agreement (NAFTA), their degrees offreedom in this respect are severely curtailedcreating a much more level playing- eld. Asa result, the importance of the (local) micro-economic foundations in achieving competi-tive advantages is rising (Porter, 1999).When local contexts become more import-

    ant, the impact of the process of globalisationon the spatial distribution of economic activ-ities is not so much a process of homogenisa-tion as one of heterogenisation betweenregions.1 Differences between regions in thecomposition of leading economic sectors,hence, become more prominent whereas in-traregional differences decrease as economicactors build upon speci c local legacies ofphysical endowments (natural or man-made),of speci c skills and know-how and of al-ready existing networks. This way, locallegacies contribute to the emergence andcontinuation of areas that are highly spe-cialised in a limited number of speci c activ-ities that can build upon the same regionaland sometimes even local base of competi-tive advantages. These highly specialised re-gions, new industrial districts (Storper,1995, 1997; Scott, 1998), are home to clus-ters of speci c economic activities: criticalmassesin one placeof unusual competi-tive success in particular elds (Porter,1998, p. 78). These clusters can encompass awide variety of economic activitiesfor ex-ample, from garment industry to lm ani-mation in Los Angeles (Scott, 1988); fromwine-making in California to leather fashionin northern Italy (Porter, 1998); or from hor-

    ticulture in the Westland area south of TheHague (Lambooy, 1998a) to environmental rms in the Ruhr area (Kunzmann, 1996), toracing-car making around the M4 corridor inthe south of England (The Economist, 1996c,p. 36).Proximity, then, is crucial in understand-

    ing the current competitive edge of theseadvanced regions in speci c economic activi-ties. Unsurprisingly, the study of the cluster-ing of economic activities has become a veryimportant research topic in current economicgeography, regional, management and evengeneral economics. (For a critical review ofthis recent geographical turn in economics,see Martin, 1999.) Different theoretical ap-proaches have been offered to explain thisclustering. Economists tend to rely oninterpretations based on a particular kind ofagglomeration economiesso-called locali-sation economiesthat are sector-speci c inthe sense of pertaining to a limited range ofeconomic activities (see Anas et al., 1998;Krugman, 1998; Quigley, 1998). Geogra-phers tend to take a less abstract approachand focus on real places (Martin, 1999).This approach opens up a much thicker em-pirical social world and economic clustering,hence, becomes part of a much broader so-cial process. A recent, very fruitful, attemptto explain economic clustering in a moresocial way has been made by Gordon andMcCann (2000).Below, we will explore if and, if so, at

    what level of spatial aggregation a kind ofclustering of economic activities is takingplace within a speci c kind of advancedurbanised area, namely, a polycentric urbanregion. These polycentric urban regions canbe de ned as follows:

    (1) They consist of a number of historicallydistinct cities that are located in more orless close proximity (roughly within cur-rent commuting distances).

    (2) They lack a clear leading city whichdominates in political, economic, cul-tural and other aspects and, instead, tendto consist of a small number of largercities that do not differ that much in

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    terms of size, or overall economic im-portance and a greater number of smallercities.

    (3) The member cities are not only spatiallydistinct, but also constitute independentpolitical entities.

    This kind of urban region can be found, forinstance, in Japan (the Kansai area), in Ger-many (the RhineRuhr region) and in north-ern Italy (the Po valley). The DutchRandstad, consisting of the four largest cities(Amsterdam, Rotterdam, The Hague andUtrecht), together with a number of smallercities in the western part of the Netherlands,can be seen as a prime example of a polycen-tric urban region with relatively strong func-tional relationships. According to Hohenbergand Lees (1985, p. 242), the Randstad goesbeyond the rather thin de nition and is aprime example of a network system in arelatively pure form. Its cities, parallellingthe gradual transformation of the Netherlandsfrom a decentralised mercantile oligarchy toa centralised nation on the European model,have gradually joined into a more articulatedwhole. David Batten (1995, p. 314) refers tothe Randstad as a classical example of amodern urban agglomeration consisting of anintricate web of corridor cities with long-standing, strongly developed functional andlocational relationships (see also Dielemanand Musterd, 1992; t Hart, 1994; Clark andKuijpers-Linde, 1994).Here, we will explore at what level of

    spatial aggregation, contemporary tendenciesof clustering of economic activities articulatethemselves within the archetypal polycentricurban region of the Randstad. We want toknow, in other words, at what spatial levelprocesses of heterogenisation between re-gions and homogenisation within regionsmanifest themselves in a period of pro-nounced internationalisationnamely, thelast decade of the 20th century. To be able totrace the more recent developments, the fo-cus is not on the changes in the industrialcomposition of the cities that constitute theRandstad as a whole. Instead, we only takeinto account business start-ups for the period

    198897. They re ect much more directlythe changes in the economic environment.The composition of business start-ups is, ac-cordingly, a much better indicator of currenttendencies towards economic specialisation.Our endeavour involves the following re-search questions:

    (1) Do we see a convergence in the sectoralcomposition of business start-ups in the13 larger cities of the Randstad for theperiod 198897?

    (2) To what extent can sub-Randstad pat-terns be discerned, especially with re-spect to the so-called north and southwing of the Randstad?

    (3) What are the implications of our ndingsfor the current debate on processes ofspatial clustering of economic activities?

    In section 2, we discuss some more recentinsights on the clustering of economic activi-ties. This will include a brief presentation ofrather straightforward agglomeration econ-omies as well as more social explanations. Inthe next section, we will focus on clusterformation and polycentric urban regions. Insection 4, the empirical ndings with respectto the patterns of economic clustering in theRandstad will be presented. In section 5, nally, the consequences of these ndingsfor the understanding of polycentricity andeconomic clustering more generally will beelaborated.

    2. Agglomeration and Specialisation

    Throughout history, different factors haveasserted their in uence on the spatial distri-bution of economic activity. In the pre-indus-trial and early industrial eras, spatialnon-homogeneities and internal economiesof scale were instrumental in the creation ofspatial concentrations of (specialised) econ-omic activities (see Anas et al., 1998). Spa-tial non-homogeneities refer to, for example,differences in mineral deposits or soil,whereas economies of scale pertain to thereduction of costs within particular pro-duction processes when output rises and av-erage xed costs decrease. These economies

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    of scale can be either private or public (suchas infrastructure endowments). These factors,complemented by technological improve-ments in transport and communications, en-abled formerly self-supporting cities andtheir hinterlands to engage in the trade ofproducts (goods and services) with other cit-ies. Cities were stimulated to specialise andbuild on their speci c strengths of naturalendowments or economies of scale in par-ticular activities. As a result, functional rela-tionships between cities intensi ed andinterurban trade grew. The rise of Italiancity-states in the Middle Ages is a case inpoint. When nation-states gradually emergedafter the 15th century, the framework oftrade changed as well. States tried to controltrade within and even across their bordersand individual cities and regions lost part oftheir economic independence. This latterphenomenon is also linked to a new phase inthe evolution of the world system wherenation-states try to expand their area of con-trolled trade by conquering new territories(Wallerstein, 1974). This phase lastedroughly about four centuries, from 1550 to1950.After 1950, contemporary capitalism

    gradually transcended the boundaries of thenation-state. The expansion of the world sys-tem, however, has shifted to a higher gear byincorporating regions (such as parts of south-east Asia and some former communist coun-tries). Nation-states in the advanced worldhave more or less willingly given upsigni cant parts of their sovereignty withrespect to trade and have become part ofsupranational bodies. Cities and regions arenow once more part of large internationaleconomic spaces and this, inevitably, has astrong impact on the international division oflabour and the role of these sub-nationalentities in particular.To understand the general backdrop of the

    role of cities and regions in the evolvingworld system, one also has to take intoaccount the process of space timecompression. Technological changes haveespecially in the 20th centurysigni cantlyreduced both time and costs involved with

    transport and communication. Distancesand even national boundariesstill matter,of course, but in a rather different way thana few decades ago.As a result, markets within this world sys-

    tem, particularly those within the large inter-national trading blocks, have become moreconnected. This, in conjunction with risingaverage discretionary income of householdsin advanced economies, has helped to changethe nature of many product markets: theyhave become more volatile and customershave developed a strong preference for qual-ity and variety as regards the products theyconsume. These circumstances have fa-voured more exible ways of productionover systems based upon so-called Fordistmass production and have given rise to amore re ned social and spatial division oflabour (Scott, 1988). In addition, althoughthe production of physical goods in purelyquantitative terms still rises, the role ofknowledge-intensive activities as problem-identifying, problem-solving and strategicbrokering has become crucial in advancedeconomies (Reich, 1991).In spite of technological developments

    suggesting a diminishing role for proximity,many economic activities display a strongtendency to concentrate in space (see, forexample, Krugman, 1991; Quigley, 1998;Scott, 1998; European Commission 1999).The combination of specialisation and con-centration of economic activity in advancedeconomies has currently been attractingmuch attention from economists and geogra-phers (see Porter, 1990, 1998; Krugman,1994; Storper, 1995, 1997; Anas et al., 1998;Martin, 1999; Wever and Stam, 1999; Scott,2000). Notwithstanding, a strong overlapwith regard to the factors underlying theseprocesses of spatial concentration, much lessconsensus seems to exist with respect to thelevel(s) of spatial aggregation on which theseclusters of economic activities manifestthemselves.2 This issue is central in our casestudy of the Randstad but, before we turn tothis, we will rst address the underlying pro-cesses of clustering.Contemporary tendencies towards special-

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    isation and concentration in space are to anever lesser degree explained by the tra-ditional sources determining the distributionof economic activity over space.3 Instead, therationale for clustering is currently most of-ten associated with the existence of so-calledexternal economies of scale (see Krugman,1994, p. 227; Anas et al., 1998). The basicidea is that, by congregating in space, rmsare enabled to produce at lower cost bybene ting from lower transaction costs,wider opportunities for matching needs andcapabilities, and the exchange of usefulknowledge and information (Scott and Stor-per, 1992). The productivity gains and factorrewards resulting from these bene ts remainrestricted to the area within which thebene ts can be offset against the costs ofgetting access to them. The idea that suchexternalities play an important part in con-temporary exible systems of production(Scott, 1988, 1998) clearly adds to the appealof this approach.In contrast with the relatively unambigu-

    ous concepts of spatial non-homogeneitiesand internal economies of scale, the conceptof external economies of scale is rather com-plex and wide-ranging. Several typologies ofexternal economies of scale are in use, eachof them being based upon different dimen-sions. A rst typology distinguishes betweenstatic and dynamic external economies ofscale. Whereas static externalities have animportant part in describing the emergenceand existence of patterns of regional special-isation, their dynamic counterparts also ad-dress the issue of localised growth. Researchon dynamic external economies of scale hasdisplayed much interest in the role of knowl-edge spill-overs in fostering innovation andlocalised growth (see Glaeser et al., 1992;Henderson et al., 1995; Henderson, 1997).Static external economies of scale are oftendivided according to the industrial sector inwhich they occur. Economies of urbanisationoccur across industries and entail the bene tsaccruing to rms from overall local urbanscale and diversity. Economies of localisa-tion on the other hand, are realised by rmswithin the same industry. By locating in

    close proximity, such rms are enabled toexploit economies of scale while conservingon production costs. This much-applied di-chotomy is derived from the work of Hooverin the 1930s and 1940s (Hoover, 1937,1948).A more functional typology, nally, cuts

    across the latter (Gordon and McCann, 2000)and goes back to Alfred Marshalls work onindustrial districts. It distinguishes betweenthe existence of a local pool of specialisedlabour, the provision in greater variety and atlower costs of non-traded inputs speci c toan industry, and the ease of transmittingideas and information as important motivesfor rms to congregate in space (see Krug-man, 1991). Within these three broad cate-gories, a variety of more speci c externaleconomies of scale can be identi ed. Theseinclude so-called economies of massed re-serves (such as offering a deep andsuf ciently wide labour market) and alsohuman capital-accumulation as labourspecialisation encourages education (Anas etal., 1998, p. 1447; see also Gordon andMcCann, 2000, p. 517, for an overview ofmore speci c sources). Each of these poten-tial sources of localised external economiesof scale can be obtained within one or moreindustrial sectors, or across the whole of alocal economy (OSullivan, 2000).Notwithstanding the high extent of

    consensus with respect to the underlying fac-tors, determining which speci c economies(and to what extent) can be associated withobserved patterns of regional specialisationand diversi cation and the identi cation ofthe trade-offs between these two trajectories,is highly problematic. Different mechanismsmay operate simultaneously, indirectly,cumulatively, counter-productively or withdifferent time-lags; and their effects mayvary for different industrial sectors or evenfor similar industries being entangled in dif-ferent stages of product development (Hen-derson et al., 1995; Henderson, 1997;Gordon and McCann, 2000). Also, in abroader perspective, economic and politico-institutional transitions as brie y touchedupon above may put on the stage new

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    types of externalities and sources for ag-glomeration and growth.Empirical studies so far have provided

    con icting results as regards the relative im-portance of localisation and urbanisationeconomies in urban and industrial develop-ment (see Glaeser et al., 1992; Henderson etal., 1995; Henderson, 1997; ODonoghue,1999). Generally, however, the occurrence ofeconomies of localisation is associated withthe clustering of rms that belong to a singleindustry or a rather limited group of indus-tries. These localisation economies are es-pecially important when new industriesemerge in dynamic places during dynamictimes (Glaeser et al., 1992). Being new, theirmarkets are still unstable, their products notyet standardised and the rms themselvesstill relatively new and small, these rmsdependence on externalities arising from co-location with similar rms may be maximal.As long as the lack of standardisation bringsabout high measurement costs and expensiveformal contracting, trust and the exchange ofinformation and ideas about new productsand new production techniques have to begenerated via frequent informal contacts on aface-to-face basis. (Many authors point to theoverriding importance of face-to-face con-tactssee, for example, Jacobs, 1969; Saxe-nian, 1994; Porter, 1998; Anas et al., 1998;Glaeser, 1998; Goe et al., 2000; Scott, 1999.)Since such contacts, despite the fall of costsof other types of communication and ex-change, are still particularly costly, clusteringin space enables these rms to reap thebene ts of scale without being too big them-selves to hamper their exibility and theirinnovative potential. Being located in closeproximity, furthermore, reduces the formaland informal costs of matching demand andsupply of adequate labour and the costs ofworkers moving between rms in the samearea (OSullivan, 2000). In addition, it mayenlarge peer pressure amplifying competitivepressure within a cluster, even among non-competing or indirectly competing rms.Pride and the desire to look good in the localeconomy spur executives to attempt to outdoone another (Porter, 1998, p. 82).

    Observations suggest that the spatial do-main over which such externalities are poten-tially available vary by industrial sector andby spatial-historical context. Clusters havebeen reported to emerge in speci c neigh-bourhoods of citiesfor example, the new rms in internet publishing around theFlatiron Building in New York (The Econ-omist, 1996b) or the recording companies inlower Manhattan (Scott, 1999, p. 1972).They have also been identi ed in largermetropolitan areasfor example, the enter-tainment industry in Los Angeles (Scott,1988). Clusters have also been identi ed inwhole regions encompassing several cities,such as the wine industry in California(Porter, 1998). Such spatial domains, how-ever, may be subject to change over time aswell. For example, developments in transportand telecommunications technologiesas faras they impinge on the costs of transactionsmay alter the balance between the bene tsand the costs of getting access to them. Also,the deepening or blurring of cultural dividesbetween speci c areas may affect the spatialscale over which economies of agglomer-ation can be obtained.

    3. Cluster Formation and Polycentric Ur-ban Regions

    To what extent are these tendencies to econ-omic clustering articulated within the contextof the Randstad? Does the Randstad as apotentialspatial entity sustain these locali-sation economies and, hence, constitute abase for cluster formation or do we have todescend to lower level of aggregation,namely the individual cities themselves? Be-fore we turn to an empirical elaboration ofthis question, we rst explore this issue froma more theoretical point of view. The histori-cally contingent spatial structure of an urbansystem is relevant to both the structure andthe quality of the economy (see Lambooy,1998b). Processes of cluster formation arearticulated within these existing spatial struc-tures. To understand patterns of economicclustering in the Randstad, we have to exam-ine its polycentric character more in detail.

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    The Randstad, as we have seen, can beseen as an archetypal polycentric urban re-gion. In western Europe, polycentric urbancon gurations are rather prominent; domi-nant primate cities such as London and Parisare not at all typical of the Netherlands,Germany or northern Italy. Much theorising,however, departed from the implicit assump-tion that primate cities are almost self-evi-dent. To deal with historical polycentricurban regions, new approaches are neededthat go beyond a strict central place hierarchy(see Hohenberg and Lees, 1985; Cortie andDignum, 1991; Camagni and Salone, 1993;Batten, 1995; Kloosterman, 1996). Recently,research into polycentric urban regions hasmoved up higher on the agenda now thattransport and telecommunication technolo-gies increasingly enable polycentric urbanregions to achieve agglomeration economiesof comparable magnitude to those of largemonocentric cities (see Lambooy, 1998a).These linkages between constituent parts ofpolycentric urban regions are crucial in help-ing to create agglomeration economies for allparts concerned on a higher level than can beachieved by the individual parts (see Battenet al., 1995). Polycentric urban regions thenbecome polycentric urban networks. Theydiffer from other urban networks in the sensethat they constitute a contiguous travel-to-work area. Notwithstanding the ambiguitywith regard to the spatial scale at whicheconomic clusters are expressed, there is anapparent limit to the size of competitive clus-ters which is determined by the costs andtime of travel.Localisation economies are strongly

    rooted in localised supplies of highly spe-cialised labour. Since the the daily journeyto work represents a particularly expensivekind of transaction per unit of distance(Scott, 1998, p. 92), the upper limit of suchclusters is set by thealbeit looselyde nedspatial scope of travel-to-work ar-eas. The same holds for the circulation ofideas. Since these are more than simple re-producible, standardised packets of inform-ation, strongly attached to their humancarriers, their exchange strongly depends on

    costly face-to-face contacts. Infrequent con-tacts may be maintained over relatively largedistances. However, to create a viable en-vironment for innovative rms, high frequen-cies are needed and this, accordingly, limitsthe distance considered to be acceptable.In the Netherlands, the interurban links are

    clearly increasing. The daily distance trav-elled per head for labour-related purposes(commuting and business visits) increased bysome 40 per cent between 1985 and 1998(CBS gures). Part of this increase stemsfrom the extension of the average commutingdistance from 14 to 17 km (20 per cent) overthe same period. Although commuting withinthe urban region remains prevalent, empiricalevidence suggests that an increase in com-muting between different (urban) regions isparticularly responsible for this extension.Such interregional commuting covers on av-erage some 4550 km and is typically carriedout by highly educated professionals (Ka-poen and Smit, 1998).Such gures also suggest that polycentric

    urban regions increasingly ful l a crucialspatial condition for cluster formationnamely, the emergence (at least with respectto highly skilled workers) of one pool oflabour. By functioning as a daily travel-to-work area at the higher end of the labourmarket, the Randstad may become a regionwhere external economies of scale can occur.From this viewpoint, the evidence for theformation of a polycentric urban networkwith strong interurban links in the Nether-lands, therefore, seems to be mounting. Someresearchers, however, are observing theemergence of such networks not so much atthe level of the region as a whole, but at alower levelnamely, that of the northernand southern wings of the Randstad (see vander Laan, 1998; Musterd and van Zelm, inthis issue).Much of the research on the network as-

    pect of the Randstad so far has been devotedto linkages in terms of commuting patternsand of (potential) functional relationships be-tween the individual components. We, how-ever, focus on a different aspect of networkformationi.e. whether the Randstad can be

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    seen as a relevant scale for the formation ofeconomic clusters. Wever and Stam (1999)have also looked at this issue, but from adifferent viewpoint. They interviewed high-tech small and medium-sized businesses intwo parts of the Randstad to nd out if closenetworks of suppliers and customers had astrong regional basis on a rather low level ofspatial aggregation. They concluded that in-dications for spatial clustering on this sub-Randstad level were rather modest.Here, we look at the changes in the sec-

    toral composition of the business start-ups inthe cities of the Randstad. Business start-upsdepend on a particular kind of supply ofaspiring entrepreneurs and on the availablemarket openings for new rms. If a city orregion is moving in the direction of the for-mation of an economic cluster, both the sup-ply and the demand not only become bettermatched, but also more focused towardsspeci c activities. If these compositions areincreasingly divergent, there is no tendencytowards cluster formation at a supraurbanlevel. If, however, they tend to converge ina clear way, there is a strong indication of atendency towards cluster formation on asupraurban level. In that case, the Randstadis becoming more of a uniform milieu rootedin the same kind of localisation economiesand social networks that are instrumental increating a highly specialised interurban econ-omy. In the next section, we will exploreempirically at what spatial level agglomer-ation economies and/or external economiesof scale occur.

    4. Cluster Formation: The Empirical Evi-dence for the Randstad

    Empirically assessing the presence, natureand scope of external economies of scale in acertain area or industry is a highly complexendeavour. Labour productivity is usuallyconsidered to be the key to measuring ag-glomeration economies. The presence ofeconomies of agglomeration should nd(positive) expression in the output perworker in a particular industry. One approachto measuring localisation and urbanisation

    economies is to estimate the effects ofchanges in industry output and city size onlabour productivity (OSullivan, 2000).4 An-other approach focuses on the realised effectsof productivity, growth and local factorprices in a particular place relative to otherlocations (Gordon and McCann, 2000).Here, we follow a different approach. We

    look for indications of localisation econom-ies by looking for evolving patterns of econ-omic clustering in the Randstad. Our focus ison business start-ups as they respond mostdirectly to the changes taking place in theeconomic environment and especially thoseregarding the supply of labour. By examininghow business start-up pro les of differentcities in the Randstad relate to each otherover time, we are able to identify whetherand at what spatial level specialisation ofeconomic activity takes place. If specialis-ation occurs at the level of the individualcities or, in other words, if each city furtherspecialises in a speci c industrial sector orgroup of sectors, we may expect the businessstart-up pro les of the cities to diverge fromeach other over time. If, on the other hand,patterns of specialisation are starting to artic-ulate themselves at levels transcending thescale of the individual cities, we may expectthe business start-up pro les of groupings ofcities to converge over time. The role ofproximity in the formation of clusters sug-gests that specialisation among groupings ofcities would rst concern cities located atclose proximity. We consider the spatialscale over which specialisation takes place tobe an indirect indicator of the availability ofexternal economies of scale and, more partic-ularly, economies of localisation over thesame domain.In this analysis, we used a set of data

    containing the number of business start-upsin 13 cities in the Randstad in 4 selectedyears out of a 10-year time-period.5 These 13cities can be considered the largest historicalurban centres of the Randstad (see Figure 1).New towns such as Zoetermeer, Hoofddorpand Almere, are not included. The 13 citiestogether are home to almost 3 million inhab-itants and make up approximately 45 per cent

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    Figure 1. Location of the 13 cities in the Randstad.

    of the population gure of the Randstad (ifthe latter is de ned relatively loosely). In1997, these cities accounted for 22 per centof the business start-ups in the Netherlands.The gures on the business start-ups wereavailable at 2-digit SBI codes for the years1988, 1991 and 1994, and at 2-digit BICcodes for 1997. The 2-digit level distin-guishes between 60 different economic sub-sectors. The Dutch Chambers of Commercecollected these data.To visualise the temporal changes in the

    business start-up pro les of the 13 cities, weused the technique of correspondence analy-sis. Correspondence analysis is basically agraphical method of data analysis which en-hances the distillation and visualisation ofinformation from complex tabular data thatare not easily made accessible by means ofnormal scatterplots and maps. In our case, for

    example, we are in danger of becoming over-whelmed with data in no less than 4 60 3 13cross-tabulations.The tables can be understood to provide

    business start-up pro les for the 13 individ-ual cities for the years 1988, 1991, 1994 and1997. A business start-up pro le for an indi-vidual city is a set of frequencies (the num-ber of business start-ups in the different2-digit economic sectors in that city) dividedby their total. For each year, the 13 businessstart-up pro les related to the individual cit-ies add up to a yearly average pro le. Simi-larly, the 4-yearly average pro les add up toa total average pro le. Correspondenceanalysis now creates a pro le space in whichthe number of 2-digit economic sectors de-termines the number of dimensions (or axes).Sixty economic sectors result in a 60-minus-1 dimensional space. Figure 2 shows the

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    Figure 2. Industrial sectors making a difference in the business start-up pro les of the 13 cities in theRandstad.

    2-dimensional sub-space that most accuratelyapproximates the 59-dimensional pro lespace. The centre (or centroid) from whichthe arrows emerge, represents the weightedaverage of all city pro les of the 4 yearsincluded. The length of the arrows is a mea-sure of the weight of the economic sector inexplaining the variance between the businessstart-up pro les of the individual cities. Forreasons of clarity, the only economic sectorsto have been labelled are those that play arelatively important role in explaining thevariance between the individual city businessstart-up pro les. In addition, economic sec-tors that hardly or do not play a role inabsolute terms (for example, mining) areomitted from the analysis.The business start-up pro les for the indi-

    vidual cities, for single years, can now asweighted averages be plotted as single pointsin this multidimensional pro le space. The

    result is shown in Figure 3. The differentcities occupy clearly different positions inthe plot, indicating that the business start-uppro les vary. A closer look reveals that thebusiness start-up pro les in the plot display atendency to move from left to right andslightly upward over the years. In 1988, thebusiness start-up pro les of the cities arerelatively widely scattered, predominantly onthe left side of the plot, indicating hetero-geneity among the business start-up pro lesof the cities. In explaining this variance, allkinds of transport and transport-related activ-ities, nance and the garment industry havean important role (compare with Figure 2). In1991, the pattern has not changed much. Thevariance has perhaps even slightly increased.The pro les for 1994 and 1997, however,clearly present a different picture. Thepro les of almost all cities start to movetowards the upper corner at the right side of

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    Figure 3. The distribution of business start-up pro les for 1988, 1991, 1994 and 1997.

    the plot. The communications sector, evi-dently one of the most important emergingindustries of the last decade of the 20thcentury, plays an important part in this. Al-though this may not be a surprising nding initself, it is interesting to note that it holds truefor all cities included in the analysis. Thedominating trend between 1991 and 1997 isone of convergence: the business start-uppro les of the various cities display an in-creasing degree of agreement throughoutthese years. This tendency may be inter-preted as suggesting the emergence of a pat-tern of specialisation taking place at the levelof the Randstad as a whole.In Figure 4, the trajectories of the cities

    with respect to the trends in their differentbusiness start-up pro les are shown. The dis-tribution of the cities in the plot con rms themore traditional images about their economic

    orientation. We nd, for example, the trans-port industry, transport on water and metalgoods having important parts to play in ex-plaining the relative position of the businessstart-up pro les of cities in the Rijnmond(Rotterdam, Schiedam and Dordrecht). In ad-dition, we see business start-ups in agricul-ture and the food industry affecting therelative position of The Hague and Delft,both cities that are located in very closeproximity to the high-tech agricultural pro-duction area of the Westland. The expla-nation for Amsterdam being located in theextreme left upper corner in 1988 and 1991,lies in the legalisation (and thus registration)of parts of the relatively vast illegal sweat-shop industry that had its base in the city(Raes, 2000).

    Remarkably, this gure con rms the div-ide between the so-called north wing and the

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    Figure 4. Trajectories of business start-up pro les for the 13 individual cities, 198897.

    south wing of the Randstad. These wingsdiffer in economic orientation and also ineconomic growth rates (de Smidt, 1992). Thenorth wing is usually associated with trade,professional services, nance and entertain-ment. In the south wing, manufacturingand transport (Rotterdam) and public ser-vices (The Hague) carry considerable weightin the regional economic structure. The twowings are quite often considered to form toa particular pointcoherent urban regions,(much) more than does the Randstad asa whole. If we distinguish between the citiesthat belong to the north wing relative to thecities that make up the south wing, in ouranalysis the divide appears rather promi-nently (see Figure 5). In accordance with theclassic picture, the economic sectors in theupper half of the plot (including nance,

    culture and sports, and businesses; see Figure2) have an important part in explaining thecharacter of the business start-up pro les ofthe north wing cities.The relative position of the south wing

    cities is largely explained by the economicsectors dominating the lower half of Figure2, which include transport and manufactur-ing. As the trajectories in Figure 4 show, thestart-up pro les of the individual cities arenot only becoming more alike at the level ofthe two wings, but they also show a moreoverall convergence. The two wings are be-coming more alike with respect to businessformation. The cities of the south wing tra-verse the largest distance in the plot, whereasthe position of the north wing cities is morestable. This apparently implies that the southwing lags behind the north wing.

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    Figure 5. Business start-up pro les of cities in the north and south wings of the Randstad.

    5. Conclusions

    Global competition is increasingly aboutmaking the most of local qualities that arehard to copy elsewhere. To survive, there-fore, rms have to tap into speci c resourcesthat enable them to get a more durable com-petitive edge. In the post-industrial era,natural endowmentsalthough still import-anthave lost their prominence. Man-madeinfrastructure and especially highly skilledlabour is now crucial in advanced economies.Infrastructure can be copied, but a speci cmilieu that specialises in a particular set ofproducts is completely different. Thesemilieux (new industrial districts or clus-ters) are the subject of much current re-search. Their formation is strongly dependenton so-called localisation economies, in par-ticular the easy availability of highly spe-

    cialised labour. This sets an upper limit tosuch a milieu in the sense that it has to be atravel-to-work area. It is, however, not justthe commuting distance that matters. Thecompetitive edge of rms is strongly contin-gent on a process of permanent innovationinvolving the transfer of non-standardisedknowledge on a frequent face-to-face basis.This means that, although the spatial levels atwhich these clusters of economic activitiesare formed vary, there are clear limits to theupper size.Socioeconomic changes interact with

    speci c local legacies in terms of morphol-ogy and institutions. The intensi cation ofcompetition and its potential for economicrestructuring, accordingly, is articulatedwithin the polycentric form of the Randstad.We have explored the extent to which suchtendencies of cluster formation in the

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    polycentric urban region of the Randstad canbe traced. We have focused on the businessstart-ups as they respond most directly tochanges in the economic environment.Our ndings for the Randstad point to the

    direction of cluster formation at a supraurbanlevel. The sectoral composition of businessstart-ups of the 13 cities is clearly convergingin the span of a decade. A process of intrare-gional (i.e. at the level of the polycentricurban region) homogenisation with respect tonew economic activities is taking place.Within the Randstad, a clear divide is re-vealed between the north wing (with Amster-dam and Utrecht as the largest cities) and thesouth wing (with Rotterdam and The Hagueas the main cities). It seems, therefore, thatcluster formation is more pronounced at thislower level of spatial aggregation than in theRandstad as a whole. The north wing isahead of the south wing in terms of new rms in sunrise sectors, such as communica-tions and media.Judged by the trends in business forma-

    tion, the polycentric urban region of theRandstad seems to be on the way to becom-ing more of an economic region that hingeson the same strategic sources of competitiveadvantagenamely, highly skilled labour.These conclusions are still rather tentative.The links with other parts of the Netherlandshave not yet been taken into account. Thereis also a lack of data on the commutingpatterns of highly skilled labour. Further-more, we do not know to what extent sur-vival rates differ in the different parts of theRandstad. More research has to be under-taken, especially with respect to the linksbetween the rms in the Randstad region andtheir effect on both short-term and long-term(innovative) labour productivity. Morespeci cally, the new stage in the researchshould focus on the links between the econ-omic actors of the polycentric urban regionof the Randstad. Are these links stronglysocially embedded and thus provide a basefor trust and, hence, for collaboration, exper-imentation, shared learning and the creationof stocks of trade secrets (Henderson et al.,1995; OSullivan, 2000)? If this proves to be

    the case, then, inevitably, the so-called insti-tutional thickness (Amin, 1994) of the Rand-stad should be increased, although theregional directorate that has been proposedby Allen Scott (1998, pp. 144145) may betoo far-fetched, perhaps even in the remotefuture. The formation of institutions that dealwith educational facilities, public transportand the bringing together of important econ-omic actors at the level of the polycentricurban region then becomes essential in orderto secure the competitive position of theRandstad.


    1. According to The Economist (1996a, p. 65)Indirect evidence from growing specialis-ation comes from the shape of trade betweenEuropean countries. This has grown fasterover the past decade than trade with the restof the world, despite the migration of manu-facturing jobs to countries outside the Eu-ropean Union with cheaper labour. The mostlikely explanation is that rms have spe-cialised within Europe and are trading witheach other to make up for sales lost in theirabandoned businesses.In this process of regional specialisation

    Europe still lags behind the US

    However, with falling internal tariff barri-ers in the Union, thereby enlarging mar-ket, European countries/regions nowappear to be moving in the direction ofmore pronounced specialisation (Scott,1998, p. 71).

    2. Cortie et al. (1992) also looked at the Rand-stad as a potential metropolis, but they didnot focus on the Randstad from the perspec-tive of an (emerging) economic cluster.

    3. Although changes in the dominant ways ofproducing goods, transport and communica-tions have set limits to the potential effect ofspatial non-homogeneities and internal econ-omies of scale, large numbers of cities stillowe their present competitive edges andeconomic strongholds to their early location-related advantages and/or infrastructure en-dowments. In addition, new forms oflocation-restricted differences arise now andthen. Currently, for example, rms that de-pend on the cross-Atlantic transmission oflarge electronic data les seek to optimiseaccess to the so-called trans-Atlantic back-bones of the internet, which, at least for the

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    time being, seems to translate into a concen-tration of such rms near the gates of thesebackbones. Another example is provided bythe clustering of recreational activities, forexample, in the Alps or along the Mediter-ranean coast, as the obvious result of topo-logical and climatic circumstances (Durantonand Puga, 2000).

    4. The gross regional product per head in largeparts of the Randstad exceeds that in most ofthe remaining parts of the Netherlands (CBS gures for 1996).

    5. Amsterdam, Rotterdam, The Hague, Utrecht,Haarlem, Zaanstad, Amersfoort, Dordrecht,Leiden, Delft, Alkmaar, Hilversum andSchiedam.


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