Clustering and the internationalisation of high technology small firms in film and television

This paper draws together three strands of literature, that on clustering, entrepreneurship and international business, examining the relationship between these three in promoting firm formation and growth within clusters. The evidence drawn on includes econometric models based on the unique International Trade in Services Film and Television dataset, an in-depth interview survey and questionnaire survey. The key conclusions are firstly that strong clusters promote entrepreneurship, which in turn promotes cluster strength in a self-reinforcing dynamic. Secondly, some firms are better able than others to benefit from cluster location due to superior firm competencies and absorptive capacity. Thirdly, cluster strength and internationalization are mutually reinforcing. Cluster strength contributes to the ability of entrepreneurial firms to expand overseas via export sales, licensing and FDI. Evidence is presented which indicates firms have greater intensity of export and import activity if they have resource-strengths, some of which are derived from their membership of a strong cluster. Strong clusters also attract multinationals and in the case of the London media cluster, although those multinationals appear somewhat less embedded than non-MNEs, they are nevertheless quite strongly embedded. This means that there is a second important feedback loop as spillovers from MNEs to local firms enhances cluster strength which attracts further multinationals. The acquisition of high performing firms by overseas MNEs does not appear to have reduced either their performance or their embeddedness in the cluster. Fourthly, the nature of internationalization strategies are conditioned by firm and industry characteristics. In particular, the extent to which tacit knowledge is embodied in a product emerges as being influential in terms of the decision of which internationalisation mode to use. Finally, the resource-based view of the firm emerges as a useful integrative framework for understanding the interplay between clusters, entrepreneurship and internationalisation strategies.