Place and competitive advantage: a qualitative study of financial services in Edinburgh and Glasgow
Riddle, Philip Keitch
This research examines the relationship between places and firms and how this contributes to competitive advantage. This is a vitally important topic at present, as businesses are adjusting to the dislocations of Brexit, trade wars, nationalism and other reactions to globalisation. Firms need a place strategy more than ever. How should resources be located in relation to markets, suppliers, skilled workers, laws, incentives, infrastructure, quality of life and the myriad other factors affecting business? Global connectivity presents so many options but also so many threats. Despite its importance, this is a subject that is relatively poorly served by existing literature and theory. A review of strategic management work relating to competitive advantage, including reflections on Chandler, Ansoff, Porter, Barney, Mintzberg, and many other authors, reveals an emphasis on management and organisation but a virtual blindness to the role of place. A review of economic geography literature related to competitive advantage, including consideration of work from Marshall to Maskell, Storper, Sassen, Glaeser, Florida and many others, shows an emphasis on place but a relative neglect, with only a few significant exceptions, for the view from the firm and the role of individuality in organisation and management. The two disciplines show a striking complementarity in their omissions. This interdisciplinary study draws on the wide range of existing material to build a new and comprehensive model of the place-firm relationship (the PFR) that brings convergence to the thinking around competitive advantage. This model is then tested and adjusted through empirical research leading to recommendations for firm strategy, government policy, academic theory and future research. The empirical study is based on the most important business sector in the UK in terms of size, growth and impact, namely financial services, and is set in the top two centres of activity in the UK for this sector outside London, namely Edinburgh and Glasgow. At the heart of the work is a series of 29 semi-structured, in-depth interviews with senior executives in these cities investigating how firms see the contribution of place to their competitive advantage, a necessarily qualitative methodology to unravel the complexity and contradictions inherent in the existing theory. The interviews have been transcribed and coded and analysis of the feedback has been used to both refine the new model and to derive insights about how it works in practice. The results of the application of the model show that the PFR is highly complex but also that it can be rigorously assessed and the key factors contributing to competitive advantage can be identified and prioritised. These factors can be grouped under the main themes of the ease of doing business, talent, quality of life, local networks and legacy. It is clear that every business enjoys a unique PFR but that the individual organisational profiles can be aggregated in line with the main themes to show agglomeration and cluster effects around places, industry sectors, types of business and other groupings. In the case of the financial services businesses tested here, the availability of talent stands out as the most important contribution to competitive advantage firms receive from places, but this is closely linked to other factors in a web of connections. Also evident is the pragmatic co-existence of competition and collaboration in firm strategies and practice and the emergence of different but overlapping cluster types, particularly one underpinned by legacy in Edinburgh and the other underpinned by government intervention in Glasgow. This research gives business managers a tool and methodology with which to assess and compare how place contributes to their competitive advantage. It thus gives an added vital dimension to most strategic decisions and particularly to considerations about relocation, expansion, off-shoring, and geographical dispersal and diversification. The agility necessary for businesses to respond to the current turbulent political and economic environment must extend to managing place and place-firm relationships in the more systematic way proposed in this work in order to maintain and extend competitive advantage. This model can also help development agencies and national and local government to interpret the competitive advantages of places as seen by firms and to make comparisons with other places. It can give an informed basis for discussion with businesses and point to where improvements can be made in line with the place objectives and overall development plans. The new model gives a common framework for different parties to reconcile their objectives to mutual benefit. Last but not least, the research presents academics with possibilities for more interdisciplinary work to address gaps in theory about one of the most pressing issues of the day. The model opens the door to new research opportunities to test its applicability in different combinations of places, businesses and industry sectors, for different types of agglomeration and cluster formation. This is an opportunity for the academic research community to furnish the objective, sound and informed view necessary to support potentially controversial decision making in these uncertain times.