Clusters and spin-outs are the key to European skills mobility

Over the last year, several CEOs of technology companies have been known to be unhappy about the lack of availability of staff with appropriate skills within reasonable distances of their headquarters or major design centres, or their inability to attract staff willing to relocate. As a result, one Scottish company, unable to get engineers to move from England, resorted to setting up a satellite design centre around the M4 corridor in the southern part of the UK.

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Another company could not get sufficiently qualified and experienced embedded software programmers and had to subsequently open a satellite design centre, this time in Sophia Antipolis (the so-called ‘telecom valley’ centred around CNET, a telecoms standard setting organisation based near Nice, France). When the CEO was asked why he could not set up the new design centre in Cambridge, UK, where there is a sufficient talent pool, his response was that Cambridge is already overpriced and congested – meaning that the salary levels are relatively high and competition for talent is equally high. Besides, the employment laws have recently changed in France, which will allow for a temporary two-year contract, similar to the UK.

In both cases, there is a common challenge: the fact that there is a relative lack of mobility amongst technical, engineering and management personnel across Europe. Like advanced technologies derived from research and development laboratories, sufficient supply of a reasonably sized and experienced talent pool is equally important for companies to sustain themselves within a given industry sector.

Why Europeans hesitate to move
When engineers enter the university programme, they are quite willing to move to a different town/city, and move again when offered their first jobs after graduation. The traditional argument for the lack of skills mobility runs like this.

Having worked and lived in a city for many years, they have established their roots and grown their families in the local communities. Moving to another town would mean different schools, friends and communities, not just for the engineers, but also for the entire family. Uncertainties about the standards of schools and hospitals, plus social factors such as crime and social environment add to this dilemma.

While there may be a good foundation for this argument, we believe that the answer to a professional workers’ mobility may result from the lack of suitable technology cluster formations around specific industry sectors.

Consider the telecoms sector as an example. A few years ago when the telecoms industry went through a period of significant rationalisation following the dot com crash, thousands of engineers found themselves in cul-de-sac towns and cities - in the UK these were places like Coventry, Nottingham, Liverpool and Newton Aycliffe. These were towns and cities where there was only one major telecoms employer, which had initially moved there to offer their employees a better work/lifestyle balance, cheaper housing and also creating local manufacturing jobs. But, somehow, these anchor companies never spawned many new companies, nor did they yield sizeable clusters of suppliers, services or even new competitors around them.

It should be noted that single manufacturing locations are only one part of a whole, larger global organisation, and it would be difficult to spawn new companies due to their distance from key R & D, sales and marketing staff.

This has been the major bug-bear for Scotland, which had spent millions of pounds in the 80s and 90s trying to entice and attract global manufacturing facilities in Scotland. These issues were pointed out to all the major regional development agencies at that time, but this happened in an era when innovation, start-ups, entrepreneurship and venture capital were all foreign concepts.

Roll your own cluster
As recognised – albeit belatedly – the best way to form a cluster is by spawning new companies that are near R & D facilities and the administrative headquarters of large global companies. The best way to create new headquartered companies in the regions is to grow your own.

For that reason, all regional development agencies should fully support and nurture their local R & D facilities, whether they are located within universities or local corporate or federal labs, and down-play the implants, since the latter will move out once the subsidies have been used up. Having said that, some new facilities will take time – maybe five to seven years – before early spin-outs can be formed, and maybe another five years or so before they become global players.

Once early signs of clusters begin to form, engineers and managers are attracted to the new clusters. They are quite willing to relocate, knowing that, if for some reason their post doesn’t work out, there will always be other opportunities in the same neighbourhood that can make use of their skill sets. New start-ups also provide better career prospects, responsibilities and reward structures. The network effect attracts more companies which want to locate near the clusters, in order to tap into the local talent pool.

This increases the size of the talent pool and introduces competition for the talent. If there are sufficient numbers of clusters, it will create competition between clusters to attract staff and provide better infrastructure/facilities.

Engineers and managers are unwilling to move to towns and cities where there will be only one major employer in their sector. In many cases, the one employer could take advantage of the situation and maintain a low salary, compensation and benefits package.

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