Firm Ecologies: Life Science and Video Game Industries in Liverpool Thesis submitted in accordance with the requirements of the University of Liverpool for the degree of Doctor in Philosophy by Dane Kevan Anderton. September 2014 1 Abstract This research examines the life science and video games industries in Liverpool. Previous research on agglomerations and cities tends to focus on epicentres or high concentration places such as Silicon Valley or global cities such as London and Tokyo, neglecting the northern post-industrial cities such as Liverpool, Leeds or Newcastle. Equally, many studies tend to focus in on one particular industry, whereas this research examines two key knowledge economy sectors in one place. Petilis (2012) argues that the cluster literature has become overemphasised and lacks analytical ability in the investigation of smaller firms and highly diverse concentrations of activity. An alternative ecological perspective is used in this thesis, which is considered more reflexive and flexible to the composition of the agglomerations seen outside the epicentres of the global economy. Using the heterarchical approach, as outlined by Grabher (2001), this research investigates the emergence and organisation of Liverpool’s life science and video game industries. It reveals the changing composition of the industries in Liverpool and how firms are connected into wider production networks beyond Liverpool. Finally, the research analyses how the two industries are situated in the anatomy of the city. The key findings are generated from a mixed methodology utilizing qualitative semi-structure interviews with owner-managers, industry informants and supporting institutions. Secondary quantitative data has been used gathered from annual reports, company websites, industry association and office for national statistics. Firstly, it is argued that the two industries emerged in Liverpool under different conditions and are on different trajectories, conditioned by local events and global mechanisms in the wider industry. Such trajectories have aided the rise or the fall of various structures and institutions within the city of Liverpool. This has resulted in a life science industry that resembles an institutionally thick anatomy and a video games industry that resembles an institutionally thin anatomy. Secondly, key findings regarding the organisation and connections beyond Liverpool highlight the fact that both industries show a lack of internal connectivity within the ecology and depend significantly on their external connections for inputs in production. For the life sciences this is exacerbated with the high level of product diversity between firms decreasing the likelihood of potential internal connectivity in production or joint resource utilization between firms. Thus firms rely on their external 2 connections for finance and resources in order to further the production of their products through licensing and merger and acquisition agreements. Thirdly, the video games industry has gained greater autonomy over production analogues to that of the industry norm. For the life sciences, the rigidity in the generic business model is reinforced by the high levels of regulation and intellectual property protections and reduces the ability of some smaller firms to complete a product. Overall, we see two key knowledge economy sectors emerging with changing degrees of functionality as a result of global changes in the industry and the development of institutional infrastructures around these two sectors. 3 Contents Abstract ..................................................................................................................................... 2 List of Figures ............................................................................................................................. 8 List of Tables .............................................................................................................................. 9 List of Abbreviations ................................................................................................................ 10 Acknowledgment..................................................................................................................... 11 1.0 Introduction ....................................................................................................................... 12 1.1 Firm Ecologies .................................................................................................................... 14 1.2 Liverpool Context .............................................................................................................. 16 1.2.1 Life Sciences .............................................................................................................. 17 1.2.2 Video Games ............................................................................................................. 18 1.2.3 Methodology ............................................................................................................. 19 1.3 Structure of the Thesis ...................................................................................................... 19 2.0 Introduction ....................................................................................................................... 25 2.1 Conceptualising the Firm ................................................................................................... 26 2.2 A Relational Approach to Investigating the Firm .............................................................. 31 2.2.1 Agency, Structure and Institutions ............................................................................ 35 2.2.2 Relational Factors: Contextuality .............................................................................. 37 2.2.3 Relational Factors: Path-Dependence ....................................................................... 38 2.2.4 Relational Factors: Contingency ................................................................................ 39 2.2.5 Situating the Relational Approach............................................................................. 40 2.3 An Ecologies Perspective ................................................................................................... 42 2.3.1 Heterarchies .............................................................................................................. 44 2.3.2 Heterarchy Features .................................................................................................. 46 2.4 The Anatomy of Cities ....................................................................................................... 56 2.4.1 Cities .......................................................................................................................... 56 2.4.2 Depicting the Anatomy of the City ............................................................................ 61 2.4.3 Depicting the Anatomy of the City: Upper Ground ................................................... 64 2.4.3 Depicting the Anatomy of the City: Under Ground ................................................... 65 2.4.3 Depicting the Anatomy of the City: Middle Ground ................................................. 66 2.5 Firms, Territories and Place ............................................................................................... 68 4 2.5.1 Geographies of the Life Science Industry ................................................................. 70 2.5.2 Geographies of the Video Games Industry ............................................................... 74 2.6 Conclusion .......................................................................................................................... 77 3.0 Introduction ....................................................................................................................... 79 3.1 The Site and CASE Partner ................................................................................................. 80 3.2 Research Paradigm ............................................................................................................ 84 3.4 Qualitative Methodology ................................................................................................... 90 3.4.1 Secondary Data Collection ........................................................................................ 94 3.4.2 Annual Reports, Company Websites and Newspapers............................................. 94 3.4.3 Pilot Project ............................................................................................................... 96 3.4.4 Researching Firms and Institutions ........................................................................... 98 3.5 Primary Data Collection Method ..................................................................................... 101 3.5.1 Video Games ........................................................................................................... 102 3.5.2 Life Sciences Sector ................................................................................................. 104 3.6 Data Analysis .................................................................................................................... 107 3.6.1 Validation ................................................................................................................ 109 3.6.2 Positionality............................................................................................................