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• 1 2017-01-21T13:54:24-08:00 DIGITAL ECONOMY 13 The Digital Economy refers to what we might think of as ICT companies and companies which either provide digital content or who rely on digital technology to conduct their business. plain 2017-03-23T14:15:15-07:00 Over the last decade, we have experienced a rise of business operating in the digital realm. E-commerce, e-learning, and e-services have one thing in common, all them are e-business, sectors that went onto a digital adventure to learn that there never coming back to just being offline. Nevertheless, there is a perception of literature heterogeneity on Information Economy, ICT Industries, Digital Economy and research focused on entrepreneurial culture, in the sense of that researchers may mean different things when addressing those terms (Spilsbury, 2015). This is why it is important to start this literature trying to draw boundaries around the specific language used to describe the digital economy. Mark Spilsbury in his research “Dynamic Mapping of the Information Economy Industries” define the terms as follows:
  • The Information Economy Industries refers to ICT companies alone (as used by BIS
and the Information Economy Council). A recent report by NIESR for Nesta uses the term ‘Information Economy Industries’ to be consistent with BIS and the Information Economy Council (Nathan, M., Rosso, A. and Bouet, F. (2014) op. cit..)
  • The Information Economy refers to the Information Economy Industries plus those ICT workers who are working in other industries across the economy.
  • The Digital Economy refers to what we might think of as ICT companies and companies which either provide digital content or who rely on digital technology to conduct their business. (Spilsbury, 2015:6)
  
  In 2014, the Organisation for Economic Co-operation and Development (OECD) listed a number of prominent features in the digital economy that are increasingly characterizing the modern economy. The key features of the digital economy are 1) Mobility, 2) Reliance on data, in particular, ‘big data’, 3) Network effects, in terms of user participation, integration and synergies, 4) Use of multi-sided business models in which the two sides of the market may be in different jurisdictions, 5)Tendency toward monopoly or oligopoly in certain business models relying heavily on network effects and 6) Volatility due to low barriers to entry and rapidly evolving technology (OECD, 2014:84)
  
  Focusing on the UK context, in 2013 Nathan and Rosso published a research called “Measuring the UK’s Digital Economy With Big Data” where they stated that the Government estimates a count of 120,000 businesses acknowledging not having “an exact picture of the number of businesses in the information economy, or its employment, or the value it brings to the UK economy” (2013:3). In terms of perception, researchers found that a popular view was to think that the digital economy it is a) small, b) dominated by start-ups, with c) low revenue d) low employment, and e) based on a few London clusters like Tech City (2013:7). The overall key findings of the 2013 report found that:
  • The digital economy is poorly served by conventional definitions and datasets. Big data methods can provide richer, more informative and more up to date analysis.
  • Using Growth Intelligence data on a benchmarking sample, we find that the digital economy is substantially larger than conventional estimates suggest.
  • SIC-based definitions of the digital economy miss out a large number of companies in business
and domestic software, architectural activities, engineering, and engineering-related scientific and technical consulting, among other sectors.
  • Companies in the digital economy have a similar average age to those outside it. Shares of startups (companies up to three years old) are very similar. Given the popular image of the digital economy as start-up dominated, this may be surprising to some. As digital platforms and tools spread out into the wider economy, and become pervasive in a greater number of sectors, so the set of ‘digital’ companies widens.
  • The digital economy is highly concentrated in a
few locations around the UK. In terms of raw firm counts, London dominates the pictures, but Manchester, Birmingham, Brighton, and locations in the Greater South East (such as Reading and Crawley) also feature in the top 10. Location quotients show the extent of local clustering, which for the UK’s digital economy is highest for areas in the Western arc around London, such as Basingstoke, Newbury, and Milton Keynes. Areas like Aberdeen 
and Middlesbrough also show high concentrations of digital economy activity.​(Nathan and Rosso, 2013:4)
  ​​A few years earlier, in 2010, a fundamental tech infrastructure for the UK economy was starting in East London. It was known as London Tech City or Silicon Roundabout. Since then, the project Tech City has also been supporting other areas such as Greater London, Manchester and other major cities around the UK. Tech City has also released a series of comprehensive analysis of the UK’s Digital Tech Economy, the Tech Nation reports. The last one of the Tech Nation reports is particularly relevant for the present research as it focuses on the North Powerhouse, home to seven of the UK’s 27 key tech clusters (Tech North, 2016:7) where Hull belongs. The report states that from the launch of the C4DI co-working space in Hull, to the expansion of Newcastle’s Ignite accelerator programme, through to the continued success of Liverpool’s Baltic Triangle, “The proliferation of accelerators, co-working spaces, meetup groups and community events is testament to the North’s enthusiasm for the digital economy, and to the widespread belief that there are better things to come” (Tech North, 2016:7).
  
  The report also acknowledge that “A fully charged Digital Powerhouse would be one that matches the performance of other leading tech hubs around the world – on startup rates, productivity performance and innovation activity, among other measures” (Tech North, 2016:11) and to achieve that it recommends to set up the perfect “creative conditions” which are:
  • Talent – The UK’s digital economy is expected to require an extra 760,000 digital workers between 2015 and 2020
  • Infrastructure – Access to superfast broadband, affordable workspace and a modern transport system are basic ingredients for a thriving tech startup ecosystem.
  • Finance – Banks, grant-making bodies, angel investors and venture capitalists (VCs) are all essential players whose capital injections keep tech clusters in motion.
  • Culture – Studies show that clusters perform best when there is a tight-knit community of businesses and a culture of openness and collaboration (Nathan, et al., 2012) Northern cities fare strongly in this regard. Sheffield Digital, Silicon Drinkabout in Leeds and Creative Kitchen in Liverpool are among the many networking groups that bring people together to encourage collaboration and support, and in many cases promote the local tech scene. The North also boasts several vibrant incubators and coworking spaces, such as Baltic Creative in Liverpool, as well as major tech festivals like FutureEverything and Thinking Digital. This is not to mention the wider cultural and heritage assets that draw talent to the region, from the nightlife of Newcastle to the great outdoors of the Peak District.(Tech North, 2016:11-12)
  The purpose of the North Powerhouse report was to identify ways of supporting the digital economy in the North, but as a broader conclusion to the analysis researchers found that the wider population has also much to gain from collaborative innovation processes of the next generation clusters linked to the digital economy, where multiple parties participate in the creation of new products and services for mutual advantage (Tech North, 2016:13).
  
  The Hull Digital Economy cluster (Figure 1) has an established track record in software development, hardware, and publishing, and its current strengths according to the Tech Nation report 2016 include App & software development, E-commerce, and Data management & analytics. KCOM group has provided a strong digital infrastructure that according to the report has been key to the successful of Hull’s digital tech businesses. The report also described the cluster’s startup community as small but growing  (Tech city, 2016).
  
  
  
  There is a bit of confusion around the term startup, that is often confused with tech business. The North Powerhouse report defines tech business as “those that solely provide a digital product or service, or which heavily rely on one as a primary source of revenue. Fourth tech business activity encompasses the creation of information and communications technology (including servers, hardware, and software) as well as digital content (including games, broadcast media and digital marketing) (Tech North, 2016:8).
  
  The term startup embodies a multitude of concepts. A few of them were compiled by Natalie Robehmed in an article titled “What is a startup?” published in Forbes magazine at the end of 2013. The author implies how the term startup has been used to describe “scrappy young ventures, hip San Francisco apps and huge tech companies” but this is certainly not how the industry describes itself. According to the journalist, “those who sip the startup Kool-Aid define it as a culture and mentality of innovating on existing ideas to solve critical pain points”, and the American Heritage Dictionary suggests it is “a business or undertaking that has recently begun operation.” Other than this temporality feature, there is no other rules on defining a startup, since “revenues, profits, and employment numbers shift drastically between companies and industries” It is quite common to consider a startup a company three years old, but, as stated in the article by Y Combinator accelerator head Paul Graham “A company five years old can still be a startup”. What it seems to be also quite prevalent, according to the journalist, is the lure of innovation attached (Robehmed, 2013).
  
  Precisely, as Grimaldi et al. pointed out in 2011, “associating entrepreneurship with innovation many nations, regions, states, and universities have adopted policies to stimulate innovation by entrepreneurial firms, in the hope of facilitating economic growth” (in Autio et al., 2014:1097). The result of this policies includes the creation of technology-based economic development initiatives such as incubators and accelerators (2014:1097). A good example of such policy application in Hull is The Enterprise Center and C4DI, the two hubs that the present research project has monitored and analyzed.   
  
  
  
  There is some literature published about the development stages of the Shoreditch cluster that is also relevant to this research project as a way of understanding how complexity, networks, and interactions take part in the digital economy (Comunian, 2010), but first, it is important to briefly summarize the specificities London case studies for several reasons. To begin with, the Shoreditch cluster was one the first initiatives of such kind to take place in the UK and one of the drivers that led to continuing the spread of the strategic value of the UK creative industries across the whole country. To the date, a project that started in one of the London boroughs aim to serve as a data archive to the whole metropolitan area and it served as “the world's first experiment using ‘big data’ to understand an innovation cluster” (Armstrong, 2011, London Enterprise Panel, 2016). The platform was created in 2011 by Trampoline Systems, one of the first software ventures in Shoreditch. An earlier version of the Tech City Map is retained as an archive, although the dataset is not maintained (Figure 2, old map). With up-to-the-minute data on London's science & technology ecosystem the successor site, Tech Map London (Figure 3, new map), showcases the sector growth highlighting location, the emergence of sectoral clusters and how fast firms are expanding. In addition, there are other many features such as filter controls that allow users to narrow the focus to individual sectors or boroughs, and some charts that track trends for over the past 10 years.