For over a century, economic geographers have known that proximity matters to firms engaged in similar economic activities. More specifically, Michael Porter has suggested that what he describes as clustering can be a key component in enhancing economic competitiveness. Firms that specialise in certain industries can have their performance boosted by being located in a milieu with a tradition of success in the sector. Collaborative opportunities and access to other competitive advantages can accrue to firms in a cluster.

Porter’s work on the competitiveness of clusters has not escaped academic criticism. Some large firms seem to thrive in ‘magnificent isolation’, for example. By concentrating on certain case studies, Porter may sometimes be a little guilty of exaggerating the strength of his case. Clusters, like the firms which are associated with them, can sicken and perish. However, firms which can insert themselves into local business networks and make use of the kind of opportunities Porter discusses may be able to steal a march on less favoured competitors. For an ambitious small or medium-sized enterprise, considering the potential of the ‘cluster effect’ may be worthwhile.

Having briefly considered the theory, it makes sense to turn to practice.  Selecting a new location for an existing firm can be a problematic process. Where a firm will make the most of its strengths is partly reliant on the sector in which it finds itself. Serviced offices in London can give a firm the potential to become part of an embryonic cluster. The use of a service office permits flexible adjustment to new realities as required.