The Impact of Spatial Clustering on the Labour Productivity of the UK Tourism and Hospitality Industry
Lead Research Organisation:
University of Surrey
Department Name: Tourism
Abstract
This research aims to investigate the impact of spatial clustering of T&H firms on the labour productivity of the UK T&H industry, specifically on the implications of agglomeration economies for labour productivity both within (direct effects, accounting for spatial feedback effects) and between (indirect spatial spillover effects) spatial units. Employing under-exploited micro-level datasets from the UK Office for National Statistics, the impact of spatial clustering and agglomeration economies (labour market pooling and knowledge spillovers) on T&H labour productivity within and between local authority districts (LADs) was examined using spatial panel modelling. Based on 373 LADs across England, Scotland and Wales and for the period 2006-2016, the fixed-effect spatial Durbin panel model was estimated. Findings concluded that the increase in the degree of clustering of T&H firms has had negative effects on labour productivity of T&H firms within the LADs but also across, and from, neighbouring LADs and back. Labour market pooling variables have shown positive effects regarding the pool of skilled labour but the effects on productivity were negative in terms of the share in high-skilled jobs. Knowledge spillover effects on labour productivity of T&H firms within a LAD were insignificant, but when considering its spatial spillover effects, they were complementary, suggesting the importance of human capital externalities and their spillover effects across geographical boundaries. Moreover, the long-run effects of agglomeration economies were significantly greater than the short-run effects on the labour productivity of T&H firms within and between LADs, suggesting the need to take a long-run perspective on how spatial clustering and agglomeration economies affect T&H labour productivity within and between neighbouring regions. Using geographically weighted regression modelling, significant spatial variations in the relationship between spatial clustering and agglomeration economies and T&H labour productivity were identified within each LAD but also spillover effects across the neighbouring districts.
Organisations
Studentship Projects
| Project Reference | Relationship | Related To | Start | End | Student Name |
|---|---|---|---|---|---|
| ES/P00072X/1 | 01/10/2017 | 30/09/2027 | |||
| 1947110 | Studentship | ES/P00072X/1 | 01/10/2017 | 30/09/2019 | YOO KIM |
| Description | The research has found that the increase in degree of spatial clustering of tourism and hospitality (T&H) firms in a local authority district (LAD) decreases the labour productivity of the firms within the LAD (direct effect) but also across neighbouring LADs (spatial spillover effect). This contended the existing literature as a positive relationship was anticipated. However, the impact of agglomeration economies (i.e. place-specific externalities generated from the colocation of firms) were significant on the labour productivity of the firms within and across the LADs. These were specifically the impact of the share of skilled labour within a LAD and the share of employees within a LAD that had a previous job in T&H (which measure the potential tacit knowledge spillover). This supported existing theoretical and empirical studies. Additionally, significant spatial variations in the relationship between spatial clustering and agglomeration economies and labour productivity of T&H firms in the UK were identified within the LAD, but also across neighbouring LADs. The assumed positive relationship between spatial clustering and agglomeration economies and labour productivity in T&H has been challenged through this research showing that spatial clustering and agglomeration economies are not uniform in nature but instead are highly variable in their effects on T&H labour productivity across space, both between and within regions. The research is one of the first to apply spatial econometric modelling to analyse the impact of spatial clustering and agglomeration economies on T&H labour productivity, estimating not just the direct effects but also the spatial spillover effects. Furthermore, to the best of the researcher's knowledge, this is the first attempt in T&H productivity research of utilising under-exploited micro-level datasets from the Office for National Statistics (ONS), which enabled the operationalisation of agglomeration economies and to research T&H labour productivity in alternative ways compared to the extant mainstream literature, which mostly relied on more aggregate secondary data or cross-sectional survey data at firm level. |
| Exploitation Route | Academically, the empirical research paper based on this funded research is under-review in the journal Tourism Management (ABS 4*). Upon publication, the research outcomes will be disseminated in the academic environment. Further qualitative research is recommended to investigate in more detail the situation of each region and LADs and their intention in productivity enhancements. As this research provides empirical evidence of the potential implications of T&H clusters, qualitative or quantitative-based survey research can explore the true perceptions and strategies that employees, practitioners, organisations and related entities of T&H have or expect in light of the new Industrial Strategy and Tourism Sector Deal. In addition, the concept of T&H clusters can be explored in an ecological perspective; with rapid changes in the socio-economic and technological environment, T&H clusters can be seen as an organic and dynamic cluster which adapts and evolves with change. Considering T&H firms as open firms that can evolve with changes in technology, such as social media, user generated content and big data, this can open up broader connections and pathways in research and theories such as innovation ecosystems, service-dominant logic and service science. Non-academically, the sectoral dimension of the productivity problem in the UK has been highlighted in the recent Industrial Strategy, specifically stating that some of the biggest opportunities for improving the UK productivity come from sectors that have lower productivity levels, such as the T&H sector. This makes the outcome of this funding relevant and useful in providing empirical evidence of potential economic effects of agglomeration for T&H businesses and insights into the significance of agglomeration economies and their possible spillover effects that can help address the low level of T&H labour productivity across the UK. This can be in the form of tourism clusters or zones. The latest Industrial Strategy Tourism Sector Deal has also proposed to introduce tourism zones, creating business networks or communities to share knowledge and resources in improving productivity at a firm, sectoral and regional level. Collaborative partnerships amongst T&H firms, and other sectors, in local areas can improve the understanding of the workforce, skills and knowledge sets in the area and deliver place-based strategies in enhancing T&H productivity. |
| Sectors | Leisure Activities, including Sports, Recreation and Tourism,Culture, Heritage, Museums and Collections,Other |