# The nested structure of urban business clusters

## TL;DR

This paper introduces a multi-scalar clustering approach based on percolation theory and copulas to analyze the nested hierarchy of urban business clusters across different geographical scales and sectors.

## Contribution

It develops a novel multi-scalar clustering method that captures the nested structure of urban business clusters using spatial and industrial data.

## Key findings

- Identification of a nested hierarchy of geoindustrial clusters
- Analysis of cluster evolution from 2007 to 2014
- Insights into the impact of the financial crisis on urban clusters

## Abstract

Although the cluster theory literature is bountiful in economics and regional science, there is still a lack of understanding of how the geographical scales of analysis (neighbourhood, city, region) relate to one another and impact the observed phenomenon, and to which extent the clusters are industrially bound or geographically consistent. In this paper, we cluster spatial economic activities through a multi-scalar approach following percolation theory. We consider both the industrial similarity and the geographical proximity of firms, through their joint probability function which is constructed as a copula. This gives rise to an emergent nested hierarchy of geoindustrial clusters, which enables us to analyse the relationships between the different scales, and specific industrial sectors. Using longitudinal business microdata from the Office for National Statistics, we look at the evolution of clusters which spans from very local groups of businesses to the metropolitan level, in 2007 and in 2014, so that the changes stemming from the financial crisis can be observed.