Economic Geography

The manufacturing sector
In many regions in advanced economies the most striking change in economic
structures has been the decline of employment in manufacturing activities in both
absolute and relative terms. In the UK, for example, employment in manufactur-
ing fell from 8.6 million in 1965 to 3.7 million today. This loss of almost five
million jobs saw manufacturing’s share of total United Kingdom employment fall
from 37 per cent to 17 per cent. This change in economic structure is reflected
in the nature of empirical work in economic geography where the proportion of
work focused exclusively on manufacturing has become less important.
Despite the decline of employment in manufacturing, the importance of an
understanding of the role of manufacturing in regional change should not be
underplayed. Other measures of manufacturing indicate clearly its overall signif-
icance in the mix of economic activities. Taking the United Kingdom as an exam-
ple again, manufacturing is responsible for two thirds of all exports by value and
for about 75 per cent of the research undertaken by business organisations. It can
be argued that despite manufacturing employment decline Cohen and Zysman’s
(1988) claim that ‘manufacturing matters’ is as relevant in the twenty-first century
as in the twentieth.
The changing significance of manufacturing has been accompanied by the
emergence of new industries and the decline in the importance of older activi-
ties. In the latter half of the twentieth century the fourth Kondratieff based on
electronics, computers and aerospace research peaked (Hall and Preston 1988).
These newer industries tend to be more knowledge based and to build upon new
technologies and innovations. This has impacted upon the research agendas in
that there has been a distinct move away from analysis of traditional industries
towards a focus on the high technology sector. Further, within the older indus-
trial sectors, analysis of the motor vehicle assembly sector has perhaps had an undue
influence on economic geography as a whole. Concepts relevant to understanding
changes in the vehicle assembly industry (sic Fordist) have been transferred (in
some cases rather uncritically) to other manufacturing industries.
In both the newer industries, and in many of the more traditional ones, changes
in the importance of manufacturing and the sectoral mix were accompanied 
by an increasing dominance of regional economies by large multi-regional and 
often multinational firms. Indeed, by the 1980s, such firms were the main form of
organisation within the manufacturing sector. The rise in importance of the large
firm led economic geographers to take an increasing interest in the impact of
these organisations on global, regional and local economic systems. Looking
back on significant economic geography texts (whether in the United States,
Jones and Darkenwald 1965 or in the United Kingdom, Smith 1953) sector after
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H. Doug Watts

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sector are discussed with only limited reference to firms. Industries rather than
firms were seen as responding to economic, social and political forces to create
specific geographies. The basic building block – the firm – was seen as only of
marginal relevance. Perhaps the main exceptions to this assertion were found in
the work of some historical economic geographers who placed considerable
emphasis on corporate interviews and archives (Warren 1970).
Admittedly, the significance of these large multi-regional firms in employ-
ment terms declined in the 1990s and smaller firms came to account for an
increasing share of employment. This was due partly to an increase in output per
person in large firms (which was not matched by smaller firms) and partly to the
outsourcing of the non-core activities of large firms to smaller firms. As a result
of the more important role of small firms, there was a shift in research interests
within economic geography from large firms to small and medium-sized enter-
prises (SMEs). Whilst this may have reflected their increasing importance in
employment terms, it also mirrored the fact that SMEs (and especially high tech-
nology and innovative firms) became of major policy interest for they seemed
more amenable to government policy initiatives than the large firm. Further, SMEs
fit rather well into debates on the emergence and continuation of industrial 
clusters, which became too central to many studies of regional performance in
the 1990s, although the benefits of clusters seem increasingly challenged (Martin
and Sunley 2003).
Despite the shift in research emphasis to the SME, the large firm continues to
be seen as a key actor in the global economic system (Dicken 2003) and, in the
United Kingdom, large firms (of over 250 employees) account for almost two-
thirds of manufacturing turnover. The corporate dynamics of large multi-regional
firms cannot be ignored in any move towards increasing our understanding
regional economic change.