DIMETIC, Maastricht 8/10-07_BD1 The Cluster Concept: Relevant, Outdated or Confusing? DIMETIC PhD course 8 October 2007 (1), Maastricht Bent Dalum DRUID/IKE, Dep. of Business Studies, CTIF Aalborg University

DIMETIC, Maastricht 8/10-07_BD2 Systems of innovation The entire menu National: Freeman, Lundvall, Nelson, etc. Regional: Economic Geography, such as Storper, Maskell, Asheim, Gertler, Cooke, etc. Sectoral: Malerba/ESSY Technological: Bo Carlsson & Jacobsson --- Porter’s cluster approach

DIMETIC, Maastricht 8/10-07_BD3 Back to Marshall’s external economies ”Something is in the air” – i.e. benefits that are not represented as costs for the single firms: –Labour market pooling –Networks of supplier and auxiliary firms –Localised knowledge spillovers

DIMETIC, Maastricht 8/10-07_BD4 Tacit knowledge – the key to understand spatial concentration (Asheim & Gertler, 2005) Tacit knowledge is difficult to exchange over long distances A growing importance of socially organized learning processes behind innovation

DIMETIC, Maastricht 8/10-07_BD5 Two paradoxical characteristics (Asheim & Gertler, 2005) The more knowledge-intensive an activity is, the more geographically clustered it tends to be. The trend towards spatial concentration of knowledge-intensive activities has become more marked over time.

DIMETIC, Maastricht 8/10-07_BD6 Propensity to cluster (Audretsch and Feldman, 1996) Greatest in industries with high dependence on new economic knowledge (R&D) and skilled labour (AER, 1996) Generation of new economics knowledge tend to result in greater propensity for innovative activity to cluster during the early stages of the industry life cycle (RIO, 1996)

DIMETIC, Maastricht 8/10-07_BD7 A regional innovation system (Asheim & Gertler, 2005, p ) ”…can be thought of as the institutional infrastructure supporting innovation within the production structure of a region.” ”Further reinforcing the systemic character of the RIS is the prevalence of a set of attitudes, values, norms, routines, and expectations – described by some as a distinctive ”regional culture” - …”

DIMETIC, Maastricht 8/10-07_BD8 Regional innovation systems – five key concepts 1.Region 2.Innovation 3.Network 4.Learning 5.Interaction

DIMETIC, Maastricht 8/10-07_BD9 RIS and clusters - Cooke 1.“A RIS usually usually exists administratively at the meso-level between central or federal, and local government” (Cooke, 2005 p. 81). 2.“But what about clusters? A well-blessed RIS will not be dependent on a mono- industrial base. As well as multiple industry sectors, a region may have some clusters; naturally not all industry is organized in clusters” (Cooke, 2005 p. 82).

DIMETIC, Maastricht 8/10-07_BD10 Regional innovation systems – empirical results (Cooke, 2005 p ) 11 regions tested in Europe: Baden-Württemberg + Wales + Basque Country + Styria + 5)….11) -

DIMETIC, Maastricht 8/10-07_BD11 The Classic Regional Innovation System (Cooke, 2006)

DIMETIC, Maastricht 8/10-07_BD12 Inside the ‘Black Box’: RIS in the Creative RIS Region (Cooke, 2006) Regional Innovation System Regional Social capital Regional knowledge culture Regional Institutions Globalising Network Relations Policy Cluster Variety Biotech Cluster Knowledge Transfer and R&D Outsourcing Knowledge Transfer R&D Outsourcing Knowledge Community ICT Cluster Creative Cluster The Creative Region

DIMETIC, Maastricht 8/10-07_BD13 Knowledge Economy Problem Tendencies: Co-ordinated markets to Liberal-markets ( Cooke, 2006)

DIMETIC, Maastricht 8/10-07_BD14 Three types of RIS (Asheim & Gertler, 2005, p ) Territorially embedded (Cooke: ’grassroot RISs’ – the Italian district) Regionally networked (Germany, Austria and Nordic countries: a regional cluster of firms surrounded by a regional ’supporting’ institutional infrastructure Regionalized NSI (Cooke: ’dirigiste’ RIS – Sophia Antipolis)

DIMETIC, Maastricht 8/10-07_BD15 A regional innovation system (Asheim & Gertler, 2005, p ) ”…can be thought of as the institutional infrastructure supporting innovation within the production structure of a region.” ”Further reinforcing the systemic character of the RIS is the prevalence of a set of attitudes, values, norms, routines, and expectations – described by some as a distinctive ”regional culture” - …”

DIMETIC, Maastricht 8/10-07_BD16 Systems of innovation The entire menu National: Freeman, Lundvall, Nelson, etc. Regional: Phil Cooke/Economic Geography Sectoral: Malerba/ESSY Technological: Bo Carlsson & Jacobsson --- Porter’s cluster approach

DIMETIC, Maastricht 8/10-07_BD17 Porter’s cluster definition Clusters are geographic concentrations of interconnected companies, specialised suppliers, service providers, firms in related industries, and associated organisations (such as universities, standard agencies, trade associations) in a particular field linked by commonalities and complementarities. There is competition as well as cooperation.

DIMETIC, Maastricht 8/10-07_BD18 Cluster definition - Giuliani and Marshall Cluster…” refer to a geographical agglomeration of firms operating in the same industry” (Guiliani 2005, p. 272). Industrial district…a concentration of “large numbers of small businesses of a similar kind of the same locality” (Marshall 1920).

DIMETIC, Maastricht 8/10-07_BD19 Martin and Sunley’s critique (2003) of Porter’s cluster definition “First, a concept so elastic as the cluster can not provide a universal and deterministic model on how agglomeration is related to regional and local economic growth” (p. 28). “Second,….just because there is an association between some high-growth industries and various forms of geographical concentration does not mean that this concentration is the main cause of their economic growth or relative success” (p. 29).

DIMETIC, Maastricht 8/10-07_BD20 Porter’s ‘cluster brand’ – Martin and Sunley (2003 p. 29) “…the cluster brand at its core is based on an image of a high-productivity, knowledge-rich, decentralized, entrepreneurial and socially progressive economy within the reach of local policy- makers (a regional version of the American Dream, perhaps?)”

DIMETIC, Maastricht 8/10-07_BD21 The location paradox (1) (Porter, 2000) Global sourcing mitigates disadvantages, but does not create advantages in itself – a defensive manoeuvre Distant sourcing is normally a second-best solution compared to accessing a local competitive cluster Paradoxically, the most enduring competitive advantages in a global economy seem to be local

DIMETIC, Maastricht 8/10-07_BD22 The location paradox (2) (Porter, 2000) Widely recognised that changes in technology and competition have diminished many of the traditional roles of location But new influences of clusters on competition have taken a growing importance in an increasingly complex, knowledge-based and dynamic economy

DIMETIC, Maastricht 8/10-07_BD23 The location paradox – solved? (1) (Porter, 2000) The existence of clusters suggests that a good deal of competitive advantage lies outside companies and even outside their industries, residing instead in the locations at which their business units are based Companies have a stake in the business environments where they are located in ways that go far beyond taxes, wages rates, etc. The health of the cluster is important to the health of the company

DIMETIC, Maastricht 8/10-07_BD24 The location paradox – solved? (2) (Porter, 2000) In more advanced economies and increasingly elsewhere, the more decisive aspects of the business environment for competitiveness are often cluster specific, such as the presence of particular types of suppliers, skills or university departments

DIMETIC, Maastricht 8/10-07_BD25 Porter’s ’diamond’ Firm Strategy and Rivalry Firm Strategy and Rivalry Demand Conditions Demand Conditions Related and Supporting Industries Related and Supporting Industries Factor (Input) Conditions Factor (Input) Conditions

DIMETIC, Maastricht 8/10-07_BD26 Regional clustering dimensions Geography Size Breadth Depth University research and education Ownership structure Etc. (Source: Michael Enright, 2001)

DIMETIC, Maastricht 8/10-07_BD27 Clusters affect competition through (Porter interpretation, 2000) 1.Increasing the current (static) productivity 2.Increasing the capacity for innovation and productivity growth 3.Stimulating new business formation

DIMETIC, Maastricht 8/10-07_BD28 Ad. 2. Location in a cluster increases the capacity for innovation (Porter interpretation, 2000) New buyer needs perceived more rapidly New technological, operating or delivery possibilities perceived more rapidly Pressure to innovate higher

DIMETIC, Maastricht 8/10-07_BD29 Ad. 3. Stimulating new business formation (Porter interpretation, 2000) Inducement to entry higher with a cluster because of better information Barriers to entry lower than elsewhere Companies located elsewhere may relocate to the cluster Foreign MNEs may establish subsidiaries in the cluster – to ’plug-in’

DIMETIC, Maastricht 8/10-07_BD30 Typology of industrial districts (Markusen 1996) Classical Marshallian industrial districts and their Italianate variant, NID (socalled New Industrial District) Hub-and-spoke district State-anchored district Satellite platform district

DIMETIC, Maastricht 8/10-07_BD31 Typology of industrial clusters (Iammarino & Cann 2006) Pure agglomeration Industrial complex Social network - New SN Social network – Old SN

DIMETIC, Maastricht 8/10-07_BD32 Typology of industrial clusters in terms of absorptive capacity (Giuliani, 2005) Static cluster Dynamic cluster Leading cluster