Clusters and Competition as Engines of Innovation—An Introduction

Never since Marshall’s seminal work on locational choice and industrial districts has the cluster idea been given more prominence than in the last decade, prominence that was in particular triggered by Porter (1990) and Enright (1990). This is not too surprising since “... both, firms keen to improve their competitiveness, and governments keen to exploit new sources of economic growth, need to understand how innovation works in order to better stimulate it”(OECD 1999). And there are many indications that, increasingly, regional growth and innovation seem to emerge from innovative complexes of firms and organizations. It is argued that it is primarily within these geographically concentrated networks or “clusters”, that regional value-added and employment growth are realized. “Policymakers care about industrial clusters and their geographical location, since clusters are associated with rents. Membership of clusters and inter-firm networks is strongly believed to enhance the productivity, and competitive performance of firms” (Forslid and Midelfart Knarvik 2002:2). It is widely recognized now that prominent clusters like California’s Silicon Valley or Boston’s Route 128 are just two examples of many clusters around the world. Regional governments have tried to imitate successful formations of innovative clusters, thereby entering into heavy competition for mobile capital and highly skilled labor. At the center of scientific and political interest are new growth sectors such as information technology, biotechnology, environmental technology and multimedia. It is discussed whether the externalities inherent in these cluster-intensive industries are strong enough to bring (regional) economies onto a higher growth path and what institutions are needed to capture the growth opportunities that these industries provide.