Innovation and Clustering in the Globalised International Economy

In this paper, it is argued that innovation is the key driver of competitiveness and productivity. Innovation is an internationally distributed system of activities and therefore geographically localised and clustered firms are likely to form only a limited set of the total actors engaged in such a system. Where Porter's concept of clusters is used to describe mainly localised economic interactions it is not therefore likely to contribute much to an understanding of the relationships between innovation and economic growth. On the other hand, when the concept is applied to trading nodes in the global economy it is more likely to incorporate the international linkages between suppliers, producers and customers that are a key characteristic of the most innovative firms. The paper focuses on Porter's main arguments concerning the relationships between innovation and clustering. The vagueness of his analysis of the geography of clusters is highlighted. Nevertheless, following his argument that trading clusters are the key to economic growth, the analysis focuses on the nature and extent of linkages and in particular their contribution to innovation. Evidence from previous studies is used to suggest that national and international linkages and networks are just as significant as their local counterparts for firms in the UK. Evidence from the third Community Innovation Survey is used to test four of Porter's six hypotheses concerning the contribution of clustering to innovation. All of them are shown to benefit from national and international linkages and collaboration.