Balancing localization and globalization:exploring the impact of firm internationalization on a regional cluster

This paper explores the impact of firm internationalization on regional industrial clusters. The past decade has witnessed the popularization of two intertwined trends in geographic competitiveness: globalization and localization. While previous research has sought to understand and analyse how multinational enterprises pursue strategies to capture critical expertise and resources in dynamic regional environments, to date only limited efforts have sought to explore how internationalization affects ‘cluster’ relationships among locally founded, rapidly growing firms. Specifically, this paper explores whether the internationalization of local firms weakens the local relationships associated with industrial clusters. It reports the findings of research conducted on the internationalization of a cluster of companies in the photonics industry. Twenty-three senior executives were interviewed, face-to-face. Grounded theory methodology was applied to the data to create a new conceptual framework to explore how internationalization impacts the embedded social relationships of locally established firms. The findings suggest that, as firms internationalize, intimate local relationships become less significant. As local companies mature and their sales and markets expand, they develop new capabilities and operations. Firms pursuing strategies to develop capabilities outside their home region gain access to outside resources and, in turn, elect to reorient their level of intra- vs. inter-cluster interaction.