Agglomeration vs. Organizational Reproduction: The Molds Cluster in Portugal

The mechanisms driving regional clustering are examined by exploring two theories: agglomeration economies and organizational reproduction. While organizational reproduction through spinoffs dominates clusters' early stages of growth, in clusters populated by small, vertically disintegrated firms accessing networks of external capabilities, agglomeration economies should emerge as a positive force. We examine just such a cluster: the molds industry in Portugal. Our empirical approach is twofold: first, we examine the early evolution (1946–1986) of the industry; second, we use detailed data on firms and founders for the period 1987–2009 to test the predictions of the two theories. We find that while organizational reproduction has played a major role in clustering, agglomeration economies recently have gained influence.