Spill over or Spill out? - A multilevel analysis of the cluster and firm performance relationship

Regional clusters have become an inseparable component of modern economies. Spurred by the idea that clusters unrestrictedly encourage firm innovativeness, such as in the lighthouse example of Silicon Valley, the cluster approach has particularly gained attention among policy makers who have supported the creation and development of clusters. Nevertheless, due to a lack of holistic consideration of different influencing variables, the scientific results about the effect of clusters on firm innovative performance are highly contradictive. For companies as well as policy makers, it is therefore still difficult to evaluate the concrete consequences of being located in a cluster. Consequently, the aim of this paper is to empirically investigate the conditions and mechanisms through which companies can gain from being located in clusters, focussing thereby in particular on possible knowledge spillovers. Therefore, based on an integration of the theoretical perspectives from the strategic management (e.g. resource-based view) and the economic geography literature (e.g. cluster approach), variables from three different levels of analysis (micro-level, meso-level and macro-level) are considered separately as well as interactively. By analysing a unique multilevel dataset of 11,889 companies in Germany, including 1,391 firms that are located within a cluster, evidence is found that being located in a cluster has indeed a positive impact on firm innovative performance. However, the results also indicate that firms benefit unequally within the cluster environment, depending on the specific firm, cluster and market/industry conditions.