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Cluster Sustainability in Peripheral Regions: A case study on Israel's and Finland's biotechnology industries


  • Breznitz, Shiri M.
  • Tahvanainen, Antti-Jussi


Even with globalization, industrial clusters are maintaining their importance in todays economy. With the decomposition of production we find that clusters are becoming focused on specific industries and stages of production. This paper analyzes two peripheral western countries, Finland and Israel, which saw success in their ICT clusters and wanted to duplicate this success building on their knowledge in the life science industry to create biotechnology clusters. This paper focuses on two innovation-based clusters, the bio¬technology agglomerations in Rehovot, Israel, and Helsinki, Finland. These industrial districts consist of companies, many spun out of university research, that are either devoted to early-stage R&D (Israel), or choose to conduct the entire business cycle (Finland). Utilizing a multi-method study that includes both quantitative and qualitative research, with a series of in-depth interviews and site visits, archival and statistical data, the paper investigates whether a cluster of young research companies can become the basis of industrial growth and bring economic sustainability to a region. We find that while the firms strategic choices regarding their focus on certain positions in the value chain do not necessarily have any direct implications on the sustainability of the respective clusters as such, a variety of other characteristics necessary for long-term sustainability are missing in both clusters. These include particularly inter-firm knowledge flows within the clusters, an active and demanding VC market, connections to international expertise, and opportunities to recruit experienced expertise.

Suggested Citation

  • Breznitz, Shiri M. & Tahvanainen, Antti-Jussi, 2010. "Cluster Sustainability in Peripheral Regions: A case study on Israel's and Finland's biotechnology industries," Discussion Papers 1212, The Research Institute of the Finnish Economy.
  • Handle: RePEc:rif:dpaper:1212

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    References listed on IDEAS

    1. Adam B. Jaffe & Manuel Trajtenberg & Rebecca Henderson, 1993. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 577-598.
    2. Michael E. Porter, 2000. "Location, Competition, and Economic Development: Local Clusters in a Global Economy," Economic Development Quarterly, , vol. 14(1), pages 15-34, February.
    3. Ron Martin & Peter Sunley, 2003. "Deconstructing clusters: chaotic concept or policy panacea?," Journal of Economic Geography, Oxford University Press, vol. 3(1), pages 5-35, January.
    4. Steven Casper & Anastasios Karamanos, 2003. "Commercializing Science in Europe: The Cambridge Biotechnology Cluster," European Planning Studies, Taylor & Francis Journals, vol. 11(7), pages 805-822, October.
    5. Casper, Steven, 2007. "How do technology clusters emerge and become sustainable?: Social network formation and inter-firm mobility within the San Diego biotechnology cluster," Research Policy, Elsevier, vol. 36(4), pages 438-455, May.
    6. Cooke, Philip, 2002. "Regional Innovation Systems: General Findings and Some New Evidence from Biotechnology Clusters," The Journal of Technology Transfer, Springer, vol. 27(1), pages 133-145, January.
    7. Coriat, Benjamin & Weinstein, Olivier, 2002. "Organizations, firms and institutions in the generation of innovation," Research Policy, Elsevier, vol. 31(2), pages 273-290, February.
    8. Casper, Steven & Whitley, Richard, 2004. "Managing competences in entrepreneurial technology firms: a comparative institutional analysis of Germany, Sweden and the UK," Research Policy, Elsevier, vol. 33(1), pages 89-106, January.
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    Cited by:

    1. Shahid Yusuf & Kaoru Nabeshima, 2012. "Some Small Countries Do It Better : Rapid Growth and Its Causes in Singapore, Finland, and Ireland," World Bank Publications, The World Bank, number 2243, June.

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    clusters; biotechnology; peripheral regions; sustainability;

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