Local Clusters, Innovation Systems and Sustained Competitiveness

The growing interest in clusters, understood mainly in terms of spatial agglomerations of enterprises and related supplier and service industries, can be traced back to two changes in the competitive environment of the firm that became increasingly evident over the 1970s and 1980s. These were the growing knowledge intensity of production which gradually extended to cover a broad spectrum of traditional industries and the emergence of innovation-based competition and its globalization as barriers to trade and investment were dismantled. These changes placed a greater burden on small and medium-sized enterprises, especially those in traditional industries, to engage in a continuous process of innovation. Clustering, which provides externalities and advantages derived from of interactivity, was seen as a potential aid in this process. Yet not all clusters are innovation systems. This paper analyzes the different ways in which firms in two clusters based on traditional industries --the wooden furniture cluster in Jutland, Denmark and the spectacle frame cluster in Belluno, Italy- have transformed have been transformed into innovation systems. Of critical importance in this regard is the way in which both industries have become tacit-knowledge intensive and embedded these advantages within the cluster.