Cluster Life Cycles Dimensions and Rationales of Cluster

Cluster Life Cycles – Dimensions and Rationales of Cluster Development Dirk Fornahl* Max-Peter Menzel** *Institute for Economic Policy Research (IWW) Section System Dynamics and Innovation *Fraunhofer Institute Systems and Innovation Research **Institute of Geography 9. November 2006 University of Bern Fraunhofer ISI Institute Systems and Innovation Research

Motivation Industry Dynamics Regional Dynamics CLC Cluster Stages Conclusions Motivation ISI • Empirical observation § Singular case studies describe regional clusters in peculiar stages § Some studies analyze the development of a cluster through some distinctive stages § Clusters emerge, grow and decline stages • Aim § Develop an analytical framework to define and examine cluster stages § Identify processes resulting in the development through the stages 1. December 2006 2/18

Motivation Industry Dynamics Regional Dynamics CLC Cluster Stages Conclusions Industry Dynamics ISI • Cluster development has characteristics like the ones of the according industry # firms / employees § Quantitative development Emergence Growth Sustaining Decline time 1. December 2006 3/18

Motivation Industry Dynamics Regional Dynamics CLC Cluster Stages Conclusions Industry Dynamics ISI § Qualitative development (innovation, knowledge, etc. ) • Impact of qualitative dynamics on quantitative ones Number of innovations Dominant design Product innovations Process innovations time 1. December 2006 4/18

Motivation Industry Dynamics Regional Dynamics CLC Cluster Stages Conclusions Regional Dynamics ISI • Firms in clusters (but the same industry) show different patterns than non-clustered firms Growth Firms outside cluster Firms in cluster time § E. g. Pouder & St. John 1996, Audretsch & Feldman 1996 1. December 2006 5/18

Motivation Industry Dynamics Regional Dynamics CLC Cluster Stages Conclusions Regional Dynamics ISI • Clusters not the mere localization of industries § Necessary to elaborate joint effects of industrial and spatial dynamics on the firms in the cluster Firms in the same industry Firms in the same region Regional cluster § Cluster dynamics more than the sum of industrial and regional dynamics § Question: What leads to the peculiar cluster development? 1. December 2006 6/18

Motivation Industry Dynamics Regional Dynamics CLC Cluster Stages Conclusions Regional Dynamics ISI • Distinctiveness of regional development § § Regional “entrepreneurial spirit” and spin-offs Marshallian externalitites (specialization) Jacobsian externalities (diversification) Additional effects by proximities (e. g. cognitive proximity) • Selected effects § Cognition and knowledge: Perception of diverse actors and higher absorptive capacity to bridge cognitive distance (Maskell 2001) § Modification of industrial dynamics (enforcing, reducing) 1. December 2006 7/18

Motivation Industry Dynamics Regional Dynamics CLC Cluster Stages Conclusions Cluster Life Cycle (CLC) ISI Quantitative Qualitative • Number of firms and Direct, organizations “firm focused” • Number of employees • Variety and diversity of competencies and organizational forms • Heterogeneity vs. focusing Systemic • Perception of cluster • Exploitation of synergies • Networks of value chains • Capabilities for collective action 1. December 2006 8/18

Motivation ISI Industry Dynamics Regional Dynamics CLC Cluster Stages Conclusions Cluster Life Cycle & Dynamics • Functioning of systemic effects in a regional context § Faster creation of synergies between firms in a regional cluster through • Facilitated co-ordination by quantitative systemic effects • Cognition of diverse actors • Both effects result in facilitated learning and bridging of technological distances 1. December 2006 9/18

Motivation Industry Dynamics Regional Dynamics CLC Cluster Stages Conclusions Application to Cluster Stages ISI Firm (size) Absorptive capacity 1. December 2006 10/18

Motivation Industry Dynamics ISI Regional Dynamics CLC Cluster Stages Conclusions Emerging Cluster Few firms and employees Quite heterogeneous Scarce possibilities for networks Cluster hardly perceivable 1. December 2006 11/18

Motivation ISI Industry Dynamics Regional Dynamics CLC Cluster Stages Conclusions Growing Cluster: Quantitative Learning effects increase absorptive capacity Growing number of firms Firms move towards each other and employees Growth of absolute diversity Decrease of heterogeneity Growing perception 1. December 2006 Open and flexible networks Exploitation of diversity Synergies 12/18

Motivation Industry Dynamics Regional Dynamics CLC Cluster Stages Conclusions Sustaining Cluster ISI Stagnating number of firms and employees Homogeneous or focussed competencies Strong bias of the regional economy towards the cluster Technological distances are maintained and created Cluster shapes the region („regional identity“) 1. December 2006 Utilization of synergies and external knowledge by open networks 13/18

Motivation Industry Dynamics ISI Regional Dynamics 1. December 2006 Cluster Stages Conclusions Declining Cluster Declining number of firms and employees Negative sentiments with respect to the cluster CLC Low diversity Strong focus on a narrow technological trajectory Insufficient adaptability of the cluster caused by closed networks 14/18

Motivation Industry Dynamics Regional Dynamics CLC Cluster Stages Conclusions Summary ISI # firms / employees heteroneity • Qualitative and quantitative development (stylized) Emergence Growth Sustaining Decline Quantitative development time Qualitative development (Heterogeneity) 1. December 2006 15/18

Motivation Industry Dynamics Regional Dynamics CLC Cluster Stages Conclusions and Outlook ISI • Summary § Cluster develop through peculiar „stages“ • E. g. cluster conditions are not favorable in all stages § Quantitative and qualitative dimension of cluster development § Cluster dynamics result from industrial and regional dynamics, but are different from the isolated impacts § Endogenous explanation for changes / movement through the stages based on qualitative dimension (incl. renewal) § Generation of empirically testable hypotheses • Entries, exits and survival over the CLC • Technological diversity over the CLC 1. December 2006 16/18

Motivation Industry Dynamics Regional Dynamics CLC Cluster Stages Conclusions and Outlook ISI • Outlook § Conceptual framework that can be extended, e. g. by • In-depth discussion of the endogenous changes • Product and process innovation • Marshallian and Jacobsian externalities over time • Market types § Beginning (in addition to spin-offs) and end of cluster § Incorporation of different kinds of clusters § Role of entries on development of competencies and type of entries over CLC § Empirical test of quantitative and qualitative dimensions over the CLC 1. December 2006 17/18

ISI Many thanks for your audience ! Contact: fornahl@iww. uni-karlsruhe. de 1. December 2006 18/18