Cluster Life Cycles – Dimensions and Rationales of Cluster Development

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

2. Motivation Industry Dynamics Regional Dynamics CLC Cluster Stages Conclusions Motivation • 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

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

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

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

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

7. Motivation Industry Dynamics Regional Dynamics CLC Cluster Stages Conclusions Regional Dynamics • 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)

8. Motivation Industry Dynamics Regional Dynamics CLC Cluster Stages Conclusions Cluster Life Cycle (CLC)

9. Motivation 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

10. Motivation Industry Dynamics Regional Dynamics CLC Cluster Stages Conclusions Firm (size) Absorptive capacity Application to Cluster Stages

11. Motivation Industry Dynamics Regional Dynamics CLC Cluster Stages Conclusions Emerging Cluster Few firms and employees Quite heterogeneous Scarce possibilities for networks Cluster hardly perceivable

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

13. Motivation Industry Dynamics Regional Dynamics CLC Cluster Stages Conclusions Sustaining Cluster 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 Utilization of synergies and external knowledge by open networks Cluster shapes the region („regional identity“)

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

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

16. Motivation Industry Dynamics Regional Dynamics CLC Cluster Stages Conclusions Conclusions and Outlook • 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

17. Motivation Industry Dynamics Regional Dynamics CLC Cluster Stages Conclusions Conclusions and Outlook • 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

18. Many thanks for your audience ! Contact: fornahl@iww.uni-karlsruhe.de