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How can the knowledge on clusters help to understand the phenomenon of innovation?

What are the management implications?

von Stella Strüfing (Autor) Alissa Golomzina (Autor) Thomas Walter (Autor)

Studienarbeit 2013 22 Seiten

BWL - Unternehmensführung, Management, Organisation

Leseprobe

Content

1. Concentration of innovative companies in particular locations and the need to consider clusters in innovation management

2. Clusters: definition, benefits and threats
2.1 Clusters are geographic concentrations of interconnected organizations in a particular field, strengthen by input, structure and demand factors
2.2 Benefits of clusters: productivity, innovations & development of new ventures
2.3 Threats of clusters for firms: structure, actor behaviour and geography

3. Access to knowledge and speed as key influencing mechanisms explaining innovativeness in clusters
3.1 Clusters give access to accumulated specific knowledge
3.2 Clusters allow to speed up innovation processes

4. Management implications: Selecting the location, active participation through competition and cooperation and cluster promotion
4.1 Strategic choice of location is influenced by firm's size, transaction costs, cluster life cycle, innovative capabilities and barriers
4.2 Active participation in cluster combines mechanisms of competition and cooperation
4.3 Bottom-up cluster promotion ensures sustainable development of regional agglomeration

5. Clusters can be successfully used to foster innovation and sustain the competitive advantage by giving access to specialized resources, labor and knowledge

6. References

1. Concentration of innovative companies in particular locations and the need to consider clusters in innovation management

In the current business environment it is remarkable that innovative companies are often concentrated in specific regions.[1] This is true for many industries, however, the probable best known example for such a phenomenon where innovative firms settle close by another is the Silicon Valley.[2] Nevertheless, this is not simply an agglomeration but due to network aspects taking place it is forming a cluster, coming along with several benefits.[3]

These benefits of clusters enhance the firm’s productivity and the firm’s innovation performance,[4] and should therefore be considered in several decision-making processes[5] such as the location choice, innovation output, access to labour and resources.[6]

Considering innovation benefits and their underlying mechanism is particularly important because the technological development cycles and time to market period are becoming increasingly shorter. Respecting the similarities, subsidiaries and interconnectedness[7] inherent in clusters and using them to increase the innovative output to generate a competitive advantage over isolated firms[8] is essential for staying at the top of the market. Understanding the location advantage cluster exhibit is therefore a competitive advantage that will affect a firm and their innovative output.[9]

This paper elaborate the influence of clusters on innovation by explaining clusters in general and in particular concerning innovation benefits and their underlying mechanism and showing how managers can possibly benefit from cluster innovative opportunities.

2. Clusters: definition, benefits and threats

2.1 Clusters are geographic concentrations of interconnected organizations in a particular field, strengthen by input, structure and demand factors

Clusters are geographic concentrations of interconnected and related organizations in a particular field, connected by similarities and subsidiaries.[10] In addition to the companies of the cluster industry, there are often supporting organizations as associations, educational institutions and consultancy companies.[11] Thus, clusters are different from pure industrial agglomerations by the inherent network aspect.[12]

Various aspects determine the raise and life cycle of clusters.[13] Clusters often rise out of historical circumstances,[14] strengthened by a feedback process build on advantages gained by the agglomeration of industrial actions.[15] Although, clusters are often within one country, they sometimes cross borders building an international cluster.[16]

Input factor conditions that are embedded in the network such as natural resources, labor qualification and infrastructure foster the cluster formation.[17] Furthermore, the presence of many suppliers and related companies simplifies cooperation.[18]

Due to the special form of supply chain organization,[19] the structure of related and supporting industries foster the success of another competitive industry by a mutually reinforcing process.[20] Thereby it is often the case in clusters that there are shared ideals, equal interpretation of collaboration and socialization between the involved actors.[21] Furthermore, there are milieu-specific norms defined to penalize antisocial actors.[22] In this structure of close and strong connections between firms, high rivalry exists.[23] In this competitive environment, personal relationships are of high importance.[24] These relationships and the mutual support of the companies lead to an increase of the competitive advantage of the whole cluster, compared to isolated firms.[25]

Besides these network aspects, the cluster domestic demand, often resulting from related industries,[26] is an impact factor of the success.[27] The high concentration in a small area does not only foster the demand but also increases the free flow of information, often even unanticipated, which is important for the strength of a cluster.[28]

2.2 Benefits of clusters: productivity, innovations & development of new ventures

Clusters provide their participants several benefits that will be described in detail in the following part.

First, clusters increase the productivity of firms by taking advantage from circumstances in the proximate region and a simplified access to highly qualified employees.[29] This labour market pooling has the advantage that there are many potential employees with the same skills available.[30] Due to that, the productivity of companies in a cluster is directly positive influenced.[31] Simultaneously, this benefit reduces the uncertainty connected to business cycles for the employees, because they have many alternative employers.[32]

Another pooling advantage is the purchasing of goods which are specific to the industry, and allows increased access to high volume and low prices.[33] These factor conditions like natural resources and work force are hard to imitate and leads to a competitive advantage for companies in clusters against isolated firms.[34] Moreover, easy access to physical infrastructure such as big highways further strengthens the attractiveness of such a region.[35]

Besides the supplier vantage there is a high domestic demand for the products of the local firms and companies in a need for a product often begin their search within a cluster.[36] For external companies this brings the opportunity to gain market share by moving closer to competitors, which makes the relocation into a cluster more interesting.[37] Thus, clusters can increase an organizations efficiency, effectiveness and flexibility.[38]

Second, clusters increase the likelihood that a company innovates, compared to an isolated firm.[39] The high competition inherent in cluster fosters innovation.[40]

Stimulated by more opportunities for informal face-to-face exchanges between employees of different firms, the diffusion of knowledge is supported.[41] These knowledge spillovers can be both unanticipated and well-regulated knowledge flows.[42] Both of them foster innovation opportunities, and even more the speed of the development cycles of the companies.[43] Furthermore, knowledge spillovers and strong connections to related companies increase organizational learning opportunities.[44] The new innovations diffuse rapidly within the cluster.[45] This is the case, because in a cluster is a closer contact and close observation of competitors possible, which allows the firms to recognize a new innovation early.[46] Furthermore, high sophisticated customers anticipate new trends and fostering innovation of the companies.[47]

To conclude innovations are an important factor for development and growth.[48] Innovation improves for instance the economic performance, pushed by the social capital, which means the intensity of networks and the shared values of people within a cluster.[49] The close relationship between key actors and the trust in a concentrated network is important to deal with risks of innovations[50] In addition the diversification by established firms and the entry from other industries into the cluster foster the introduction of new skills and strategies.[51]

The third beneficial character of clusters arise trough their location benefits and a mature infrastructure that leads to the development of new ventures.[52] Many startups and spinoffs of existing mature companies, form new competitors or suppliers.[53] Clusters provide small firms the advantage that they are in the focus of customers since these prefer suppliers in a proximity area.[54] This circumstance of concentrated customers reduces the risk for start-ups and facilitates to identify opportunities.[55] Furthermore, due to the geographical closeness, firms can easily establish close customer services without big logistical expenditure.[56] The raise of new ventures and the inherent new ideas foster the vitality of the cluster region.[57]

To conclude, cluster foster innovation, productivity and the rise of new ventures due to knowledge spillover.[58] The result of the benefits of higher productivity and higher innovation, mentioned above is, that firms in clusters can outperform their isolated competitors, regarding the profitability.[59] Because of this competitive advantage, companies have an interest in further strengthening their cluster.[60]

2.3 Threats of clusters for firms: structure, actor behaviour and geography

Despite the mentioned advantages cluster also exhibit some limitations.

The advantages from clustering are for many industries dependent on the structure and the level of cluster development.[61] It is not the case that the benefits increase linearly with the scale of the cluster, but there is the phenomenon of an inverted u-shape instead.[62] Moreover, the impact on innovation depends on the life cycle stage of the industry, the type and composition of activity among companies.[63] Thus, regarding the phenomena of clusters, it is important to recognize that they are not suitable for every industry.[64]

An additional limitation of clusters is that the behaviour of actors is not always beneficial for the network, such as the implementation of an unwritten law against poaching.[65] A high competition for employees on the other side can result in increasing wages.[66]

Geographical limits regarding the degree of knowledge spillover hinders clusters to fully expand their scope.[67]

The above-mentioned advantage of higher innovation is not true in every case of geographical agglomeration.[68] Therefore, a strong network aspect is essential, using collaboration to exploit the chances of proximity.[69]

3. Access to knowledge and speed as key influencing mechanisms explaining innovativeness in clusters

3.1 Clusters give access to accumulated specific knowledge

“Firms need to innovate in order to sustain and extend their competitive advantage”.[70]

As it was stated in the previous part innovations tend to occur in geographic concentrated areas and firms located in those clusters tend to be more innovative than isolated firms.[71] In the following part the mechanism behind innovations in clusters will be discussed.

Clusters underlie the principal of the flow of information and exchange between organisations while competition is still maintained at the same time.[72] One key element of clusters are local knowledge spillovers that affect innovation activities and help to explain technological innovation.[73] It refers to the advantage that firms receive through the access to knowledge that unintended spills-over from other firms or research institutes.[74]

Three mechanisms for knowledge to be spilled over can be identified. The first occurs from spin-offs since they tend to be located close to their parent organization such as universities or research institutes. [75] The second mechanism arises through the intense labour mobility within clusters. Employees switching organisations transfer their tacit knowledge to the new organisation.[76] “Since labour mobility is a regional phenomenon”[77] the knowledge spill-over that come along with it are localized too. The last mechanism for knowledge spill-over is informal knowledge exchange through the social networks.[78] In clusters tacit information is more likely to be transferred since persons involved in R&D are more likely to approach friends with experience outside their own organisation, as this will not affect their career evaluation.[79]

[...]


[1] See Schiele (2003), p. 14.

[2] See Porter (1998), p 78.

[3] See Rocha/ Sternberg (2005), p. 268; DeBresson (1996), p. 161.

[4] See Baptista/ Swann (1998), p. 535; Ciccione/ Hall, (1996), p. 23-32; Fromhold-Eisebit/ Eisebith (2005), p. 1250; Porter, (1998), p. 81; Steinle et al. (2007), p. 236; Sternberg/ Krymalowski (2002), p. 271.

[5] See Porter (1998), p. 87-88; Porter (2000), p.16.

[6] See Carbonara (2004), p. 23; Huang et al. (2012), p. 726; Iammarino/McCann (2006), p. 1029; McCann et al. (2002), p. 660; Schiele (2008), p. 35; Tödtling/Trippl (2005), p. 1209.

[7] See Baptista/ Swann (1998), p. 525; Rocha/ Sternberg (2005), p. 268; Steinle et al. (2007), p. 235; Porter (1990), p. 78.

[8] See Baptista/ Swann (1998), p. 535; Fromhold-Eisebit/ Eisebith (2005), p. 1250:

[9] See Schiele (2003), p. 31; Steinle et al. (2007), p. 238.

[10] See Baptista/ Swann (1998), p. 525; Rocha/ Sternberg (2005), p. 268; Steinle et al. (2007), p. 235; Porter (1990), p. 78.

[11] See Schiele (2003), p. 27.

[12] See Rocha/ Sternberg (2005), p. 268; DeBresson (1996), p. 161.

[13] See Fromhold-Eisebith/ Eisebith (2005), p. 1265; Steinle et al. (2007), p. 237.

[14] See Porter (1998), p. 84.

[15] See Baptista/ Swann (1998), p. 527.

[16] See Porter (1998), p. 79.

[17] See Steinle et al. (2007), p. 237. Porter (1990), p. 78.

[18] See Steinle et al. (2007), p. 237.

[19] See Porter (1998), p. 79.

[20] See Porter (1990), p. 86.

[21] See Steinle et al. (1998), p. 374; Steinle et al. (2007), p. 238.

[22] See Steinle et al. (2007), p. 238.

[23] See Porter (1998), p. 79; Steinle et al. (2007), p. 237.

[24] See Porter (1998), p. 88.

[25] See Schiele (2003), p. 31.

[26] See Baptista/ Swann (1998), p. 527.

[27] See Baptista/ Swann (1998), p. 527; Porter (1990), p. 78.

[28] See Porter (1990), p. 86.

[29] See Porter, (1998), p. 81; Sternberg/ Krymalowski (2002), p. 271.

[30] See Baptista/ Swann (1998), p. 527; Schiele (2003), p. 39.

[31] See Ciccione/ Hall, (1996), p. 23-32.

[32] See Baptista/ Swann (1998), p. 527; Schiele (2003), p. 39.

[33] See Baptista/ Swann (1998), p. 527.

[34] See Steinle et al. (2007), p. 237.

[35] See Baptista/ Swann (1998), p. 527.

[36] See Baptista/ Swann (1998), p. 527; Steinle et al. (2007), p. 237.

[37] See Baptista/ Swann (1998), p. 527.

[38] See Porter (1998), p. 80.

[39] See Baptista/ Swann (1998), p. 535; Fromhold-Eisebit/ Eisebith (2005), p. 1250; Steinle et al. (2007), p. 236.

[40] See Steinle et al. (2007), p. 237.

[41] See Baptista/ Swann (1998), p. 527;Cantner et al. (2010) p. 1939; Steinle et al. (2007), p. 238.

[42] See Breschi/ Lessoni (2001), p. 1000; Porter (1990), p. 86.

[43] See Breschi/ Lessoni (2001), p. 1000.

[44] See Hakansson et al. (1999), p. 450; Schiele (2003), p. 30.

[45] See Porter (1990), p. 86.

[46] See Schiele (2003), p. 30.

[47] See Steinle et al. (2007), p. 237.

[48] See Buesa (2010), p. 733.

[49] See Dominics et al. (2013), p. 2326.

[50] See Akcomak/ ter Weel (2009), p. 562.

[51] See Porter (1990), p. 86.

[52] See Porter (1998), p. 84; Feldmann (1999), p. 20.

[53] See Schiele (2003), p. 32.

[54] See Baptista/ Swann (1998), p. 527.

[55] See Porter (1998), p. 84.

[56] See Baptista/ Swann (1998), p. 527.

[57] See Schiele (2003), p. 35.

[58] See Feldmann (1999), p. 20.

[59] See Schiele (2003), p. 27; Steinle et al. (2007), p. 236.

[60] See Steinle et al. (2007), p. 236.

[61] See Sternberg/ Litzenberger (2004), p. 787.

[62] See Chi et al. (2012), p. 240.

[63] See Feldmann (1999), p. 21.

[64] See Sternberg/ Litzenberger (2004), p. 787.

[65] See Schiele (2003), p. 31.

[66] See Porter (2003), p. 571.

[67] See Feldmann (1999), p. 21.

[68] See Steinle et al. (2007), p. 238.

[69] See DeBresson (1996), p. 161; Rocha/ Sternberg (2005), p. 268; Steinle et al. (2007), p. 238.

[70] Lecocg et al. (2012), p. 2.

[71] See Porter (1998), p. 82; Steinle et al. (2007), p. 237; Flemming et. al. (2007), p. 938.

[72] See Baptista/ Swann (1998), p. 525.

[73] See Zhang (2009), p. 1.

[74] See Ponds et al. (2010), p. 231.

[75] See Zucker et al. (1998), p. 65; Ponds et al. (2010), p. 233.

[76] See Almeida/ Kogut (1999), p. 914; Breschi/ Lissoni (2001), p. 991; Ponds et al. (2010), p. 233.

[77] Ponds et al. (2010), p. 233.

[78] See Breschi/Lissoni (2001), p. 982; Ponds et al. (2010), p. 233.

[79] See Flemming et al. (2007), p. 940; Munari et al. (2012), p.430.

Details

Seiten
22
Jahr
2013
ISBN (eBook)
9783656391937
ISBN (Buch)
9783656392224
Dateigröße
569 KB
Sprache
Englisch
Katalognummer
v211100
Institution / Hochschule
University of Twente – School of Management and Governance
Note
1,7
Schlagworte
innovation clusters agglomeration supply chain management location supply chain geographic concentration access to knowledge innovation speed knowledge innovation process strategic choice of location innovation barriers innovation capabilities cluster promotion specialized resources labour

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Titel: How can the knowledge on clusters help to understand the phenomenon of innovation?