External environment
Cluster
structure Cluster
governance
4.2.2 Cluster structure
The cluster structure influences the performance of the cluster. The effect of such ‘structural’
variables on cluster performance differs in different environments. From all four schools discussed in the preceding paragraph, one or more ‘stylized facts’ with regard to the influence of the structure of a cluster on the performance of the cluster are widely acknowledged. These are given in Table 3.
Chapter 4 – Variables of Cluster Performance 35
Table 3: Stylized facts on cluster structure and performance School Stylized facts with regard to cluster structure Diamond School Internal competition enhances cluster performance.
The presence of a ‘critical demand’ enhances cluster performance.
New economic geography
Presence of agglomeration economies (presence of suppliers and a labor market and knowledge spillovers) enhances cluster performance.
Presence of agglomeration diseconomies (congestion, land rents) hampers cluster performance.
Population Ecology Heterogeneity of cluster population enhances performance.
Spatial entry, start-up and exit barriers influence cluster performance.
Industrial District School
Small firms that cooperate in local production systems are competitive vis-à-vis large multinationals.
We discuss these stylized facts more in detail in the next chapter, where the influence of the structure of a cluster on its performance is center stage.
4.2.3 Cluster governance
Cluster governance can be studied with the use of institutional economic theories. When analyzing cluster governance, attention should be paid to learning (Montgomery, 1995), since learning is necessary to change existing routines and capabilities, and institutions (see Amin and Thrift, 1992). The term institution is rather broad and includes both formal and informal ‘rules of the game’. In change processes institutions play an important role, both on the firm level (see Beckert, 1999) and for aggregated levels such as clusters, networks and industries (see Scott, 1988). Table 4 shows the ‘stylized facts’ of the four schools with regard to the influence of cluster governance on performance. These stylized facts are explored in some more detail in chapter 6.
Table 4: Stylized facts on the relation between cluster governance and performance School Stylized facts with regard to cluster governance
Diamond School Clusters are ‘vibrant environments’, where benefits flow between actors in the cluster.
The presence of a support infrastructure enhances cluster performance.
New economic geography Knowledge spillovers are a force towards clustering.
Population Ecology -
Industrial District School The cooperation of clustered firms among themselves and with the local government adds to the performance of clusters.
The presence of trust adds to the performance of clusters.
The behavior of ‘leader firms’ adds to the performance of clusters14.
4.2.4 The relation between structure and governance
The governance of firms in a cluster influences the structure of the cluster and the governance is influenced by the structure of the cluster (for general literature on the relation between structure and agency, see Beckert, 1999), this distinction has not been applied to clusters). Lambooy and Boschma (2001) argue that:
It is not only the given structure that influences actors, the actors (especially the innovators) also change the structure (Lambooy and Boschma, 2001, p. 114).
The structure also influences governance: in a different population of firms, different forms of governance develop. Central in this respect is the presence or absence of potential ‘leader firms’ (Albino et al, 1999) that can play an active role in the governance of a cluster. The level of internal competition also influences the governance in the cluster. Table 5 shows the stylized facts on the relation between structure and governance.
14 Traditionally, the ID school focused on small and medium sized firms. However, the term ‘leader firm’ does not imply firms are large multinationals. The concept is used to describe firms that are especially important in clusters.
Chapter 4 – Variables of Cluster Performance 37
Table 5: Stylized facts on the relation between structure and governance in clusters
School Stylized facts with regard to the relation between structure and governance
‘Diamond School’ Governance can enlarge agglomeration economies.
Cluster governance affects the intensity of internal competition.
Institutional inertia is more likely to develop in a cluster predominantly serving a local market.
New economic geography - Population economics -
Industrial District School SME’s have relatively good coordination skills.
4.2.5 Feedback effects
Apart from the effects of structure and governance on performance, feedback effects from performance to both structure and governance exist. For example, a bad performance changes the structure of a cluster because firms leave the cluster population. Furthermore, a bad performance can lead to changes in cluster governance, because a ‘sense of crisis’
develops and governance mechanisms are changed. We acknowledge these effects, but do not study them in the cases.
4.2.6 The environment
Cluster structure and cluster governance variables are incorporated in the framework. Both types of variables are cluster specific: they have to be analyzed at the cluster level. The performance of clusters is also affected by changes in the ‘environment’ of a cluster. For instance, the development of a new solar technology might deeply affect the development of a chemical cluster. Five important effects from changes in the ‘environment’ on the performance of a cluster can be distinguished:
• The nation effect
• The industry effect
• The policy effect
• The resource effect
• The technology effect
'Nation specific variables’ lead to a ‘nation effect’, on the performance of clusters. Relevant nation specific variables include the judicial structure (North and Douglas, 1990), national
culture (Fukuyama, 1996) and the overall national economic development. Second, ‘industry effects’ affect the performance of a cluster. In general clusters in growing industries perform better than clusters in mature industries. An information technology cluster is more likely to grow rapidly than an agricultural cluster, regardless of the performance relative to other clusters, simply because the growth of the industry. Another example of an ‘industry effect’
is changes in consumer behavior in an industry.
The ‘policy environment’ also influences the performance of a cluster. Non-cluster specific local and national (public) policies affect the development of a cluster. A fourth effect is the
‘resource effect’. Changes in availability and prices of resources (such as labor and physical resources) also affect the development of a cluster. The ‘technology effect’ finally, is relevant when a technological breakthrough impacts the performance of a cluster. An example is the development of ‘mini-mills’ that reduce the minimum efficient scale, for instance for producing steel.
These effects are relevant for the performance of clusters, but the focus of this study is on the influence of the cluster specific variables on the performance of clusters15. In the case studies, the existence of the ‘environment effects’ is acknowledged and explored, but the focus is the same. In the next two chapters, these variables are discussed in detail.
15 A practical justification of this choice is that actors in the cluster can influence the cluster specific variables, but this is much more problematic for the other effects.