Factors of cluster success

'Old Economy' Inputs for 'New Economy' Outcomes: Cluster Formation in the New Silicon Valleys, Timothy Bresnahan, Alfonso Gambardella, Annalee Saxenian, 2001

While looking for links between old and new hi-tech clusters, I came across this paper. It ties in with a series of studies conducted a while back in Ireland, India, Israel, Taiwan etc.

The authors argue that the factors that start a cluster are very different from those that keep it going/growing. (E.g. "success breeds success" isn't useful in founding a cluster). Starting a cluster involves much higher risks for firm founders, especially since they must bet on future technology trajectories.

They focus on the following factors of cluster success in their analysis:
- unemployed skilled technical labor (or skilled labor with low opportunity cost)
- managerial labor
- new firm foundation and firm growth (large firms attract more specialized supply, invest in larger projects, connect to world markets)
- connection to markets
- complementarity to leading/existing clusters rather than head-to-head competition. Strong links as people and ideas flow back and forth
- physical/supply-side restrictions on existing clusters support growth in new clusters
- policy of "benign neglect" and/or investment in education, encouraging multinationals, tolerating/encouraging brain drain, and - if possible - fostering sizable demand (e.g. national policies of adopting the GSM standard uniformly increased market size for telecoms suppliers)

Interestingly, (telecoms) infrastructure is not mentioned, even though at least some of the clusters in question (think outsourcing of services to Ireland and India) were greatly aided by the availability of excess bandwidth. Communications links also supported the 'strong links as people and ideas flow back and forth.'

Here's the paper abstract:

This paper discusses the results of a two-year research project on the sources of success in regional clusters of entrepreneurship and innovation like Silicon Valley. Our project has studied a number of locations, most of which have shown spectacular rates of growth of information and communcations technology-related activities during the 1990s. Our case studies comprise some emerging regions, notably in Ireland, India, Israel and Taiwan, along with more advanced areas like Northern Virginia in the US, Cambridge, UK, the Scandinavian countries and the Silicon Valley 40 years ago by way of the memory of one of its 'father founders', Gordon Moore. Through visits, interviews and other materials, we uncovered some regularities about the determinants of success of these entrepreneurial-led models of economic growth. We find that the economic factors that give rise to the start of a cluster can be very different from those that keep it going. Agglomeration economies, external effects and 'social increasing returns' of any sort arise almost naturally after a cluster has taken off. But the most difficult and risky part is to get the new clusters started. At that stage, 'old economy' factors like firm-building capabilities, managerial skills, a substantial supply of skilled labor and connection to markets were crucial for the take off of these 'new economy' clusters (including Silicon Valley 40 years ago).