Agglomeration and Firm Performance

The greatest assets of clusters are their positive external effects or knowledge spillovers generated through the colocation of firms of the same or similar industries. These externalities can have a positive influence on various performance indicators, not only for firms inside clusters but for the entire region in which clusters are embedded as well. However, several empirical studies show that these positive results do not always manifest themselves. Moderating effects such as industry- or country-specific as well as cluster- and firm-specific characteristics play important roles. Therefore, the goal of this chapter is to provide an overview on the effects both inside and outside of clusters identified in empirical studies, thereby investigating the following indicators: innovativeness, productivity, employment growth and wage level, entrepreneurship, survival probability and growth of start-ups as well as resilience.

The I-district effect establishes the existence of dynamic efficiency in Marshallian industrial districts in the form of a positive innovative differential comparing to the average of the economy. The hypothesis has been empirically validated for the case of technological innovation using patent indicators. Empirical research has assumed that all types of patentable figures (utility models, national patents, EPO, WIPO) have the same weight regardless of its actual or expected market value, which may be questionable given the differences in coverage, protection and cost of each figure. In this article, we question the existence of the I-district effect when each patent is weighted by its expected potential value. As the I-district effect theory predicts, the relative differential effect is maintained even in the presence of the weighting, rejecting that the industrial district specializes only in low-quality patents. However, in this case, the primacy of industrial district as the most innovative local production system can be outpaced by other local production systems.

The goal of the paper is first to synthesise the knowledge on clusters’ role in internationalisation processes and second to refer to innovation as a mediating variable in the internationalisation of clusters’ firms. We outline diverse channels of how clusters can foster foreign expansion, distinguishing the following types of internationalisation: passive inward-looking and active outward-looking, with direct top-down and indirect bottom-up support for the cluster as such and its members. The proposed classification may enrich the current research in this area and facilitate future studies, serving as some navigation tool and typology instrument. The case of Polish successful boiler-making cluster illustrates the consideration presented in this article. Particularly, it highlights the role of top-down, more formal activities stimulating innovation which is one of the cluster channels for promoting internationalisation.

Technological changes, globalisation and the increasing heterogeneity of firms populating Italian industrial districts (IDs) have deeply affected the fabric of these IDs. This chapter sheds light on the contribution of inward foreign direct investments (FDIs) to the host country’s skilled workforce, which is one of the most critical factors in IDs’ socio-economic resources. The chapter investigates whether, within the IDs, the labour workforce skills composition of affiliates of foreign multinational enterprises (MNEs) differs from that of uni-national firms. The analysis uses microdata from the Veneto NUTS-II region (Northeast Italy), as this is an economic area world-renowned for its manufacturing production and has historically been considered as a referential context for the Italian ID model. The results show that foreign affiliates of MNEs located in the Veneto IDs hire more skilled workers and more experienced workers (above 30 years old), as well as fewer foreign workers. This provides evidence of a positive impact of the presence of foreign affiliates of MNEs on the sustainability of IDs’ socio-economic fabric.

This paper adds to the literature by deconstructing knowledge heterogeneity for the understanding of cluster evolution. Starting from the distinction between sustaining and radical innovations, as moderators of knowledge heterogeneity in Marshallian industrial districts (MIDs), this study’s objective consists of answering the question why and how districts evolve, through the understanding of the differing processes creating knowledge, i.e. sustaining and radical, and the type of firms that do so, and analysing critical issues such as how technological changes affect the pattern of district evolution. Theoretical development states that (1) in MIDs radical disruption can be expected to be led by new firms and not by incumbent technology gatekeepers (TGs), which are mainly oriented to providing incremental innovations in order to maintain their status quo and centrality, and (2) in MIDs leading incumbents demonstrate predominantly an orientation towards the creation of sustaining knowledge in dense and orchestrated networks and aim to develop competence-enhancing variety which ensures their centrality and the status quo, making clusters evolve expanding central stages, i.e. specialization. Our argumentation has also challenged a central assumption in MIDs about leading incumbents: the type of knowledge necessary to challenge leading incumbents must be new to the industry and to the district, based on exploratory district boundary-spanning, technology-distant knowledge.

In this paper we analyse economic data over a period of 5 years from the Smith Travel Research (STR) database using an event study technique to compare economic performance among a total of 27,207 hotels, 4339 of them located in US touristic clusters. The aim of the research is to determine if the cluster effect is affecting the economic performance of hotels. Hotels are segmented and compared to similar groups in terms of revenue, scale, location, and affiliation, and then each of the hotels within a touristic cluster is compared to a similar group of outside-cluster hotels. Though the mean values for economic performance are higher than those properties located in clusters, specific analysis suggests that the cluster effect is not affecting all the hotels in the same way and that property level influences the economic performance of hotels within a touristic cluster.

The chapter explores in an original manner the evolutionary trajectories of the cluster concept over time through the application of analytical tools coming from the realm of bibliometric analysis and social network analysis. In particular, we build on a previous work (Lazzeretti et al. J Econ Geogr 14(1), 21–43; 2014) to observe the evolution of the cluster literature alongside two main dimensions: (1) publication outlets and (2) paper keywords. Our analysis confirms the interdisciplinary character of the cluster concept, with the presence of publication outlets from different research fields. However, the contribution of management and innovation studies increases over time. The longitudinal analysis of the keywords confirms this trend and reveals that the cluster literature is evolving from economic and sociological-related issues to management-related topics, where innovation and firm performance are the leading issues.

In this chapter we analyze how firms’ characteristics, along with the network that each firm establishes, evolve through three different periods of time: incubation, growth, and maturity. We observe that as firms stay longer in the park, they have a higher number of direct relationships, and also these relationships tend to be stronger in terms of both frequency and friendship. Nevertheless, this higher level of interactions do not benefit firms in the same way, being the best period for improving innovation, the growth initial period, in which firms have between 3 and 6 years.

This chapter presents an analysis of the long-term development of the footwear industry in Italy and Turkey, focusing in particular on their main industrial districts/cluster: one in Italy and three in Turkey. Our research contributes to the reflection on the evolving relationship between history-dependent localisation externalities and firm performances. Agglomeration benefits do exist in the various stages of the cluster life cycle. However, not all firms benefit equally from being in a cluster, and not all firms show an accelerated pattern of growth after being located in a cluster. We found that after the take-off and the cluster’s emergence, the dynamics of clusters is driven by the ability of some leading firms to connect the cluster (and its internal supply chains) to external markets and to global knowledge sources.

In today’s context of economic crisis, certain structures such as industrial clusters have been forced to change in order to remain competitive. For years, local supporting organizations have been focused on strengthening cluster networks, providing specialized services, and fostering innovation practices. Nowadays, thanks to their increasing connectivity, supporting organizations have become hybridizers and catalyzers of knowledge that spreads among local firms after an intense process of refinement. Acting as mediators between local firms and gatekeepers of extra-cluster knowledge, they smooth firms’ access to fresh knowledge and nourish the innovativeness of the system. Using data collected in the Toy Valley cluster during 2014, this chapter looks at the mechanisms allowing supporting organizations to successfully diffuse knowledge and pays attention to these two in-between positions. In line with previous research, findings corroborate the particular relevance of facilitators of knowledge. However, important differences emerge when considering the profile of the local organization and the type of knowledge shared.

Recent debate in regional studies has focused on place-based approaches to local development that are associated more and more to the investigation of systemic features able to trigger sustainable innovation paths and resilience against shocks and challenges. This chapter draws on the interpretative arguments related to the endogenous processes of innovation and systemic mechanisms of longevity and long-term competitiveness in industrial districts and local production systems. A critical review of the recent contributions on this topic allows a novel understanding of how—under certain conditions—local production systems can benefit from endogenous rerouting, especially in the face of the recent technological changes strongly impacting on traditional industrial organisations. The activation of latent mechanisms of transition may recombine embedded competences and useful knowledge to deliver path-breaking economic solutions that create new competitive advantages and allow longevity to local production systems.

We carry out a firm-level empirical analysis to evaluate the economic impact of the sequence of earthquakes that occurred in 2012 in the Italian region of Emilia-Romagna and to address the question of whether the localization of a firm within an industrial district mitigated or exacerbated this impact. We estimate the effect of the earthquake on firms’ performance via two alternative methods: Difference-in-differences and propensity score matching in levels and first-differences. Our findings suggest that the earthquake reduced turnover, production, value added, and return on sales of the surviving firms, at least in the short term. In addition, the debt over sales ratio grew significantly more in the firms located in the areas affected by the earthquake. The empirical evidence also suggests that the negative impact of the earthquake was slightly higher for the firms located in industrial districts, thereby suggesting that, at least in the short term, the usually positive cumulative processes associated with localization within an agglomerated area could have reversed and magnified the negative impact of a disruptive exogenous supply shock.

Economic crises, such as that which started in 2007, increased business turbulence and threaten firms’ survival in many different ways. Economic instability plays a role akin to a natural selection mechanism, allowing the best performing and most competitive firms to survive. The aim of this work is to analyse to what extent firms belonging to cluster associations can “shelter” from adverse economic scenarios, and promote a better recovery, when economic conditions begin to improve. The paper analyses the performance of 405 firms that operate in key sectors, covered by five cluster associations in the Basque Country region of Spain, during the years 2011–2014. We employ seven performance ratios commonly used to measure firms’ economic and financial conditions to check if operating performance, during a period of economic instability, presents significant differences between affiliated and non-affiliated firms that may result in higher adaptation, and resilience, of the former ones. The results suggest that associationism does indeed provide certain advantages in periods of economic growth in the wake of a recession. There is a positive and significant relationship between membership of a cluster association and certain performance indicators, mainly sales growth. The affiliated companies perform better even in adverse economic environments, retaining their ability for differentiation, compared to non-affiliates, and, furthermore, this capability would be bolstered when the recovery begins.

Using a “difference-in-differences” approach, we show that the share of entrepreneurs in Italy declined more in industrial districts than in comparable labour markets during the 3 years following the 2008 recession. We have examined alternative explanations of this finding, thus concluding that it is consistent with the idea that intense social interactions typical of industrial districts act as a multiplier that amplifies the response to shocks. However, we cannot exclude that this may translate into a positive effect on employment as the flows from entrepreneurship to employment appear to be greater within industrial districts.