Clusters are groups of geographically proximate firms and institutions in related industries. They arise naturally from factors like natural resources or local demand. Clusters benefit firms through externalities, access to specialized inputs, and knowledge spillovers. This increases competitiveness by fostering entrepreneurship and innovation. However, clusters can suffer from inefficiencies like knowledge, network, and collaboration failures. Cluster initiatives by governments and organizations aim to strengthen interactions in clusters and close gaps to improve innovation. The document provides an overview of what clusters are, how they benefit firms, potential problems clusters can face, and ways cluster initiatives address issues to support clusters.

1. Clusters –
what they are, how they work,
and what to do with them
CLAC7, Monterrey, 30 May 2012
Göran Lindqvist
Stockholm School of Economics

2. 1
What are clusters?
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3. Alfred Marshall
Principles of Economics, 1890
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4. Staffordshire Sheffield
pottery cultery
Buckinghamshire
chairs
Bedfordshire
straw plaiting
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5. Giacomo Becattini Paul Krugman Michael Porter
1990
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6. What are clusters?
Clusters are groups of
geographically proximate
firms in related industries
and related institutions
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7. 7

8. Surf Surf
shops clothing
Competitions
Foam & Festivals
Local
fiberglass surf
heroes
Surf Clubs
Surfboard Surf Schools
Wax
makers
Manu-
facturing
Chemicals Association
Media Lobby
Groups
Skateboards Museums
and Other
Snowboards Local local
university education
Source: HBS MOC student team
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9. Research
Government organisation
s
Firms
Capital Education
providers organisations
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10. 2
How do they work?
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11. How do clusters arise?
Clusters are naturally occurring phenomena
The grow out of seeds such as:
o natural resources
o particular local demand
o acts of entrepreneurship
Evolution versus construction
o Most clusters have evolved spontaneously
o Some clusters are built as acts of policy
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12. What are the benefits of clusters?
Mechanisms
Externalities: when firms benefit from the
presence of other firms in ways they don’t
have to pay for
Access to highly specialised inputs
Knowledge spill-overs
Local labour pool
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13. What are the benefits of clusters?
Competitiveness
Increased entrepreneurship
Increased innovation
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14. 3
What to do with them?
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15. Government
Research
organisations
A cluster…
Companies
Capital
providers
Education
organsiations
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16. Government Research
organisations
A cluster…
or isolated
Companies
islands?
Capital Education
providers organsiations
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17. Weak interaktion Strong
interaction
Poor knowledge Good knowledge
Sparse networks Dense networks
Different “languages” Common “language”
Different norms and Similar norms and
attitudes attitudes
Different visions Shared vision
Low trust High trust
Negative incentives Positive incentives
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18. Reality is inefficiencies
+ Knowledge failures
+ Network failures
+ Collaboration failures
+ Coordination failures
= Innovation failures
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19. The seven gaps of innovation
Government gap 4 1 The research
gap
5 The company-to-
company gap
The capital gap 3 2 The education gap
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20. Cluster-to-
cluster gap
6
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21. Global market gap
6
7
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22. Are you a cluster manager?
• We need Latin American
participants in the Global Cluster
Initiative Survey
• An online survey, in English
• About your cluster organisation
• Interested? Contact me!
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23. What are clusters?
 They are groups of geographically
proximate firms in related industries and
related institutions
How do they work?
 They improve competitiveness by
fostering entrepreneurship and innovation
What to do with them?
 They need cluster initiatives to help
improve collaboration in the cluster
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24. Contact
Göran Lindqvist, PhD
Center for Strategy and Competitiveness
Stocholm School of Economics
www.sse.edu/csc
goran.lindqvist@hhs.se
+46 8 7369524
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