This monthly selection of articles has been carried out by Philippe Gugler and Damiano Lepori, the Center for Competitiveness, University of Fribourg. The entire selection, carried out since 2013, can be consulted on the academic articles page of our web.

Impact of clusters on regional economic performance: a methodological investigation and application in the case of the precision goods sector in Switzerland

By: M. Resbeut, P. Gugler. Competitiveness Review, Vol. 26, Iss. 2.

Abstract: “This contribution examines on the one hand the methodology used to identify clusters and on the other hand assess the economic impact that those may have on regions.

The influential work on ‘clusters’ lead by Michael Porter since the 90s has become a tool for promoting innovation and growth at national and regional level. Even if the theory has become very popular, a few empirical investigations were conducted since lately. In a recent study, Delgado, Porter and Stern developed a model to investigate the impact of cluster composition on the performance of regions in the US. They find strong evidence that industries operating in a strong cluster environment perform better. The aim of this study is to improve the methodology used in evaluating the cluster environment and then to replicate their model and apply it to a highly competitive industry in Switzerland, namely the precision goods sector. It enables to look closely at the importance of the microeconomic environment surrounding an industry at the regional level. In Switzerland, the precision industry forms a traded cluster in three different regions. The model then reveals that those regions perform better. The results show that industries located in or nearby regions with a strong cluster environment experience higher employment growth rates. It highlights the importance of the microeconomic environment even in small competitive countries.” [ABSTRACT FROM AUTHORS]

The Effect of Industrial Cluster Policy on Firm Performance in Ethiopia: Evidence from the Leather Footware Cluster

By: T. D. Getahun. Center for Development Research, University of Bonn, ISSN: 1436-9931.

Abstract: “This paper empirically analyzes the productivity, profitability, innovation and network effects of a public policy promoting micro and small scale industrial clusters in Ethiopia. To this end, firm-level survey data was collected from randomly selected clustered leather shoe manufacturers that have directly benefited from the policy and those that do not, both before and after the cluster policy intervention. The results from econometric analysis suggests that the industrial cluster policy adversely impacts the productivity, profitability, growth, and innovation performance of the small and micro leather shoe manufacturing enterprises that moved to the government created clusters . The analysis of the transmission mechanism further reveals that the relocated cluster policy hampers the treated firms’ collaborative business and knowledge network and aggravates their growth impediments which includes lack of trust, high customer and supplier search and reach cost, lack of market information, imperfect contract enforcement, delays in the supply of raw materials and the lack of skilled labor. The time lag between policy implementation and its impacts may conceal the long-term impact of the cluster policy. The overwhelming majority of the representatives of treatment group firms also continue to believe that their buisness performance will improve over time as a result of their participation in the MSE cluster development program. This study is a pioneer to quantitatively evaluate the productivity, profitability, innovation and network effect of industrial cluster policy in Ethiopia.” [ABSTRACT FROM AUTHOR]

Nothing is in the air

By: R. D. Fitjar, A. Rodríguez-Pose. Centre for Economic Policy Research, Discussion Paper n. DP11067.

Abstract: “It has often been argued that ‘there is something in the air’ which makes firms in high-density environments – such as cities or clusters – more innovative. The co-location of firms facilitates the emergence of serendipity and casual encounters which promote innovation in firms. We assess this hypothesis using data from a survey of Norwegian firms engaged in innovation partnerships. The results indicate that there may be ‘much less in the air’ than is generally assumed in the literature. The relationships conducive to innovation by Norwegian firms emerged as a consequence of purpose-built searches and had little to do with chance, serendipity, or ‘being there’.” [ABSTRACT FROM AUTHORS]

Related and unrelated variety as regional drivers of enterprise productivity and innovation: A multilevel study

By: J. Aarstad, O. A. Kvitastein, S.-E. Jakobsen. Research Policy, Volume 45, Iss. 4, Pages 844–856.

Abstract: “We conduct multilevel analyses of Norwegian data and find that related industrial variety is a positive regional driver of enterprise innovation. Unrelated variety is a negative regional driver of enterprise productivity. This implies that regions with high levels of related variety and low levels of unrelated variety optimize enterprise performance. We argue that regional specialization is a two-dimensional construct inversely associated with related and unrelated variety. Thus, a specialized region (low in unrelated variety) is in fact a driver of enterprise productivity. In addition, we find that population density is another regional driver of enterprise productivity.” [ABSTRACT FROM AUTHORS]

Regional Spatial Changes in the Slovak Agriculture

By: L. Bartova, V. Konyova. European Association of Agricultural Economists, Paper n. 228857.

Abstract: “This paper discusses the Slovak regional economy structural changes, development and factors of regional economic specialisation and geographic concentration of sectors with a focus on agriculture from 1995 to 2012. Specialization and sector geographic concentration were quantified by Herfindahl and Entropy indices. At the national level we found steadily growing share of crop production at the expense of animal production. Regional concentration of both, crop and animal production and animal production specialisation has been increasing. Spatial clusters of similar specialised regions were detected for crop production. Linear panel models were used to estimate the effect of selected factors on regional crop and animal production specialisation. The agricultural policy instruments, including the CAP had significant effect on regional crop and animal production specialisation patterns. Provision of the complementary national direct payments (CNDP) and investment support had positive effect on regional crop production diversification. Density of regional road network, average annual temperature in the growing season, average annual rainfall in the growing season and provision of the LFA payments had positive effect on both regional crop and animal production diversification.” [ABSTRACT FROM AUTHORS]

The impact of the timing of patents on innovation performance

By: B. Kim, E. Kim, D. J. Miller, J. T. Mahoney, Research Policy, Volume 45, Iss. 4, Pages 914–928.

Abstract: “In the context of industry standard-setting, firms face the strategic decision of whether to move faster than competitors or wait for more information that reduces uncertainty. These decisions are even more challenging if there are multiple standards, and if there are benefits to belonging to more than one standard. This paper examines the effect of the timing of patents on a firm's innovation performance. The strategic logic of real options posits that patent timing is determined by the tension between the value of preemption and the value of waiting. We analyze 680 DVD disc patents in DVD patent pools to test the effect of the timing of patents on innovation performance. Consistent with real options logic, under high uncertainty, the later the timing of the patent, the higher the innovation performance, while under low uncertainty there is an early-mover advantage.” [ABSTRACT FROM AUTHORS]

The Effects of Agro-clusters on Rural Poverty: A Spatial Perspective for West Java of Indonesia

By: D. Wardhana, R. Ihle, W. Heijman. European Association of Agricultural Economists, Paper n.  212683.

Abstract: “The agricultural sector plays an important role for rural economies. However, rural populations still face poverty as one main issue threating livelihoods. Regional concentration and specialization in agricultural production and processing is referred to as agro-clusters. These clusters might generate income possibilities so that rural poverty may be reduced. We empirically analyse this question by applying spatial econometric models because neighbouring regional economies are likely to influence each other. The analysis focuses on the 545 sub-districts of the West Java province of Indonesia where about 10% of the population live in poverty. Concentration of agricultural employment is found to have significant effects on poverty reduction in the sub-district as well as its neighbouring regions. Specialisation in agricultural output is also found to cause lower poverty rates. This implies that the government should support the regional specialization in agriculture. Based on the identification of the comparative advantage of each sub-district, the government should establish regional production nuclei in agriculture in order to boost the specialization. Care has to be taken of the spillover effects the policies will have for surrounding areas.” [ABSTRACT FROM AUTHORS]

Review of International Production and Global Value Chain Studies: the Case of Turkish Regional Networks

By: E. Erdil, T. Göksidan. Science and Technology Policies Research Center, Working Paper n. STPS-WP-14/04.

Abstract: “This study focuses on how Turkey’s small and medium-sized enterprises (SMEs) can participate in global markets. In fact, developing countries provide a means for accelerating the development of enterprises and countries, providing openings that developing country enterprises can exploit to upgrade their capabilities. For such enterprises, or local clusters of enterprises, the task is to insert themselves into the wider networks. This may be regarded as the main achievement for sustaining competitiveness, in similarities with the re-structuring of regional networks in developing countries that often compete by participating in extensive inter-firm networks. As another dimension in our study, we will investigate and argue whether if it is possible to increase and improve the participation of Turkish’s SMEs in the global economy, which is explicitly the baseline hypothesis of this study. The literature on regional networks and global value chain (GVC) will provide us some new insights to show the international linkages of Turkish SMEs, which often lack the capabilities to participate effectively in global markets.” [ABSTRACT FROM AUTHORS]

The effect of innovation activities on innovation outputs in the Brazilian industry: Market-orientation vs. technology-acquisition strategies

A. Germán Frank, M. Nogueira Cortimiglia, J. L. Duarte Ribeiro, L. Subtil de Oliveira. Research Policy, Volume 45, Iss. 3, Pages 577–592.

Abstract: “This research investigates innovation in Brazil, one of the largest emerging economies in Latin America. More specifically, we aim to understand how innovation activities conducted in Brazilian industrial sectors (innovation input) are related to and affect innovation results (innovation output). The paper presents a quantitative analysis of a comprehensive nation-wide, government-sponsored innovation survey (PINTEC), covering more than 30,000 companies and 34 industrial sectors. Data from PINTEC reports were analyzed by means of PCA and 2SLS regression. Our results show that Brazilian industry tends to adopt two main opposite innovation strategies: market-orientation or technology-acquisition. The market-orientation strategy prioritizes internal and external R&D activities as well as commercialization and product launch activities; these activities showed a positive effect on innovation output. On the other hand, a technology-acquisition strategy based on industrial machinery and equipment acquisition showed a negative effect on innovation output. Moreover, our results show that innovation efforts that concentrate investments on software acquisition also generate negative results on innovation outputs. Our results shed light on critical aspects of innovation in the Brazilian emergent economy that provide insights and contributions for both managers and policy makers.” [ABSTRACT FROM AUTHORS]