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.

Why some places are left-behind: urban adjustment to trade and policy  shocks

By: A. J. Venables. University of Oxford, Department of Economics, Discussion Paper Series No. 903, 2020.

Abstract: “Economic adjustment to trade and policy shocks is hampered by the fact that some sectors tend to cluster, so are hard to initiate in new places. This can give rise to persistent spatial disparities between cities within a country. The paper sets out a two-sector model in which cities divide into those producing tradable goods or services subject to agglomeration economies, and those only producing non-tradables for the national market. If import competition destroys some established tradable sectors, then affected cities fail to attract new tradable activities and switch to just produce non-tradables. Full employment is maintained (we assume perfect markets and price flexibility) but disparities between the two types of cities are increased. All non-tradable cities experience real income loss, while remaining tradable cities boom. The main beneficiaries are land-owners in remaining tradable cities, but there may be aggregate loss as the country ends up with too many cities producing non-tradables, and too few with internationally competitive activities. Fiscal policy has opposite effects in the two types of cities, with fiscal contraction causing decline in cities producing non-tradables, increasing activity in cities producing tradable goods, widening spatial disparities, and in the process increasing the share of rent in the economy.” [ABSTRACT FROM AUTHOR]

Does light touch cluster policy work? Evaluating the tech city programme

By: M. Nathan. The London School of Economics and Political Science, CEP Discussion Paper No. 1648, 2019.

Abstract: “Despite academic scepticism, cluster policies remain popular with policymakers. This paper evaluates the causal impact of a flagship UK technology cluster programme. I build a simple framework and identify effects using difference-in-differences and synthetic controls on rich microdata. I further test for timing, cross-space variation, scaling and churn channels. The policy grew and densified the cluster, but has had more mixed effects on tech firm productivity. I also find most policy ‘effects’ began before rollout, raising questions about the programme’s added value.” [ABSTRACT FROM AUTHOR]

Effects of cluster policies on regional innovation networks: Evidence  from France

By: K. Alain N’ghauran, C. Autant-Bernard. Halshs-02482565, 2020.

Abstract: “Despite the growing body of literature evaluating cluster policies, it still remains difficult to establish conclusively their structural effects on regional innovation networks. Focusing on the French cluster policy during the period 2005-2010, this study aims at evaluating how cluster policies influence the structure of local innovation networks following network topologies that may be beneficial for regional innovation. Based on a panel data of four periods and 94 NUTS3 French regions, we estimate spatial Durbin models, allowing us to identify direct, indirect and total effects of cluster policies. The results suggest that cluster policies can result in both positive and negative total effects on the structure of local innovation networks depending on regions’ technological specialisation. Beyond the heterogeneous effects, the results also highlight that cluster policies may lead to a regional competition for the strengthening of innovation networks. This finding echoed previous research pointing out the possible ‘beggar-thy-neighbour’ effects of cluster policies.” [ABSTRACT FROM AUTHORS]

Economic geography and emerging market clusters: A co-evolutionary study  of local and non-local networks in Bangalore

By: F. A. Taübe, A. Karna, P. Sonderegger. International Business Review, Vol. 28, Iss. 5, 2019.

Abstract: “The presence of network ties within location plays a significant role in organization and evolution of clusters. This has proven to be particularly true for clusters specializing in knowledge intensive industries, where the organization of resources – people and technology – has been a primary driver for firm and regional performance. With the help of a longitudinal case study of the Bangalore IT cluster in India, we investigate the effect of local and non-local network ties on its evolution. We argue that networks – both local and non-local – play an important role in the development of cluster. We propose a non-linear relationship between cluster evolution phases and the type of network ties most prominent. Our study also outlines the role that embedding, expansion, and extension of ties plays in transitioning cluster from one phase to the other. The consideration of non-local ties is rather nascent in the cluster literature and promises to enhance the understanding of how clusters develop at both levels – policy as well as firm.” [ABSTRACT FROM AUTHORS]

Spill over or Spill out? – A multilevel analysis of the cluster and firm  performance relationship

By: N. Grashof. Utrecht University, Papers in Evolutionary Economic Geography No. 20.13, 2020.

Abstract: “Regional clusters have become an inseparable component of modern economies. Spurred by the idea that clusters unrestrictedly encourage firm innovativeness, such as in the lighthouse example of Silicon Valley, the cluster approach has particularly gained attention among policy makers who have supported the creation and development of clusters. Nevertheless, due to a lack of holistic consideration of different influencing variables, the scientific results about the effect of clusters on firm innovative performance are highly contradictive. For companies as well as policy makers, it is therefore still difficult to evaluate the concrete consequences of being located in a cluster. Consequently, the aim of this paper is to empirically investigate the conditions and mechanisms through which companies can gain from being located in clusters, focussing thereby in particular on possible knowledge spillovers. Therefore, based on an integration of the theoretical perspectives from the strategic management (e.g. resource-based view) and the economic geography literature (e.g. cluster approach), variables from three different levels of analysis (micro-level, meso-level and macro-level) are considered separately as well as interactively. By analysing a unique multilevel dataset of 11,889 companies in Germany, including 1,391 firms that are located within a cluster, evidence is found that being located in a cluster has indeed a positive impact on firm innovative performance. However, the results also indicate that firms benefit unequally within the cluster environment, depending on the specific firm, cluster and market/industry conditions.” [ABSTRACT FROM AUTHOR]

Trade Shocks and Growth: The Impact of the Quartz Crisis in Switzerland

By: T. Twinam. Department of Economics College of William & Mary, 2020.

Abstract: “Agglomerationeconomiesandclusteringeffectsareakeydriverofurbangrowth. They can also be a source of vulnerability when cities and regions specialize in export- intensive industries. Foreign competition, exchange rate movements, macroeconomic volatility, and technological change are all potential threats to exporters, and shocks to these industries can have long-run impacts on population size and growth. In this paper, I study an unusual confluence of all four of these trade shocks: The quartz crisis in Switzerland, which devastated the globally-dominant Swiss watch industry in the 1970s. I document the geographic agglomeration pattern of the industry and the impact of the crisis on exports, employment, and wages. Using a differences-in-differences strategy, I show that this series of trade shocks led to a large and rapid loss of population in affected areas, and a long-run change in growth patterns. I explore the mechanisms behind this population change, including the role of manufacturing employment and immigration. I discuss the implications of these results for theories of urban growth, and contrast them with recent work on the China shock in Europe and the United States.” [ABSTRACT FROM AUTHOR]

High-growth Firm Shares in Austrian Regions: The Role of Economic  Sructures

By: K. S. Friesenbichler, W. Hölzl. WIFO Working Papers, No. 595, 2020.

Abstract: “This paper explores the structural determinants of high-growth firm shares in Austrian regions. The region- al level of analysis allows to uncover regularities which are not detectable in firm-level studies. We find that lower mobility barriers, firm exits and technological opportunities, measured by digitalisation intensities, and, to a lesser extent, agglomeration effects are associated with a larger share of high-growth firms. The results suggest that comparisons of shares of high-growth firms across countries and regions should consider differences in the industrial structures together with the often-emphasised differences in policies and regulations.” [ABSTRACT FROM AUTHORS]

Putting the watering can away Towards a targeted (problem-oriented)  cluster policy framework

By: N. Grashof. CIRCLE, Papers in Innovation Studies, Paper no. 2020/04, 2020.

Abstract: “In view of the undisputed promising effects of regional clusters and spurred by lighthouse examples such as Silicon Valley, cluster policies have been popular in many countries worldwide. However, in recent years the complaints have become louder about the actual economic relevance and efficiency of such regional innovation policies. In particular, the high degree of standardization in the so far applied cluster policies, focusing primarily on collaborative incentives to strengthen the relational density in clusters, have been criticized as being rather ineffective and costly to society. In order to solve this one-size-fits-all problem it has been proposed that cluster policies should instead focus on the concrete conditions and needs within regional clusters. The aim of this paper is to respond this call by considering firm-, cluster- and market- /industry-specific particularities. Based on an extensive systematic literature review and own empirical results about the relationship between clusters and firm’s performance, an overview about relevant conditions is elaborated. Such an overview makes it possible to identify potential problems, e.g. in terms of missing absorptive capacities, which cluster policy can purposeful address. For each identified problem, a potential targeted (problem-oriented) policy intervention is therefore suggested. The corresponding result of this procedure is a policy-framework that offers an increased practical value in terms of bringing forth specific adaptive cluster policies rather than one-size-fits-all policies and thereby contributing to a more sophisticated understanding of the design of cluster policies.” [ABSTRACT FROM AUTHOR]