chapter  5
5 Mechanisms of Innovation-Based Cluster Transformation
Pages 20

Clusters are networks of organizations, and their transformation is a collective social phenomenon. Clusters have been defined as “a set of co-located firms operating in related industries” (Gnyawali and Srivastava, 2013). They are agglomerated configurations of companies and institutions with positive externalities that benefit from specialized labor, productive inputs, and knowledge (e.g., Krugman, 1991; Baptista and Swann, 1998; Porter, 1998; Maskell, 2001; Lorenzen, 2005) on the supply side. On the demand side, firms in clusters may take advantage of strong local demand from related industries. Under certain conditions, firms may also benefit from being located close to rivals due to decreased consumer search cost and learning from key users (Porter, 1998). However, clustering does not provide all of these benefits indefinitely. The limits to gaining these benefits relate to congestion and competition effects that arise from input and output markets (Pouder and St. John, 1996; Baptista and Swann, 1998; Maskell and Malmberg, 2007; Delgado et al., 2014) and other changes in the economic and societal environment. Thus clusters need to change over time.