Mark Lorenzen and Peter Maskell 1. INTRODUCTION Current wisdom has it that many industrial clusters around the world mainly exist because they facilitate localized knowledge creation across incumbent ﬁrms. While frequently illustrated by case studies and other anecdotal documentation, most will probably agree that the jury is still sitting and that it will probably take a while before we have sufﬁciently solid empirical evidence to prove or discharge this widespread assertion. The main aim of the present chapter is to contribute to the reﬁnement of a few selected conceptual categories deemed crucial for subsequent empirical testing of knowledge-based cluster hypotheses. We conﬁne ourselves to situations where knowledge creation in a cluster is not university-driven but takes place in an interactive way across ﬁrms engaged in traditional manufacturing or service industries – in particular consumer goods and services – even if sometimes heavily supported by local research and educational institutions. The essence of such clusters is thus the localized knowledge creation processes taking place in inter-ﬁrm relations and transactions on local markets. A theoretical focus on the transaction costs of market relations (Coase, 1937; Dahlman, 1979; Storper, 1995) may help explain a general propensity for vertically disintegrated industries to cluster, but still leave us unable to understand if there are aspects of knowledge creation activities in market relations that are more sensitive to distance than other activities taking place on the market (such as, for example, outsourcing in order to take advantage of comparative advantages). In other words, before...
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