Government, University and Business Linkages
New Horizons in Entrepreneurship series
Edited by Scott Shane
Chapter 7: Smart Places for Smart People: Cluster-based Planning in the 21st Century Knowledge Economy
7. Smart places for smart people: cluster-based planning in the 21st-century knowledge economy Michael Luger INTRODUCTION Cluster-based planning for economic development has swept across the USA, Europe and Asia during the past decade. The literature that undergirds the practice goes back over a century, to Alfred Marshall. In short, clusters represent a critical mass of businesses related to each other in different ways. Those relationships create various positive externalities for the members of the cluster, and a basis for policy formation at the local level. Clearly Marshall’s economy in the late nineteenth century was different in fundamental ways from today’s economy. His was increasingly dominated by labor-intensive manufacturing businesses and, consequently, he called his clusters ‘industrial districts’. He, and a host of successors stretching to the present, have described the importance of business colocation, or ‘agglomeration’ (Weber, 1929), in terms of what economists now call urbanization and localization economies (Hoover, 1937), increased market power through brokered buying and selling, availability of specialized repair facilities, shared information, reduced risk and uncertainty for entrepreneurs, and tailored infrastructure (Isard, 1956; Lichtenberg, 1960; Vernon, 1960; Carlino, 1978, 1979). Even the earliest theorists recognized the difference between static and dynamic external economies from colocation, where the former arise as a result of reduced costs because of better proximity to suppliers or markets, and the latter are associated with learning, innovation and increased specialization (Bergman and Feser, 1999, p. 8). Bellandi (1989) pointed out that industrial districts are important, not just because of their shared labor...
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