Chapter 2: Institutional Environment in City Software Clusters
_____________________________________________________________ The study of the role of cities in the growth of industry in Asia, Europe and America could be traced back to the work of Weber (1921) and Pirenne (1925). Eberhard (1956 p. 254) summarized the essence of cities in Europe: ‘We have come to believe that the industrial civilisation in which we now live were essentially created by a “middle class” who lived in the cities of Europe. We believe that it is the city with its condensation of population, its great division of labour, its mixed population that made it possible to create the first industries and the first great accumulation of capital which were necessary for an industrial society.’ As innovation is the prime source of competitive advantage within knowledge-intensive industries, the growth of software firms in cities during the post-industrial era requires the synergy of human capital, information infrastructure, venture capital as well as industry-specific knowledge. Innovation represents various combinations of pieces of tacit and explicit knowledge associated with the activities of developing and commercializing new software products. As knowledge is a public good that can be easily transferred, the prime source of innovation advantage which cities provide to industries is, therefore, derived from the transmission of knowledge from its generators to exploiters. Indeed, as Glaeser et al. (1992 p. 1127) pointed out, ‘intellectual breakthroughs must cross hallways and streets more easily than oceans and continents’. Cities have been associated with knowledge and unique intellectuality. Political, legal, social, technological, cultural and economic innovation originated from cities...
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