Studies in Regional Economic Development
New Horizons in Regional Science series
Edited by Charlie Karlsson, Börje Johansson and Roger R. Stough
A fundamental but neglected issue in economic analysis is the account of the benefits of clustering. The benefits associated with clusters are oftentimes assumed to be self-evident (Maskell, 2001), and/or discussed in relation to market transactions among dispersed firms. Porter (1998, p. 80), whose work on clusters has become a standard in the field, does acknowledge clusters as an intermediate organizational form, standing between arm's-length market transactions and conglomerates. However, the benefits of clusters are almost exclusively identified by taking arm's-length market transactions as the benchmark: Compared with market transactions among dispersed and random buyers and sellers, the proximity of companies and institutions in one location-and the repeat exchange among them-fosters better coordination and trust. On a related note, standard economic analysis, based on optimizing choice, has historically played a marginal role in the study of clusters. However, since the early 2000s, a number of works have appeared, testifying that this situation may be due to the insufficient development of the analytical apparatus, rather than to intrinsic methodological weaknesses. This chapter addresses this analytical gap, by providing a framework within which clusters and conglomerates can be compared as alternative organizational forms. We focus on a stylized process in which productive ideas can be combined and translated into production opportunities by the individual agents.
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