Cases and Policies
Edited by Charlie Karlsson
Chapter 20: Institutions and Clusters
Ulrich Blum We show that transaction costs and external economies, which change institutional arrangements considerably, inﬂuence cluster structures. There are two types of clusters (i), the vertical cluster where a hub dominates suppliers that have settled in the vicinity and (ii), the horizontal cluster where ﬁrms have a common platform: historically a natural resource, today often knowledge and competences. Furthermore, non-cluster ﬁrms exist. We show, in a model, how these types emerge from the interaction found in ﬁrms and the interaction of ﬁrms within a network system. Changing transaction costs and externalities inﬂuence clusters and produce cluster dynamics. The sustainability of a cluster depends on its ability to stabilize the basis of its existence. This is easier for horizontal clusters, that can steadily develop their knowledge and competence platform, than for a vertical cluster which depends heavily on product life cycles. We give some evidence for clusters in East Germany, which presents an interesting example. The Treuhand1 atomized the giant combines, so that the rearrangements may be interpreted as results of fundamental market forces. Therefore major inﬂuences on the emerging institutional structure should stem from transaction costs and externalities. 1 The role of institutions in cluster economics Why are certain regions more successful than others? Why do some agglomerate whereas others decline? Can we think of economic development without the concentration of activities? What role do economic development policies play: are they able to trigger, to reinforce concentration or prevent existing agglomerations to see their potentials being...
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