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A close up of cogs in an engine.
A close up of cogs in an engine.

Business clusters 'irrelevant' for innovation, study finds Add to ...

At some point, the "business cluster" emerged as a kind of silver bullet for economically-challenged municipalities.

Find a way to put companies together in a single geographic area and they will become each other's customers, suppliers and collaborators. Innovation, prosperity and jobs will follow.

A new study from Europe's Centre for Economic Policy Research throws a wrench into at least one part of that theory.

The analysis of 1,604 companies in the five largest Norwegian cities found that regional and national clusters are "irrelevant for innovation." On the contrary, international cooperation or "global pipelines" were identified as the main drivers of innovation.

"We found interaction through pipelines was as much as four times more powerful than local interaction when it came to innovation," said Rune Dahl Fitjar of the International Research Institute of Stavanger, who wrote the report with Andres Rodriguez-Pose of the London School of Economics. "The idea about global pipelines has become quite prominent in research over the past few years but you don't see much of a policy impact yet. We are mainly relying on cluster policies still. Certainly that's true in most of Europe."

About 80 per cent of the companies - located in the Norwegian cities of Oslo, Bergen, Stavanger, Trondheim and Kristiansand - collaborated with at least one partner inside their region. Only 45 per cent of firms sustained "global pipelines," interacting with companies from abroad.

After controlling for company size, industry type and share of foreign ownership, the authors found that the more international partners a firm had, the more likely it was to innovate. In terms of product development, the addition of just one new international relationship improved a firm's odds of successfully introducing new ideas by 26 per cent, Mr. Fitjar said.

Knowledge drawn from international partners by firms with established global pipelines wasn't shared at the local level with other firms - suggesting that in Norway at least, pipelines and clusters are not complimentary. Even worse, clusters in relatively small cities run the risk of circulating stale ideas, Mr. Fitjar said.

Still, clusters have been embraced by Norway and countless other cities and countries "as the main idea for how to achieve innovation."

"I think it's a strange macro-development in politics," Mr. Fitjar said. "It's a common story that municipalities want this to happen. But the most successful clusters tend to happen naturally without political interference. You can't really legislate innovation."

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