Geography Reference
In-Depth Information
tant since spinof s can exploit the opportunities of their parents by entering with a similar
product. Consequently, they either compete directly or more narrowly with one of the
parent's activities (Franco and Filson, 2000).
Application diversii cation and innovations relate closely to the activities of parents
and grow out of research undertaken there. Spinof s will occur when employees pursue
new technological discoveries made in their own i rm. Wiggins (1995) and Anton and
Yao (1995) add that the innovations are likely to be path-breaking and opening new
sub-markets within the industry. The work of new i rms and organisations is related to
activities of parents and is in some cases innovative by introducing new products or serv-
ices. Entrepreneurs bring knowledge and skills from their past working and educational
activities that may be valuable in searching for new business areas and opportunities as
well as in the daily life of running a i rm (Shane, 2000). Founders are likely to bring spe-
cii c knowledge about a wide range of issues to their new i rm, such as customer demand,
products, technologies, suppliers and competitors (Helfat and Lieberman, 2002). This
may also include knowledge about how to exploit new knowledge and technological
developments based on unmet supplier or customer demands or prior scientii c and tech-
nical training (Roberts, 1991).
Growth in the number of i rms within a particular industry in a region is by dei nition
the most important process in the emergence of clusters. However, the emergence may
stop at various stages, even when the necessary conditions seem to be present. Three key
mechanisms are central determinants in the early growth phase of clusters: (1) the geo-
graphical dimension of entrepreneurial activity, (2) spinof s from successful i rms, and
(3) new market opportunities. It is in the interaction between these three mechanisms
that a particular industry may grow from a single i rm to become a cluster. Geography
obviously plays a role in the interaction between the i rst two determinants, but the new
market opportunities relate more to the industry life cycle and the growth of markets
outside the region. Location-specii c externalities might emerge as the cluster evolves
from a single i rm to many. However, in the early phase it seems unlikely that these
are attracted to a non-externality region. Internal circumstances may cause a spinof
process to stop. Jacobs (1969) describes how Rochester, New York, used to 'produce' a
high number of breakaways within precision manufacturing and optical products, but
turned into a company town, since the successful Eastman Kodak company started i ght-
ing breakaways and acquiring competitors. Sometimes a successful company does not
'produce' spinof s but grows large on its own. Then a regional agglomeration within a
particular industry consists of one or a few large i rms.
A successful incumbent can spawn new i rms that are more successful on average
because their founders bring knowledge from the incumbent. Success will breed success
in this respect. This spinof mechanism is not necessarily geographic in its nature, but
since most entrepreneurs found i rms near their past employers, local success is more
likely to generate success in the same region rather than elsewhere. The opportunities for
application diversii cation and market diversii cation increase when the market grows.
These three mechanisms put together can be the main driving forces of geographic
clustering of economic activities, because a single successful incumbent can lead to well-
performing spinof s, which later on can spawn other new i rms. To a large extent this is
because entrepreneurs are likely to stay where they are, and because they are able to rely
on the success they experienced while being employed at the incumbent. Furthermore,
