Impact of clusters on regional economic performance

Abstract

Purpose – This paper aims to examine the methodology used to identify clusters on the one hand and assess the economic impact that those may have on regions on the other hand. Design/methodology/approach – The influential work on “clusters”lead by Michael Porter since the 1990s has become a tool for promoting innovation and growth at national and regional level. Even if the theory has become very popular, a few empirical investigations were conducted since. In a recent study, Delgado, Porter and Stern developed a model to investigate the impact of cluster composition on the performance of regions in the USA. They find strong evidence that industries operating in a strong cluster environment perform better. The aim of this study is to improve the methodology used in evaluating the cluster environment and then to replicate their model and apply it to a highly competitive industry in Switzerland, namely, the precision goods sector. It enables to look closely at the importance of the microeconomic environment surrounding an industry at the regional level. Findings – In Switzerland, the precision industry forms a traded cluster in three different regions. The model then reveals that those regions perform better. The results show that industries located in or nearby regions with a strong cluster environment experience higher employment growth rates. Originality/value – It highlights the importance of the microeconomic environment even in small competitive countries.