The New Geography of Innovation: Clusters, Competitiveness and Theory

Citation

Guimón, J. (2015), "The New Geography of Innovation: Clusters, Competitiveness and Theory", Competitiveness Review, Vol. 25 No. 2, pp. 238-239. https://doi.org/10.1108/CR-09-2014-0028

What are the forces driving the concentration of economic activity in clusters? How do innovative clusters emerge and remain competitive? What role do multinational companies (MNCs) play in shaping the global distribution of innovative activities? This book contributes to addressing these important questions by bringing together recent studies on clusters, innovation and foreign direct investment (FDI), and by providing new empirical evidence from Switzerland. The book’s central argument is that, to remain competitive, clusters increasingly need to tap into foreign sources of specialized knowledge through FDI, building global innovation networks that span not only throughout the most advanced developed countries but also toward emerging countries.

The book is structured in nine chapters, grouped into three parts. Part I (“The Economics of Innovation”) provides an overview of the literature to clarify how innovation is defined and measured, and how innovation is linked to other economic outcomes like development, catching-up, employment and competitiveness.

Part II (“The Nature of the Innovation Process and the New Geography of Innovation”) focuses on analyzing the self-reinforcing relationship between clusters and MNCs in the global innovation process. The author traces the theoretical foundations behind the concept of clusters, including the increasing importance attached to microeconomic competitiveness and the processes of localized learning and knowledge spillovers associated with industrial agglomeration. Traditional cluster studies have focused on innovation and knowledge diffusion among firms and organizations belonging to the cluster, while only limited consideration has been given to understanding the process of absorption of extra-cluster knowledge. Among the different modes through which clusters link with foreign sources of knowledge, cross-border investments by MNCs play a prominent role. MNCs have a unique capacity to tap into the specific knowledge of different clusters and to internalize the benefits of the management of geographically dispersed activities. But, only a few recent studies have explicitly addressed the complex interactions between clusters, innovation and FDI (Mudambi and Swift, 2012; De Beule et al., 2008). This book goes some way to fill this gap in the literature, providing an original integrative analysis of the interactions between clusters and the global innovation networks of MNCs.

Part III (“The Distribution of Inventive Activity: Evidence from Patent Data in Switzerland and Focus on the Basel Pharmaceutical Cluster”) presents an application of the abovementioned theoretical framework, which constitutes the most significant contribution of this book. In particular, the author explores the innovative activity of Swiss regions based on patents filed in the European Patent Office, and then focuses on the particular case of the so-called BioValley cluster in the Basel region, one of the world’s leading pharmaceutical clusters. The study first provides a comparative analysis of the patenting activity of Swiss regions, which unveils large differences across regions in terms of patenting intensity as well as with regard to their specialization patterns. The author claims that this analysis represents a unique tool for policymakers and regional leaders to evaluate the inventive performance of their region and take the most adequate measures to sustain innovation and prosperity in the long run. Unfortunately, however, he falls short in providing specific policy recommendations.

Subsequently, the empirical study focuses on the pharmaceutical cluster in Basel, with the objective of analyzing how firms in this cluster internationalize their R&D activities to be able to tap into complementary knowledge located in foreign clusters. Patent documents represent a powerful tool to chart the internationalization of innovation, as they report the name of the inventor and the applicant/owner along with their countries of residence. When the owner’s and inventor’s countries of residence differ, this often indicates that a firm has located R&D activities in a foreign country, and the owner will generally be the MNC’s headquarter, while the inventor an employee of its foreign subsidiary (Guellec and van Pottelsberghe, 2001). Using this method, the author is able to provide a new perspective on the internationalization of the inventive process and on the role of clusters in the global innovation process of firms located in the Basel pharmaceutical cluster. In addition, this quantitative exercise is complemented with qualitative insights from personal interviews with top executives of some Swiss pharmaceutical firms like Novartis and Roche. This study shows how firms in the Basel pharmaceutical cluster are increasingly reaching out for foreign knowledge by multi-locating their R&D operations in several leading pharmaceutical clusters around the world. Geographically, although specialized clusters in North America and Europe still account for the largest share, this study highlights that China and India are also progressively becoming important destinations for R&D investments in the pharmaceutical sector.

Overall, this book breaks new ground in highlighting how foreign clusters and cross-cluster relationships play an important role in fostering innovation in MNCs and enhancing their competitiveness. It shows how companies from innovation-driven clusters like the BioValley aim to constantly enhance their technological assets by sourcing knowledge from the most specialized knowledge hubs around the world. Thus, this book should be of great relevance to scholars, business managers and policymakers interested in better understanding the dynamics of innovative clusters and the globalization of corporate R&D.