Can firms build clusters?

With fundamental changes of the industrial fabric underway, the share that countries and regions hold of global value-added is shifting. With the surge of new technologies, more competitive capital and product markets, and new modes of organising the value delivery process, current distribution patterns are poised to change in the favour of adaptive and well-endowed regions, so called technology clusters. In such an arena, firms struggle to re-configure and re-coordinate their activities to best capture geographic arbitrage. This approach bears the penalty of substantial costs of re-location. These are substantial if assets, economies of scale and scope accruing from regional concentration of activities, privileged relationships and firm identity are lost. To resolve this trade-off, some firms have taken strides to reverse the deficiencies of a historic corporate location. They systematically ameliorate their immediate homebase economies. It is the effectiveness of firms building clusters and their ability to sustainably appropriate the benefits which are subject to this treatise. The work reviews the current literature on cluster-based growth and explicates the link between localised cluster externalities and value creation within firms. It investigates a string of prominent, firm-induced cluster initiatives and evaluates their effectiveness in triggering regional growth and the returns which such a move creates to shareholders. Results indicate that firm-induced cluster augmentation can be - contingent on location and company factors - a rational alternative to spatial fragmentation of the value chain or to an internal compensation of suboptimal context conditions. For the cases reviewed, corporate mentorship of cluster-initiatives can be shown to result in pareto-efficient payouts to all local community members. It delivers conceptual and empirical support for a stronger involvement of private sector actors into economic development policy.