Climate of competition, clusters and innovative performance

Abstract

The aim of this paper is to examine industry competition and cooperation in industry clusters, and to explore the role they play in driving innovation among firms. The dependent variable, innovative performance, is measured in terms of both product and process development. A theoretical model is built on the basis of three constructs: industry competition, involving both structural and relational, or ‘climatic’ characteristics; industry cluster; and innovative performance. Seven hypotheses are extracted from the model. A LISREL model based on a stratified sample of all Swedish manufacturing industries is used to test our hypotheses. The empirical findings have important theoretical implications in three areas. First, by introducing relational dimensions of competition—the ‘climate of competition’—we can build a more refined model of the nature of industry competition. Two types of climate are identified, the ‘hot’ and the ‘cold’. Second, it is shown that the structure and climate of competition are both important drivers of innovative behavior. Third, in addition to competition, cooperation within clusters also has a significant impact on innovation.