Comparing Top-Down and Bottom-Up Cluster Initiatives from a Principal-Agent Perspective: What We Can Learn for Designing Governance Regimes

Abstract

Cluster initiatives are either initiated top down by public administrations or bottom up by private firms to strengthen cooperation of regional firms and institutions. We compare the governance regimes of top-down and bottom-up cluster initiatives by using a classic principal-agent framework comprising task setting, assignment of decision rights, performance evaluation, and incentive system. We use the Bavarian Cluster Initiative, a top-down initiative, as a reference point and compare it with the governance regimes of German and Austrian bottom-up clusters. We show that differences in task setting and other elements of the principal-agent framework can lower the effectiveness of top-down clusters.