Entry, exit and knowledge: evidence from a cluster in the info-communications industry

Abstract

The process by which knowledge is created, accumulated and eventually destroyed appears crucial to many industrial dynamics patterns, since it shapes the profile of evolution of industries by favouring the entry of new companies, the co-existence of incumbents and new entrants and, eventually, their selective or joint exit over time. Though problematic, and all too often neglected, the connection between two nodes of interest, Industrial Dynamics on the one hand, and Knowledge Dynamics on the other hand, thus appears as a promising field of research. On the basis of a case study in the info-communications industry, we start by emphasizing that this field of research has direct importance at the empirical level. Knowledge dynamics can create specific models of evolution among firms at the local level, such as non-shakeout patterns within the cluster, which significantly differ from more global patterns of evolution in the info-communications industry, now generally oriented towards trends of decline and bust. We further argue in favour of the development of Knowledge-Based Industrial Dynamics, an approach that lies at the interface of industry and knowledge dynamics, and which can explain how a cluster may decrease the barriers to knowledge of clustered companies and, further, create a specific knowledge dynamics that is able to shape the industrial dynamics. Finally, we document how this process of knowledge dynamics was collectively implemented in our case study on the info-communications cluster and decompose the mechanisms that led to a local non-shakeout pattern of industrial dynamics. We conclude with some remarks on the policy implications.