The Implications of Geographic Cluster Locations for New Venture Performance - Executive Summary

Abstract

If you have ever wondered why there is so much interest in geographic clusters, which are places such as Silicon Valley, Route 128 or the Research Triangle -- you are not alone -- these regions have intrigued scholars for many years. A review of the literature on clusters suggests their popularity may be attributable to three observations of these regions: the higher levels of specialized resources, the higher levels of startup activity, and the reported superior performance of firms operating within cluster regions. Although firms operating from cluster locations have been reported to outperform firms operating from other locations, the impact of cluster regions on the new firms operating within them is less clear. Specifically, while some studies reported that clusters positively affect new firm performance, others have found that clusters negatively affect performance. However, because few studies measured the attributes of the firms likely being affected by the firms' presence within a cluster, the factors contributing to the differential results is unclear.The purpose of this research was to accomplish two objectives. First, to determine whether new firms operating from cluster locations have higher or lower levels of performance than new firms operating from other locations; second, to understand what factors are influencing the performance of cluster new ventures. Utilizing the literature on industry clusters, agglomerations and industrial districts, this research began on the premise that cluster regions are entrepreneur-friendly environments yielding entrepreneurial expertise, access to resources, capital and other support systems to the firms operating within them. These characteristics of clusters were expected to contribute positively to the innovation and growth performance of new ventures. In addition to the aforementioned representations of geographic clusters, the literature suggested that two attributes of the firms would be particularly affected by a location with a geographic cluster region. One is the knowledge that firms assimilate into their operations. The other is the alliances into which the firms enter.