Knowledge Flows and IndustrialClusters: An Analytical Review of Literature

The dynamism and persistence of competitiveness among industrial clusters, even in the wake of globalization and liberalization in the 1990s, has led researchers to explore the causes of dynamic efficiencies at the cluster level. Cluster studies in the 1980s focused on static advantages of clustering that essentially emerge from lower transaction costs, vertical disintegration of production, availability of skilled manpower and inter-firm interaction. Recent studies have focused on dynamic efficiencies that emanate from learning at the cluster level. The "knowledge focus" of cluster studies is of recent origin and we know very little about the nature of knowledge flows and their determinants. This paper reviews the available literature to identify key processes at work and the gaps in the understanding of these processes. It is suggested that the nature and quantum of knowledge flows in a cluster would depend upon its (a) internal characteristics, (b) external linkages and (c) external policy and economic environment. Using available studies, the paper highlights the role of these characteristics in the generation and flows of knowledge within the cluster. Many of the relationships are still being explored and no consensus has emerged. Future efforts at analyzing these issues will need to systematically capture the knowledge embodied in products, processes and practices and the variety of sources that contribute to the development and diffusion of this knowledge. Apart from other issues, a research focus on the role of "external" linkages of a cluster in knowledge flows will be extremely useful and should be accorded top priority. In the process, the linkages between "internal" and "external" sources of knowledge should also be systematically analyzed. Some methodological issues that will need to be addressed while pursuing research in this direction are identified.