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Enhancing OPEN INNOVATION through CLUSTER and REGIONAL settings: From local bonding to international bridging

Clusters and other kinds of inter-organisational networks are useful concepts to foster innovation activities, but one should beware of over-embeddedness of such constructs. In order to avoid lock-ins of actors into local networks and an over-specialization of territories based on industrial traditions of the past, it is worthwhile for firms to enlarge the geographical and sectorial scope of their collaboration practices and consider more of-the-beaten-track partnerships. In the spirit of “the strength of weak ties”; to develop ties with actors outside of territorially delineated clusters or industrial district settings is just as important for firms than to bond with partners in their direct vicinity.

by Henar Alcalde
Assistant professor and researcher at Deusto Business School, Spain

April 25th, 2012

Clusters can be defined as geographic concentrations of interconnected companies, specialized suppliers, service providers, and institutions that provide support in terms of e.g. R&D, education and trade. They find each other due to geographical proximity, but also due to sectorial and value chain relatedness, in which they can act as each other counterpart and/or competitor. However, due to the attractiveness of building up synergies with nearby located partners in regions that shelter strong cluster foundations, there is also a risk of over-reliance on the usual local suspects and of not reaching out to more distant sources from which to absorb knowledge and technology and with which to cooperate on new product ideas and market launch. This then can lead to the framing of open innovation processes in a rather limited geographical setting. The same may happen if clusters are highly technology-driven. There is then a risk that cooperation for new product development is very much engineering-oriented and takes place on R&D grounds instead of taking a more pronounced business and sales orientation. This then can hamper the potential that firms obtain from open innovation processes and the market uptake potential of the new products and services they develop upon that basis.

If we examine the above at the level of a European region with a strong tradition in clustering and with good scores on input indicators with regard to innovation and R&D activity, the concern expressed above is confirmed. The Basque Country serves as a point in case for this. Its economy and innovation policies, which have recently been hailed as highly resilient and forward-looking in policy review exercises on behalf of the OECD, the EC and Harvard Business School, indeed provide a lot of good practice learning material for peers. However, a closer look also reveals weaknesses in terms of output indicators with regard to innovation. It is plausible to think that the imperfections observed in this case are also symptomatic for situations elsewhere in Europe and the overall disadvantage of Europe vis-à-vis Japan and the USA as to “Return-on-Innovation”.

What can be observed from the Basque case is that domestic firms score less well on output indicators related to innovation, such as the introduction of new products to market than foreign-owned companies located in the region. This disparity in performance cannot be attributed to internal spending on R&D and innovation, since the local firms clearly devote a stronger percentage of their means to that than their foreign counterparts. Therefore, it may be correlated to differences in collaborative innovation behaviour as displayed by the autochthonous and foreign-owned firms. Whereas we see that local firms tend to focus on cooperation with nearby located technological partners for innovation, the foreign-owned firms make use of a larger variety of innovation partners. Both from a geographical and business functional perspective, that is. They make more use of and reach out more to partners beyond the host region and work more with actors that serve to support the commercialization of products, and not just the research stages prior to the conceiving of new products.

Given the strong tradition in clustering that has been built up in several parts of Europe, like in the Basque Country, there is a risk than that the local endowment that has resulted from that in terms of available R&D centres and b2b relationships among affiliates, can give way to a network failure of the over-embeddedness kind. I.e., leading to risks of lock-ins and an over-reliance on local sources. Or as it was verbalized at the European Cluster Conference 2010: “We have created monsters (= clusters), and now they are coming at us!”

Therefore, firms involved in regionally articulated clusters may run a risk of not profiting fully from the potential that more open and collaborative innovation practices can offer if they limit themselves to intra-cluster cooperation patterns (and to the science- and research-based segments in the chain of new product development and market launching activities). Arguably, developing a more outward- and market-uptake oriented cooperation strategy may thus be the key to improve performance on output indicators in such clusters to avoid that lock-ins into local cluster settings becomes a liability for its members.

In the light of the former, the initiatives of the European Commission to support the development of world class clusters through networking at a European level of innovative clusters and enabling them to pool and provide access to facilities and resources among them, can be understood as very opportune. By promoting cooperation between clusters, companies are incentivised to break out of limited territorial moulds and function on a more eclectic basis linking up actors from different clusters and establish better functioning conduits between them. It is this kind of linking that allows bridging between clusters as a complement to local bonding. Through that combination, a more fertile ground can be provided for open innovation. To enhance this fertilization further, there is also an important role to be played by intermediaries that should assume a major role in order to help firms to find their ways to better partners to improve their innovation output performance. I.e., by promoting the use of search tools or broker structures as Innocentive and fostering the use of European innovation vouchers and schemes like Creative Credits to get companies to liaise outside the classical R&D spheres in their efforts to come up with new products and services.