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Journal Article•DOI•

Clusters and knowledge: local buzz, global pipelines and the process of knowledge creation

Harald Bathelt1, Anders Malmberg2, Peter Maskell3•
University of Marburg1, Uppsala University2, Copenhagen Business School3
01 Feb 2004-Progress in Human Geography (SAGE Publications)-Vol. 28, Iss: 1, pp 31-56
TL;DR: In this paper, a distinction is made between the learning processes taking place among actors embedded in a community by just being there dubbed buzz and the knowledge attained by investing in building channels of communication called pipelines to selected providers located outside the local milieu.
Abstract: The paper is concerned with spatial clustering of economic activity and its relation to the spatiality of knowledge creation in interactive learning processes. It questions the view that tacit knowledge transfer is confined to local milieus whereas codified knowledge may roam the globe almost frictionlessly. The paper highlights the conditions under which both tacit and codified knowledge can be exchanged locally and globally. A distinction is made between, on the one hand, the learning processes taking place among actors embedded in a community by just being there dubbed buzz and, on the other, the knowledge attained by investing in building channels of communication called pipelines to selected providers located outside the local milieu. It is argued that the co-existence of high levels of buzz and many pipelines may provide firms located in outward-looking and lively clusters with a string of particular advantages not available to outsiders. Finally, some policy implications, stemming from this argumen...

Summary (4 min read)

Jump to: [1. Introduction] – [Aim and structure of the paper] – [2. Knowledge creation within and across firms] – [Cluster dimensions] – [Localised capabilities] – [4. Knowledge creation across clusters: the nature of pipelines] – [The need for pipelines] – [The limitations to pipeline formation] – [Absorptive capacity] – [Main propositions of the model] – [Countervailing forces and limitations] and [Policy implications]

1. Introduction

  • The riddle the authors are dealing with in this paper is concerned with spatial clustering of economic activity and its relation to the spatiality of knowledge creation.
  • Such exchange and interaction can be organised in different ways.
  • Even in cases where codified knowledge is actually almost omnipresent it may become valuable only if fused with less transitory knowledge whether proprietary or embedded in a local environment in tacit forms (Maskell et al. 1998, Asheim 1999).
  • One of the main distinguishing features of spatial clusters of similar and related economic activity is that they provide opportunities for the transmission of sticky, nonarticulated, tacit forms of knowledge between firms located there.

Aim and structure of the paper

  • The authors maintain that the skills and efforts required when attending to the local environment are rather different from the ones necessary to maximise the inflow and utilisation of codified knowledge produced elsewhere, and that these differences must be managed.
  • In doing this, the authors do not intend to explore all possible local-global production configurations.
  • 7 Despite this conclusion, Humphrey and Schmitz (2002) primarily deal with this shortcoming from a global value chain perspective providing an analysis of the localised effects and prospects of upgrading strategies within such commodity chains.
  • The authors argument proceeds in the following way.
  • In section three the authors take a closer look at inter-firm knowledge creation at the local level, within the framework of geographical agglomerations or spatial clusters of similar and related economic activities.

2. Knowledge creation within and across firms

  • A main argument in the contemporary literature on learning and innovation is that these are the result of interactive processes in which different actors come together to collaborate in solving particular problems.
  • Learning within firms can take place in many different ways (Simon 1991) but is often closely related to the ongoing activities extending the existing internal knowledge pool (Fuchs 2001, Tracey, Clark and Lawton Smith 2002).
  • But as knowledge is in itself an important source for further knowledge creation small initial individual differences increase over time even when sharing common experiences.
  • As the firm matures its knowledge stock will, consequentially, grow in an uneven fashion and gradually become less coherent.
  • Furthermore, each field of competence usually requires some sort of dedicated vision and targeted effort, somewhat different from the demands of all other fields of the firm’s knowledge base (Loasby 2000).

Cluster dimensions

  • The horizontal dimension of a cluster consists of those firms that produce similar goods and compete with one another.
  • Rather, the respective firms benefit from their co-location through which they are well informed about the characteristics of their competitors’ products and about the quality and cost of the production factors that they use.
  • Once a specialised industry cluster has been established, the firms of this cluster develop a demand for specialised services and supplies.
  • 16 Karaska’s (1969) classical study of input-output linkages in the Philadelphia manufacturing sector revealed that only a relatively small percentage of material linkages took place within the region.

Localised capabilities

  • A location within an industrial cluster brings further advantages that are not available to firms situated elsewhere.
  • In fact, the diffusion of buzz within a cluster can go smoothly but it can also be somewhat blocked depending on the structure of social relations between the local actors and firms and the history of interactions between them (Bathelt and Glückler 2002).
  • This occurs in negotiations with local suppliers, in phone calls during office hours, while talking to neighbours in the garden or when having lunch with other employees and so on.
  • This is particularly the case in the context of a cluster which has a rich history of social interaction and offers opportunities for multiplex relationships, face-toface contacts and meetings.

4. Knowledge creation across clusters: the nature of pipelines

  • While a large number of studies in economic geography and related social sciences have emphasised the importance of local networking (e.g. Scott 1988, Saxenian 1994, Maillat et al.
  • Empirical work on regional linkage patterns has provided evidence that even in regions, such as the San Francisco Bay area and Baden-Württemberg which are often portrayed as prototypes of regional networking, internal transactions are by no means dominant over external relations (Oakey, Rothwell and Cooper 1988; Grotz and Braun 1993).
  • Not surprisingly, an increasing number of studies have begun to question the seemingly dominant character of local learning processes (Malecki and Oinas 1999, Bathelt 2001, Gertler 2001a, Vatne 2001).
  • And further, “it seems evident that the creation of new knowledge might be best viewed as a result of a ‘combination’ of close and distant interactions” (p. 365).

The need for pipelines

  • Owen-Smith and Powell (2002) use the term ‘pipeline’ to refer to the channel used in such distant interactions.
  • According to the work of Bresnahan et al. (2001), the openness of cluster relations and active search for large external markets is therefore key in understanding the rise of successful clusters.
  • He refers to these network relations as ‘plumbing’ through which information and resources are being transmitted.
  • Thus, it can be hypothesised that both local buzz and global pipelines offer particular, albeit different, advantages for firms engaged in innovation and knowledge creation.
  • Of course weak ties are very important in the local buzz which characterises the communication flows between the actors of a cluster.

The limitations to pipeline formation

  • Tapping into an external pool of knowledge and establishing new relations with distant firms requires conscious efforts.
  • This is not easy because information about the set of potential partners is usually truncated and the knowledge of these firms and their important when making decisions about which outside technologies and markets to tap into and which external partners to select for pipeline investments.
  • In contrast with the information flows in global pipelines, the local buzz spreads information of both the successes and failures of other actors and their projects.
  • Gertler (2001b) points out that systematic influences of institutions, especially between different national environments, prevent the diffusion of universal operational standards or a single ‘best practice’.
  • Alternatively, firms can also scan their environment through a mobilisation of ‘weak ties’ (Granovetter 1973) or use regular conventions and trade-fairs to establish contact with potential partners which they have known through former such events.

Absorptive capacity

  • Identifying the value and location of external knowledge and building pipelines to access that knowledge is, however, only part of the challenge when attempting to boost a firm’s innovative capability.
  • A firm’s ‘absorptive capacity’ (Cohen and Levinthal 1990) depends not only on its direct interface with its local environment and on the number and extent of its pipelines, but also on the way whereby information can be transferred across and within departments and sub-units which may be removed from the point where the pipelines enter into the firm.
  • Yet if too different from the present mental representations, genuinely new knowledge may easily be ignored or treated as something unique and therefore not taken seriously enough (Durham 1991, 1992).
  • The distribution of expertise also affects how knowledge, which arrives through the pipelines and is dispatched by the local gatekeepers, will be understood and handled by the individuals who receive it in the various departments and sub-units of the firm.

Main propositions of the model

  • The basic argument should be obvious: the existence of local buzz of high quality and relevance leads to a more dynamic cluster.
  • The authors hypothesis therefore is that the more developed the pipelines between the cluster and distant sites of knowledge, the higher the quality (and value) of local buzz benefiting all firms in the local cluster.
  • The third argument highlights the intrinsic trade-off between a too much inward-looking and a too much outward-looking organisational structure.
  • In the latter case the external information can be understood and translated by the gate-keepers, but the internal communication gaps may prevent it from reaching the units where it could be transformed into commercially useful knowledge.
  • If the buzz is sufficiently intense some such derelict knowledge may come into productive usage anyhow through highly informal channels of communication using unconventional interpretative schemes.

Countervailing forces and limitations

  • One problem with the set of propositions made above is that they do not include any notion of an upper limit to the benefits of spatial clustering.
  • Information overload is believed to induce psychological, physical and social problems which show up in a lack of direction, absence of a common interpretative framework, paralysis of analytical capacity, on-going search for more information, increased anxiety and poor decision-making (Buchanan and Kock 2001).
  • The information-rich actors are also paralysed simply due to their inability to create order and attach meaning to the buzz around them.
  • Information overload would, thus, normally not be a major problem in the context of local buzz.

Policy implications

  • The authors final comments are directed towards the policy implications of the line of argument developed in this paper.
  • Policy ambitions and initiatives to build, support and develop spatial clusters of similar and related economic activity have been abundant in recent years, in the OECD world and beyond.
  • The local buzz is certainly dependent on particular local institutional preconditions but the important point is that it largely takes care of itself.
  • Of course, the authors do not suggest that cluster firms should be exclusively outward-oriented as this would reduce internal cohesiveness within the cluster and ultimately threaten its existence.
  • Perhaps it would be wiser for policy actors to consider the possibilities of stimulating pipeline development rather than to make extensive efforts in generating and promoting local buzz through various forms of social engineering.

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TSpace Research Repository tspace.library.utoronto.ca
Clusters and Knowledge:
Local buzz, Global Pipelines and the Process
of Knowledge Creation
Harald Bathelt, Anders Malmberg & Peter Maskell
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Citation
(published version)
Bathelt, H., Malmberg, A., & Maskell, P. (2004). Clusters and
knowledge: Local buzz, global pipelines and the process of knowledge
creation. Progress in Human Geography, 28(1), 31-56.
Copyright / License
Publisher’s Statement The version of record [Bathelt, H., Malmberg, A., & Maskell, P. (2004).
Clusters and knowledge: Local buzz, global pipelines and the process of
knowledge creation. Progress in Human Geography, 28(1), 31-56.] is
available online at:
http://phg.sagepub.com/content/28/1/31
[doi: 10.1191/0309132504ph469oa]
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April 24, 2003
Accepted for publication in Progress in Human Geography
Clusters and knowledge:
Local buzz, global pipelines and the process
of knowledge creation
Harald Bathelt, Anders Malmberg & Peter Maskell
Harald Bathelt, Professor, Ph.D.,
Faculty of Geography, Philipps-University of Marburg,
Deutschhausstraße 10, D-35032 Marburg, Germany,
Phone +49 6421 28 24211, Fax + 49 6421 28 28950,
E-mail: bathelt@staff.uni-marburg.de
Anders Malmberg, Professor, Ph.D.,
Department of Social and Economic Geography,
and Centre for Research on Innovation and Industrial Dynamics (CIND),
Uppsala University,
P.O. Box 513, S-751 20 Uppsala, Sweden,
Phone +46 18 471 25 34, Fax +46 18 471 74 18,
E-mail: anders.malmberg@kultgeog.uu.se
Peter Maskell, Professor, Dr.Merc.,
Danish Research Unit for Industrial Dynamics (DRUID), Department of Industrial Economics and
Strategy (IVS), Copenhagen Business School (CBS),
Howitzvej 60, DK-2000 Frederiksberg, Denmark,
Phone: +45 3815 2881, Fax: +45 3929 2226,
E-mail: pm.ivs@cbs.dk
Keywords: knowledge creation, clusters, buzz, pipelines, absorptive capacity
JEL-codes: D83, L22, R10
2
ABSTRACT
The paper is concerned with spatial clustering of economic activity and its relation to
the spatiality of knowledge creation in interactive learning processes. It questions the
view that tacit knowledge transfer is confined to local milieus whereas codified
knowledge may roam the globe almost frictionless. The paper highlights the conditions
under which both tacit and codified knowledge can be exchanged locally and globally.
A distinction is made between, on the one hand, the learning processes taking place
among actors embedded in a community by just being there - dubbed buzz - and, on the
other, the knowledge attained by investing in building channels of communication -
called pipelines - to selected providers located outside the local milieu. It is argued that
the co-existence of high levels of buzz and many pipelines may provide firms located in
outward looking and lively clusters with a string of particular advantages not available
to outsiders. Finally, some policy implications, stemming from this argument, are
identified.
3
1. Introduction
The riddle we are dealing with in this paper is concerned with spatial clustering of
economic activity and its relation to the spatiality of knowledge creation. A condensed
version of a knowledge-based theory of spatial clustering, to which the present authors
have contributed in various papers in recent years,
1
goes as follows. Innovation,
knowledge creation and learning are all best understood if seen as the result of
interactive processes where actors possessing different types of knowledge and
competencies come together and exchange information with the aim to solve some –
technical, organisational, commercial or intellectual – problems. Such exchange and
interaction can be organised in different ways. The main argument regarding the spatial
aspects of this has been that – on the one hand – the more codified the knowledge
involved, the less space-sensitive should these processes tend to be. If – on the other
hand – the knowledge involved is diffuse and tacit, the argument is that such interaction
and exchange is dependent on spatial proximity between the actors involved. Only by
being in the same local environment, and by meeting repeatedly in person, can and will
such more subtle forms of information be exchanged. This has been proposed as the
main mechanism that makes it beneficial for a firm to be located in a spatial cluster,
surrounded by other similar and related firms.
This paper grows out of a certain dissatisfaction with the above line of reasoning (see,
also, Gertler 2001a), as it does not explain why interactions and transactions between
firms within a cluster are often fairly limited. The aim of the following, therefore, is to
develop a crude but still somewhat more sophisticated line of argument that breaks out
of the simple “tacit = local”-vs.-“codified = global” model, by highlighting the
conditions under which both tacit and codified knowledge can be exchanged locally and
globally.
2
1
Cf. Malmberg and Maskell (1997, 2002), Maskell et al. (1998), Maskell and Malmberg (1999a, 1999b),
Maskell (2001), Bathelt (2001, 2002), Bathelt and Glückler (2002), Bathelt and Taylor (2002).
2
We are aware that tacit and codified knowledge are certainly not independent categories of knowledge (e.g.
Nonaka and Takeuchi 1995, Maskell and Malmberg 1999a). In contrast, they are interdependent,
complementary and dialectically interwoven. For our argument, however, it suffices to start with a simple
tacit-vs.-codified knowledge dichotomy and its problematic local-global implications in order to move on to a
more developed argument tackling the complex interdependencies of internal and external cluster relations
and their respective information and communication ecologies.
4
Codified and tacit knowledge, local and global
Codified knowledge may travel the world with gradually less friction thanks to relaxed
trade regimes, emerging markets for intellectual property rights and improvements in
information and communication technologies. Such reductions in the friction of space
have sometimes led to the assumption that knowledge, once codified, is almost instantly
available to all firms at zero costs regardless of their location.
3
However, in reality there
are usually substantial costs associated with identifying, assessing, assimilating and
applying codified knowledge already in existence and use. Attaining knowledge
existing elsewhere requires decisions and investments and both contribute in making the
possession valuable.
4
Even in cases where codified knowledge is actually almost
omnipresent it may become valuable only if fused with less transitory knowledge
whether proprietary or embedded in a local environment in tacit forms (Maskell et al.
1998, Asheim 1999).
One of the main distinguishing features of spatial clusters of similar and related
economic activity is that they provide opportunities for the transmission of sticky, non-
articulated, tacit forms of knowledge between firms located there.
5
However, when this
locally embedded knowledge is combined in novel ways with codified and accessible
external knowledge new value can be created. It is the quest for superior rents that
compel firms in clusters not to rely on internal or local assets only, but to pursue
systematically and sometimes vigorously potentially useful knowledge pools residing
elsewhere (Scott 1998, Maillat 1998).
3
This is, for instance, the case in recent theories of increasing returns and endogenous growth and is spilling
over into the models developed within the branch of economics which is sometimes referred to as ‘new
economic geography’ or geographical economics (Fujita, Krugman and Venables 1999).
4
If neither decisions nor investments were needed codified knowledge would indeed become a ubiquity and,
as realized since Weber (1909) published his seminal work, would be without much value as no superior rents
can be earned on ubiquities.
5
There may be several, mutually reinforcing, reasons for the ease with which knowledge is communicated at
the local level. Lawson and Lorenz (1999) emphasise, for instance, how actors in a cluster develop a common
language, joint interpretative contexts and a shared knowledge basis. Grabher (2002b) demonstrates how co-
location facilitates the establishment of common interpretative schemes, especially through ‘hanging out’ in
local ‘communities of practice’ (Brown and Duguid 1991, Wenger 1998). Such features have, furthermore,
been proposed as a general explanation for the existence of clusters as well as for their sustained economic
success (Malmberg and Maskell 1997).
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Abstract: Torre A. and Rallet A. (2005) Proximity and localization, Regional Studies39, 47- 59. The objective of this paper is to pave the way for an analysis of the relations between proximity and localization of activities and people, two notions that are often mistaken for one another. Our method consists in exploiting the semantic wealth of the notion of proximity. We distinguish two types of proximity (geographical and organized) and propose a grid of analysis of the main models of geographic organization of activities by articulating both types of proximity. We then introduce the phenomenon of tension between geographical and organized proximity in order to discuss problems that are often underestimated in spatial economy. First, organized proximity offers powerful mechanisms of long-distance coordination that constitute the foundation of the increasing geographical development of socio-economic interactions. The confusion between information interactions and knowledge exchange, and the constraint of being lo...

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Cites background from "Clusters and knowledge: local buzz,..."

  • ...Second, for each of these mechanisms one can analyse whether geographically close or more distant relationships are driving knowledge creation and spillovers (Rallet and Torre, 1999; Malmberg and Maskell, 2002; Bathelt et al., 2004)....

    [...]

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"Clusters and knowledge: local buzz,..." refers background in this paper

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01 Nov 1998-Harvard Business Review
Michael E. Porter
Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations

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01 Aug 1993-Quarterly Journal of Economics
Adam B. Jaffe, Manuel Trajtenberg, Rebecca Henderson
Frequently Asked Questions (1)
Q1. What are the contributions mentioned in the paper "Clusters and knowledge: local buzz, global pipelines and the process of knowledge creation" ?

In this paper, the authors focus on the relationship between spatial clustering of economic activity and its relation to the spatiality of knowledge creation.