Recent Research: A Response to the Morrison Paper on Leading Firms

Editor's Note: Last week's issue of the Digest included a Recent Research item, Are Leading Firms Team Players? that drew an animated reaction from a reader whose opinion SSTI holds in great respect because of his contributions to improving the understanding and delivery of technology-based economic development initiatives. As a result, Dr. Jerry Paytas, director of the Carnegie Mellon University Center for Economic Development, accepted our request to prepare an alternative review of Andrea Morrison's "Gatekeepers of Knowledge" within Industrial Districts: Who They Are, How They Interact. He is joined in this response by Dr. Donald F. Smith Jr., university director of economic development for Carnegie Mellon University and the University of Pittsburgh.

SSTI believes this guest article, while rare, is a welcome addition to the Digest. There needs to be greater discourse concerning the practical and policy implications of academic research in the field as well as the validity of conclusions drawn from or within that research -- including our own. The Digest may present the best medium for reaching the broadest population of tech-based economic development practitioners so we embrace this opportunity.

A Review of Morrison, Andrea.  2004. "Gatekeepers of Knowledge" within Industrial Districts: Who They Are, How They Interact. Working Paper 163.  Centro di Ricerca sui Processi di Innovazione e Internazionalizzazione (CESPRI).

by Jerry Paytas, Ph.D., and Donald Smith, Ph.D.

Morrison's (2004) analysis is an important contribution to our understanding of the limits and dynamics of clusters and the role of leading firms in the dissemination of knowledge. As Markusen (1996) demonstrated, there is more than one kind of cluster and the different dynamics of cluster types can determine the impact of a cluster on regional growth. More simply, all clusters are not created equal. The analysis of the sofa triangle focused on the two leading firms in the Murgia Industrial District, a cluster with a total of 121 firms and less than 6,000 employees. The study concluded that the leading firms are not effective transmitters of knowledge, particularly the tacit kind that is a key component of cluster development. The analysis does show, however, that these firms act as nodes in less important information networks.

The researcher concludes that caution is required in attracting leading firms to anchor a cluster. There are two fallacies in this conclusion. The first is the assumption that the "transmission of technical know-how" is the only reason for recruiting a leading firm, when in reality there are a variety of reasons. For example, leading firms can act as magnets for talent and for other firms. Tacit knowledge may be transmitted when employees leave these leading firms - a mechanism for transmission that was not captured by the study's methodology. Leading firms can also be generators of spin-out companies that not only transmit knowledge but grow the cluster, as in the case of Fairchild Semiconductors in Silicon Valley and Hybritech in San Diego.

The second and most critical fallacy is that there is nothing to suggest that these results can be generalized to other regions or industry clusters. The sofa triangle is an established, but not very large cluster. It may be that characteristics of this specific cluster or the furniture industry influence the transmission of knowledge. The analysis also demonstrated differences in the knowledge networks of the individual leading firms. The employees and departments at Calia appear to play a more central role in the knowledge network than their counterparts at Natuzzi. This suggests reason for caution when recruiting a leading firm as not all "leaders" provide the same benefits.

Morrison (2004, 30) provides an appropriate caution in her conclusion that "public interventions supporting individual leaders, intended as engines of growth for local systems, should be implemented cautiously." In fact, there are many reasons for caution when implementing an attraction strategy, not the least of which are the balance of costs and benefits.

SSTI's summary of the study may have overstated the evidence provided in the study, which does not suggest that attracting leading firms won't work for any cluster in any region.

"Gatekeepers of Knowledge" within Industrial Districts: Who They Are, How They Interact is available at: http://www.cespri.it/papers/WP163Morrison.pdf.

Reference:

Markusen A. (1996), 'Sticky places in slippery space: a typology of industrial districts', Economic Geography, pp.293-313.