This Just In: Washington Post: Cluster Theory Irrelevant in 21st Century

July 19, 2011

Emily-Wamsteker-Bloomberg

 A recent column in the Washington Post reported on a Norwegian study that asserts that industry clusters are irrelevant in the 21st century. The “cluster theory”—in which governments build technology parks near research universities, offer incentives and rejoice as collaboration spurs innovation and growth—was the holy grail of regional economic planning two decades ago (think Silicon Valley). Now, in the digital era, the trend has lost momentum.

According to the study, the key drivers of innovation now are “the communication channels that local entrepreneurs maintain to the outside world and their open-mindedness toward foreign cultures…and new ideas.” Indeed, companies that rely on regional ties are four times less likely to innovate than those with global networks.

The implications? While physical infrastructure remains important for connecting supply to demand, it’s a firm’s digital connectivity that is crucial. So what can communities do to spur growth? Rather than “obsess over clusters, we need to start obsessing over people,” writes columnist Vivek Wadhwa. He argues that planners should “remove the obstacles to entre­pre­neur­ship — such as knowledge of how to start companies, fear of failure, lack of mentors and networks, government regulations and financing.”

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