Economic geography and networks: role of local and non-local ties in cluster evolution

Abstract

The organization of geographic clusters plays an increasingly significant role due to the presence of network ties that exist within the location and beyond. This has proven to be particularly true for knowledge-intensive industries, where the organization of resources – people and technology – has been a primary driver for firm and regional performance. With the help of a longitudinal case study of the IT cluster in Bangalore (India), we investigate the effect of local and non-local network ties on its evolution. We argue that local and non-local networks play a clear role in cluster evolution. We propose a U-shaped relationship between cluster evolution phases and the distance among the network tie members. Our study also outlines the role that embedding, expansion, and extension of ties plays in transitioning cluster from one phase to the other. The consideration of non-local ties is rather nascent in the cluster literature and promises to enhance the understanding of how clusters develop at both levels - policy as well as firm.