Why do firms locate across multiple clusters? cluster density, capabilities and ethnic ties

Abstract

It is well-accepted that firms locate in clusters to benefit from spillover effects from similar firms in the location. However, some firms choose to locate in multiple clusters. In this paper, we focus on the phenomenon of multi-cluster presence. Through an empirical investigation of 95 firms from the information technology enabled service industry within India, we analyze the drivers of membership across multiple clusters. Our findings indicate first that firms that are located in lower density clusters show a tendency to locate in a larger number of clusters. Second, firms that are looking for people-based creative capabilities also tend to locate in a larger number of clusters. Finally, the firms that are not founded at the location of ethnic origin of the founder CEO also tend to locate in a larger number of clusters.