Does a cluster promote innovation and productivity in its firms?

Abstract

Objective: The fierce competition in a globalized market forces firms to adopt innovative strategies to obtain a competitive advantage over their competitors. However, innovating is a difficult task to accomplish in isolation. One way to mitigate this isolation is to separate organizations into sectoral clusters, facilitating the search for innovation and productivity. From this perspective, this research aims to compare the relationship between innovation performance (IP) and the productivity of Brazilian firms, considering whether they are inserted into clusters or not, and analyze their implemented internal and external research and development (R&D) strategies. Originality/value: This article expands the literature’s understanding of open innovation, testing the complementary role of internal and external R&D for the implementation of innovation in firms using a relevant contextual condition: their presence or absence in a cluster. The study helps to enhance the understanding of several mechanisms by which the cluster helps to promote innovation and productivity. Design/methodology/approach: To test the hypotheses, the study used multigroup structural equation modeling in a sample of 5,581 companies, with 1,878 cluster participants and 3,703 non-participants. Findings: The results support a positive impact of both external and internal R&D on IP and support the notion that IP, regardless of whether or not the firm is part of a cluster, positively impacts its productivity. The external and internal R&D, in turn, proved to be complementary only for companies inside a cluster.