The Economies and Diseconomies of Industrial Clustering: Multinational Enterprises versus Uninational Enterprises

Abstract

This study's objective is to compare cluster economies and diseconomies for multinational enterprises (MNEs) and uninational enterprises (UNEs) within the London financial services cluster. In contrast to the implicit assumption of the cluster participation literature that the economies and diseconomies of clusters are valued similarly by all firms, we find that economies relating to social capital and labour market pooling are equally important to MNEs and UNEs, economies relating to local competition and diseconomies relating to congestion costs are more important to MNEs than to UNEs, and economies relating to the reputational effects of locating in a world-leading cluster and access to specialised suppliers are more important to UNEs than to MNEs. That MNEs and UNEs do not experience cluster economies and diseconomies in the same way indicates that both cluster participation theory and international business theory need augmentation to recognise that cluster incumbents benefit and suffer from cluster membership differently.

The Influence of Resources on Competitive Advantage through Clustering in Printing Companies in JABODETABEK

“…Cluster economies and cluster diseconomies companies experience different experiences depending on how the economy or diseconomy increases its resource strengths, reduces resource weaknesses, or is overcome by resource strengths. In addition, the ability to take advantage of available cluster externalities also differs (Pandit et al, 2018).…”

Innovation Clusters Revisited: On Dimensions of Agglomeration, Institution, and Built-Environment

“…Knowledge spillovers from competing co-located firms, public research infrastructure, and suppliers and customers [43]. Spillover mechanisms include employment turnover, spin-offs, as well as both formal and informal interactions [11,44]. Spatial proximity is important to the transfer of tacit knowledge which is best acquired experientially (face-to-face) [45].…”

“…This "untraded interdependencies" [49] partly overlap with the institutional perspective of clusters discussed later in Section 3. In addition, firms in clusters benefit from reputations established by other local firms, which overcomes the information asymmetry regarding firms' quality [44,50].…”

“…Folta et al [34] found that for the performance of U.S. bio-tech firms, marginal benefits to cluster size decline as clusters get large, and then eventually become negative. Excessive co-location and increased competition result in lower output profit, higher input costs (including land/housing, labor, material, and services), unintentional outflow of valuable knowledge, and degradation of environmental quality [34,44,[51][52][53]. Agglomeration diseconomies also occur when a cluster becomes older even without getting larger.…”

“…Firms' different organizational form also accounts for agglomeration asymmetry. As Pandit et al [44] noted, in the London financial service cluster, UNEs (uninational enterprises) benefit more from reputational effects and specialized suppliers, while MNEs (multinational enterprises) are more affected by agglomeration diseconomies. Additinoally, sectoral variations also lead to different clustering effects [58].…”