Social network analysis: Do cluster development programs help firms to expand their innovative collaboration?

Marina Rybalka
Statistics Norway

Rolf Røtnes
Economics Norway

Abstract
Innovation takes place in interaction between people, organisations and businesses. Individual companies can, however, hardly keep track of, hold or deal with all relevant knowledge and are consequently dependnt on interaction with other companies and research institutions. Information and knowledge spill-overs can give clustered firms a better production function than isolated producers (Krugman 1991). Thus, countries seek to strengthen or replicate the success factors that have encouraged the concentration of innovative firms associated with the knowledge economy. A clear rationale for public support of clusters concerns the transaction costs and coordination costs of bringing the appropriate actors together (OECD 2007).

Cluster development programs have become a part of many governments’ economic policy strategies in the recent decades. They are intended to facilitate knowledge spill-overs between firms and research and education institutions and include a variety of activities justified by theories of how innovation takes place in interaction between different operators. Modern cluster policies aim to put in place a favourable business ecosystem for innovation and entrepreneurship in which new winners can emerge, thereby supporting the development of emerging industries (European Comission 2015).

Since the early 2000s, Norway has had a strategy to strengthen industry clusters through a national cluster program. The Arena program was launched in 2002, since when it has supported nearly 70 cluster projects. Norwegian Centres of Expertise (NCE) was launched in 2006 to further strengthen interaction in the Norwegian innovation system. NCE has supported 15 projects. In 2014, Arena and NCE were merged into one program: the Norwegian Innovation Clusters program (NIC). At the same time, Global Centres of Expertise (GCE) was initiated as a third level. GCE supports three cluster projects today.

Though the cluster policy is well supported by the theory, its evaluation is still necessary to justify the use of the financial resources that are constrained. The comprehensive literature on the policy evaluation provides an overview of the reasons to undertake evaluation and a basic methodological understanding (see e.g. Georghiou and Roessner, 2000; Hansen, 2005). However, in addition to the challenges that are common for policy evaluation process (such as the definition of a control group, the identification and measurement of effects and side effects, and the calculation of overall program costs), evaluation of cluster policy programs faces their specific challenges. These are due to the hybrid character of cluster policy which combines elements of various policy areas, the multidimensional, systemic concept of clusters and the last but not the least the data availability (cf. Schmiedeberg, 2010).

Norwegian Innovation Clusters program, as well as similar cluster programs internationally, has a clear objective to enhance collaboration activities. In this paper we use a unique dataset on Norwegian firms’ formalized research collaboration and analyse whether participation in a cluster project has had an impact on the participating firms’ innovative collaboration networks. Since our available data comprises detailed information about firms and research institutions that are engaged in different R&D projects, we are able to construct an R&D collaboration network for each cluster firm by counting direct links between them and other R&D project collaborators. We also construct cluster networks, i.e. the links between all firms and research institutions participating in the given cluster. Then we compare R&D collaboration networks for the cluster firms 3 years before and 3 years after their enrolment in a cluster. We also construct the networks of the potential collaborators for the future cluster members comprising all indirect connections through their collaborators before they become a cluster member.

The results are striking. Even controlling for the potential collaborators, we find that participation in a cluster program has had a positive impact on the firms’ innovative collaboration networks. That yields both the establishing of new collaborative interactions and collaborative intensity for the existing interactions. The results vary dependent on the types of the nodes (firms or research institutes) and on the cluster program level (regional or national). The collaboration between cluster firms in the same cluster has doubled through the programs at the regional level, while similar collaboration has more than doubled through the projects at the national level. We also find a significant increase in collaboration between cluster firms and R&D institutions in the same cluster.

Based on the obtained results, the main conclusion is that Norwegian Innovation Cluster program contributes to more innovation-oriented collaboration among firms and between firms and R&D institutions. There is further reason to assume that this collaboration contributes to greater innovation than would otherwise have been the case, although this conclusion requires a separate analysis.