Beyond the Knowledge-Based Theory of the Geographic Cluster

The knowledge-based theory of the geographic cluster represents a major attempt to re-conceptualize clusters, in essence arguing that the localization of firms in similar and related industries stimulates learning and innovation, giving a competitive advantage to clustered firms. This paper critically examines the knowledge-based theory the cluster, arguing that it has greatly overstated the advantages of co-location to firms and misidentified the mechanisms through which learning occurs in clusters. In particular, the theory is criticized on three points: the flexible, under-specified way that it defines its object of study; the focus on firms as an explanatory variable instead of more fundamental processes of resource accumulation; and the functionalist mode of theory that employs as an explanation. Ways to address of each of these issues are discussed. In a final section I suggest that the rather static notions of learning put forward in the knowledge-based theory of the cluster be replaced by a developmental theory of regional dynamics that focuses on both learning and structural transformation.