Clusters’ Impact on Firm Performance in the Growth and Sustainment Stages of the Cluster Lifecycle

This paper examines the mechanisms driving firm performance throughout a cluster’s lifecycle, focusing on later stages of that cycle (growth and sustainment). We look at two alternative mechanisms driving firm performance at these later stages, once agglomeration has been established: agglomeration economies and organizational heritage. The setting for this research is a vertically disintegrated industry composed of networked small firms where scale economies are not prevalent and tacit knowledge is important. Results show that both mechanisms have significant effects on performance. However, effects associated with heritage through spinoffs seem to have a stronger impact, supporting a stronger durability of heritage effects in the growth and sustainment stages of the cluster lifecycle. Results also point to the importance of spinoffs from related industries (in the same value chain).