The Dynamics of Industrial Clustering in Biotechnology

Abstract

This paper is a study of the process by which industrial clusters form. It identifies the forces of attraction to new companies to a cluster in biotechnology in the U.S. as it grows. It uses a model of entry of new firms into the industry to measure the degree of attraction to those new firms of the presence of an existing cluster at a particular location.1 The paper finds that the main agent of attraction to new firms to enter the biotechnology industry is the presence of a strong science base at that location. This provides a greater magnet than the strength of any particular sector of the industry. In terms of attraction between different sectors within the industry, the paper finds that there is positive attraction and feedback between a group of sectors in the biotechnology industry - namely the therapeutics, diagnostics and the equipment/research tools sector. However in other sectors of the industry - chemicals, food and to some extent agriculture - there is much less attraction and interaction between them. This implies that clusters of firms tend to develop only in particular sectors of the industry and positive feedback mechanisms do not extend to other parts of the industry.