The literature on clusters and cluster building has been rapidly growing both in academic and policy-making circles. Central to this interest and body of work has been the assumption that location in clusters helps firms to exchange, acquire and generate new knowledge. Since knowledge is increasingly believed to be the basis of firm competitiveness clustered firms and industries will outperform others. This paper sets out to examine the evidence for propositions regarding the knowledge-enhancing qualities of clusters by reviewing the literature with the expressed intention of examining whether such claims in fact rest upon rigorous and verifiable empirical findings. In order to do this we extract from the theoretical literature on clusters three hypothetical arguments for the knowledge creating and competitiveness generating power of clusters: knowledge in clusters is created through various forms of local inter-organizational collaborative interaction; knowledge in clusters is created through increased competition and intensified rivalry; knowledge in clusters is created through spillover following from the local mobility and sociability of individuals. The paper goes on to assess and evaluate the number and rigour of empirical cases supporting these types of argument.
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