This document discusses value creation in clustered firms from a resource-oriented perspective. It focuses on locational resources and the role of lateral cluster actors like cluster managers. The presentation analyzes how shared locational resources can be fostered. It provides a framework for systematically mapping clusters based on their strategic resources. Cluster managers can use this resource profiling to identify valuable resources, assess their potential to generate advantages, and find ways to sustain and upgrade resources over time.

1. Towards a better understanding of value creation in
clustered firms
Susanne Royer & John Burgess
Academic Summit: Clusters as entrepreneurial ecosystems
4 September 2013

2. Towards a better understanding of
value creation in clustered firms
A resource-oriented perspective with
the focus on locational resources and
the role of lateral cluster actors
Susanne Royer (University of Flensburg, Germany) &
John Burgess (Curtin University, Australia)

3. 16th TCI Annual Global Conference
Kolding/Denmark - September 2013
Susanne Royer & John Burgess
Purpose & Agenda
Agenda for today’s presentation
1. A resource-oriented cluster conceptualisation
2. Valuable resources on the locational level
3. Implications for cluster managers
 main objective: investigate how shared locational cluster resources may
be fostered by lateral actors
 strategic firm perspective brought together with cluster management
activities
 rationale behind our conceptualisation of locational resources: enable
cluster managers to reduce complexity of analysing location factors by
providing a resource-oriented mapping tool that also identifies criteria to
assess the value of resources for cluster firms and shows avenues for
sustaining and upgrading them

4. 16th TCI Annual Global Conference
Kolding/Denmark - September 2013
Susanne Royer & John Burgess
Resources on different cluster levels
• Critical resources are often embedded in clusters (Enright 1999)
• Resource-oriented cluster literature investigates the impact of resources on
different cluster levels, on cluster performance respectively the performance
of single players in a cluster (e.g., Brown et al. 2010a, Festing et al.
2012, Hervas-Oliver/Albors-Garrigos 2007, Steffen 2012, Tallman et al. 2004)
• Examples for critical, strategically relevant resources in clusters:
 informal networks which are especially relevant and valuable for
company founders (Dahl/Pedersen 2003)
 pool of qualified human resources (Hervas-Oliver/Albors-Garrigos 2007)
 particular knowledge and adherent mechanisms to exchange this
knowledge among cluster actors while at the same time protecting it
against imitation by others (Tallman et al. 2004)

5. 16th TCI Annual Global Conference
Kolding/Denmark - September 2013
Susanne Royer & John Burgess
Locational resources and value adding webs (VAWs)
• when investigating valuable and less valuable location factors in different
clusters we use a resource-oriented perspective
• relevant unit of analysis: locational resources of a certain cluster [we are
interested in their value as shared resources for the cluster members]
• we define locational resources in terms of Wernerfelt’s (1984: 172)
definition of firm resources as »anything which could be thought of as a
strength or weakness« of a given location, i.e. focus on valuable resources
embedded in certain locations and accessible for cluster firms
Our definition: Clusters are VAWs in terms of a »series of
linkages between single firms in a certain surrounding.
Understanding clusters as value adding webs takes the
connectivity of individual firms on different levels in a
cluster into account. Value is added by horizontal, vertical
and lateral actors« (Brown et al. 2008: 159). Source: Festing et al. 2010: 150.

6. 16th TCI Annual Global Conference
Kolding/Denmark - September 2013
Susanne Royer & John Burgess
Cluster managers as key lateral actors
 building on a resource-oriented
understanding of value creation in
clusters we investigate contextual
resources in overlapping VAWs
 focus: regional context of a cluster
(=location and the embedded
resources )
 main objective: investigate how shared locational resources in clusters can be
fostered by lateral actors
 cluster managers as typical lateral cluster actors are suggested to profit when
they get access to a better understanding of valuable shared locational cluster
resources which in the next step then are to be sustained and/or upgraded

7. 16th TCI Annual Global Conference
Kolding/Denmark - September 2013
Susanne Royer & John Burgess
Clusters and public policy
• »organic« (bottom-up) vs. »developed« (top-down) cluster initiatives
• ~2000 statistically relevant clusters in EU (almost 40% of EU jobs in clusters)
Cluster development
 core measure of public policy in the recent decade (Martin/Sunley 2003, Newlands
2003, Jayachandran et al. 2010)
 central element of public policy in many countries to create jobs and wealth in certain
regions (European Commission 2008, Pitelis 2012 )
 more neo liberal market approach in countries such as Australia where cluster
development is left to market (privately funded, bottom up development processes) or
where lateral actors support cluster development at a very localised level; i.e., without
an over arching national cluster policy or program (Grimstad/Burgess 2013)
How can value creation of clustered firms be mapped and systematised?
What are the advantages for a single firm to be located in a cluster? Which
ideas for cluster managements (often paid for by public policy) can be
derived? How to identify valuable resources? How to upgrade and leverage
existing resources in a cluster to increase the value creation potential for
the participants?

8. 16th TCI Annual Global Conference
Kolding/Denmark - September 2013
Susanne Royer & John Burgess
Identifying and enhancing locational resources
Upgrading the
human resources
pool
Expanding the
cluster
Improving the
business
environment
Mandatory Certain (vocational)
training programmes for
particular professions may
be compulsory
Setting a legal framework
that facilitates
entrepreneurial activities
Monitoring and reporting
about the cluster
development may guide
public funding
Incentive A frequently used activity
by cluster managers is to
offer events and trainings
to which cluster members
have access
Frequently direct
financing and/or the
provision of facilities
takes place
Developing the image/
reputation of a certain
region in joint efforts by
horizontal and lateral
actors
Voluntary Sometimes lateral actors
provide practical
assistance and advice
Lateral actors such as
universities may offer
entrepreneurship
education and support
entrepreneurs
Networking events may
be organised by lateral
actors
Selected Objectives
SelectedPolicyInstruments
Source: Activities and objectives adapted from European Commission 2007: 18; Policy instruments adapted from Hood
1983 as put in the context of cluster public policies by Brown et al. 2010a and b.

9. 16th TCI Annual Global Conference
Kolding/Denmark - September 2013
Susanne Royer & John Burgess
Cluster managers and locational resources
Clusters…
build on spatial proximity to develop networks of (in)formal information exchange and
serve as a focus to support specialists and key knowledge agents (Mitchell et al. 2010)
often have cluster managers who may act as brokers with regard to the joint use or
exchange of resources with the main task of managing resources embedded in social
relations and structures (Gretzinger/Royer 2013 & there cited literature) - this function
is important in not only identifying cluster resources, but in consolidating them and
providing points of access, especially for new and small firms (Collins et al. 2013)
Locational resources may…
be structured into regional, competitive and institutional resources (Brown et al. 2010)
be assessed on the basis of the isolating mechanisms from the traditional resource-
based view of the firm (Barney 1991, Collis/Montgomery 2005)
lead to contextual rents (instead of Ricardian rents)
Cluster managers…
after identifying locational resources may assess their potential to generate advantages
for the cluster actors,
can evaluate the possibilities to keep such resources exclusively in the cluster by
investigating the isolating mechanisms (i.e., physical uniqueness, path
dependency, causal ambiguity, economic deterrence) at work

10. Systematisation of
contextual resources
Value?
Does a resource enable
cluster actors to exploit
external opportunities
or neutralise external
threats?
Rare?
Is a resource currently
controlled by only a
small number of
competing locations?
Assessment if
resources have
potential to generate
locational
advantage:
Regional resources:
Type of area
Natural resources (e.g., minerals or
a particular climate)
Others
+/-/~ +/- √/(√)
Industry-related resources:
Rivalry between horizontal cluster
actors
Entry barriers to the cluster
Bargaining power of vertical cluster
actors (suppliers & buyers)
Bargaining power of external
suppliers and buyers
Threat of substitutes
+/-/~ +/- √/(√)
Institutional resources:
Social specificities
Cultural specificities
Legal specificities
+/-/~ +/- √/(√)
10+ YES; - NO; ~ neutral; √: further investigation (√): no further investigation of resources
Source: Brown et al. 2010a: 28 (VRIO elements adapted from Barney and Hesterly, 2010: 70 and 84).

11. 16th TCI Annual Global Conference
Kolding/Denmark - September 2013
Susanne Royer & John Burgess
Locational resources in the Glashütte watch cluster
• Glashütte since 1845 established a unique and path-dependent close relation to
watch making and became a branded location for craft-oriented mechanical watches
• implicit experiential knowledge makes up a large portion of the relevant knowledge
for making mechanical watches (causal ambiguity)
• limited market size does defer potential competitors from becoming actual
competitors (mechanical watch making as a niche market)
Active coordination of locational resources can be crucial:
 e.g., locational brand Glashütte is protected by the so-called lex Glashütte
(prohibiting using the name when not at least 50% of value creation happens in
Glashütte) which has been established and is enforced
 identified valuable locational resources of a particular cluster can be assessed by the
shown criteria leading to a resource profile which shows the value creation potential
of the resources (ideal profile) as well as the actual use of resources (real profile) and
thus reflects the current cluster position as well as the possible future position and
makes avenues to follow more obvious
 resource profile leads to founded pragmatic implications

12. 16th TCI Annual Global Conference
Kolding/Denmark - September 2013
Susanne Royer & John Burgess
Locational resources profile in the Glashütte watch cluster
 Limited access to specific land-use areas (regional resource)
 High bargaining power of suppliers since only few suppliers are able to provide the
needed inputs in the required quality and quantity (industry-specific resource)
 Lex Glashütte protected by the trademark protection act (institutional resources)
Source: translated and adapted from Festing et al. 2012: 268.
Type of
Resource
Critical resources on
the cluster and
locational level
Ideal profile
(value creation potential of
resources)
low medium high
Real profile
(actual use of resources)
low medium high
Location-
specific
resources in
the cluster
•Support programs
•Lex Glashütte
•Buildings and land
•Labor pool
•Entry barriers
•Suppliers in Glashüttte
•Cluster-related
distribution channels

13. 16th TCI Annual Global Conference
Kolding/Denmark - September 2013
Susanne Royer & John Burgess
Pragmatic Implications
Analytical focus on competitive advantage generation of participating
firms makes systematic mapping of clusters possible.
Cluster managers get knowledge how they can sustain and improve the
resource profile.
 Resource development: Sustain and upgrade locational resources in regional
context!
 Let actors learn from each other: Identify local knowledge and foster
regional knowledge exchange!
 Help actors to find balance: Understand local shared resources better to
help firms to find there position between competition and cooperation!

14. 16th TCI Annual Global Conference
Kolding/Denmark - September 2013
Susanne Royer & John Burgess
Concluding summary
 VAW conceptualisation facilitates systematic cluster mapping on the basis of
strategic resources on different levels; we focused on locational resources
 compilation of findings of our previous conceptual and case study research to
illustrate the analytical framework we have developed and highlight
competitive advantages offered to single (and new) firms from cluster
participation
 locational resources and their contribution to value creation and possibilities
of lateral actors to sustain and upgrade such resources are relevant topics in a
world where clusters are a dominant public policy in many countries
 cluster management and development as important factors in sustaining a
cluster and in facilitating the development of new businesses within clusters:
requires not only knowledge of the cluster context and its resources, but a
framework for resource sharing and access.
essential role of information brokers to span gaps between different cluster actors
and provide (in)formal points of access to existing and new cluster participants

15. 16th TCI Annual Global Conference
Kolding/Denmark - September 2013
Susanne Royer & John Burgess
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16. Towards a better understanding of
value creation in clustered firms
A resource-oriented perspective with
the focus on locational resources and
the role of lateral cluster actors
Susanne Royer (University of Flensburg, Germany) &
John Burgess (Curtin University, Australia)