An innovation ecosystem could be described as encompassing economic actors within the research and commercial economy, that are linked together to allow innovative discovery, located in geographical proximity with one another (Jackson, 2015). One would think that this proximity would generate diseconomies, such as competition leading to higher land prices. However, there is significant evidence that these ecosystems exist and continue to thrive. Therefore, there must be advantages that offset these costs. Alfred Marshall, the Cambridge economists for whom the current economics library receives its name, said that this is due to agglomeration economies, or external economies of scale. The three mechanisms for this are: knowledge spillovers, labour pooling and input sharing, which are said to attract firms to cluster in the same geographic area (McCann, 2013). The idea that we are concerned with here is knowledge spillovers.
Marshall described the process of knowledge spillovers as;
‘The mysteries of the trade become no mysteries; but as if it were in the air. Good work is appreciated; inventions and improvements in machinery, in processes and the general organisation of the business have their merits promptly discussed, if one man starts a new idea it is taken up by others and combined with suggestions of their own; and thus it becomes the source of new ideas’ (Marshall, 1890).
In this regard, if many firms in the same industry are collocated, it implies that the employees of any one particular firm have relatively easy access to employees from other local firms (McCann, 2013). This allows for regular face to face contact to establish trust and connections that facilitate the transfer of tacit knowledge, which, it is argued, such exchange and interaction depends on spatial proximity This can then lead to the creation of ‘buzz’, which consists of: specific information which is continuously updated, intended and unanticipated learning, the creation of mutual understanding of new knowledge and technologies, as well as shared cultural traditions and habits which stimulate the establishment of conventions and other institutional arrangements for knowledge creation. This information is then automatically received by those who locate in this ecosystem and participate in the social and economic spheres (Bathelt, et al., 2004). Therefore, in markets that are characterised by rapidly changing information, clustering thus affords these firms an information advantage relative to all others (McCann, 2013).
Although ‘buzz’ is not always generated, as it depends on the structure of social relations, most policy attempts focus on establishing these internal links. The advantages to this are clear, however pipelines to the outside world are also critical to a successful innovative ecosystem. If they are too inward looking then they can develop a problem of overembeddedness and institutional lock-in. This means that the degree of openness is crucial to allow for external innovation and growth impulses (Bathelt, 2005). These pipelines can be costly to establish as the interactions depends a lot on trust, which must be built in a conscious and systematic way (Bathelt, et al., 2004). One way in which this could be facilitated is using temporary clusters that bring together a wide variety of actors and firms for a given period (Maskell, et al., 2006). This is a place where formal and informal relations can be sought out or developed through opportunities for face to face interaction between firms and individuals with similar or related interests, that would have otherwise not been located together. This helps to establish initial links that can blossom into fully grown pipelines, by reducing the potential search costs through creating an environment within a common language and governance mechanisms. These interactions can then be mutually reinforcing with local ‘buzz’. The more firms that engage in building these pipelines, the more information about markets and technologies are brought into the internal network, creating more dynamic ‘buzz’. Therefore, supporting an ecosystems cohesion and strengthening the internal translation process between actors (Bathelt, 2005). Hence, policy should focus on helping firms to establish these links, rather than solely being concerned with internal connections, otherwise they risk losing the competitive advantage of the ecosystem.
Bathelt, H., 2005. Geogrpahies of production: growth regimes in spatial perspective (II) - knowledge creation and growth in clusters. Progress in Human Geography, 29(2), pp. 204-216.
Bathelt, H., Malmberg, A. & Maskell, P., 2004. Clusters and Knowledge: local buzz, global pipelines and the process of knowledge creation. Progress in Human Geography, 28(1), pp. 31-56.
Jackson, D., 2015. What is an Innovation Ecosystem. Arlington, National Science Foundation.
Mackinnon, D. & Cumbers, A., 2011. Introduction to economic geogrpahy: globalization, uneven development and place. Edinbrugh: Pearson education limited.
Marshall, A., 1890. Industial organisation continued. In: Principles of Economics. London: Macmillan.
Maskell, P., Bathelt, H. & Malmberg, A., 2006. Building global knowledge pipelines: the role of temporary clusters. European PLanning Studies, 14(8), pp. 997-1013.
McCann, P., 2013. Modern Urban and Regional Economics. 2nd ed. Oxford: Oxford University Press.