On Technological Specialization in Industrial Clusters

Abstract

In this chapter an agent-based industry simulation model is employed to analyze the relationship between technological specialization, cluster formation, and profitability in an industry where demand is characterized by love-for-variety preferences. The main focus is on the firms’ decisions concerning the position of their products in the technology landscape. Different types of strategies are compared with respect to induced technological specialization of the industry and average industry profits. Furthermore, the role of technological spillovers in a cluster as a technological coordination device is highlighted, and it is shown that due to competition effects, such technological coordination negatively affects the profits of cluster firms.