Regional Clusters in a Global World: Production Relocation, Innovation, and Industrial Decline

by Poul Andersen

Fall 2006

Volume 49
Issue 1

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In the wake of globalization, still more regional clusters are globally outsourcing (purchasing components that were originally manufactured internally) or offshoring (globally relocating manufacturing while maintaining ownership control). Policy makers and business strategists alike are searching for theoretical frameworks to understand the underlying dynamics of this global reshuffling of production activities and how this will affect innovation and competitiveness. This article examines production relocation from a regional perspective. It shows that the impact of globalization on regional clusters depends on the modularity and digitalization of the regional production activities, which affect stickiness and coordination costs.

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