1 Regional cluster adoption: The role of transaction costs, resource characteristics, and technology Grant Castner University of Oregon Peter Green University of Queensland OASIS Workshop December 2004

2 Overview BackgroundMotivation Research model Research method Results and conclusions

3 Background Clusters are “geographic concentrations of interconnected companies, specialized suppliers, service providers, firms in related industries, and associated institutions (e.g. universities, standards agencies, trade associations) in a particular field that compete but also cooperate” (Porter, 2000, p.16).

4 Example – Study Cairns

5 Background Substantial government agency interest in cluster development. SMEs looking for methods to develop their business. Consulting projects on how to use e- commerce technologies for cluster development are prevalent.

6 Motivation Identify factors relevant to the extent of cluster adoption by organizations. Reconcile factors from transaction cost economics and resource-based view of the firm. Investigate relations amongst innovation diffusion factors. Explore the role of technology in cluster adoption. Improve participation and take-up rates of organizations into clusters.

7 Research model Compatibility Trialability Result demo.Visibility Specificity Frequency Technology Complexity Relative advantageAdoption

8 Research method 12 semi-structured interviews with cluster members from five different clusters. Shorter informal interviews were also conducted to provide further evidence. Shorter informal interviews were also conducted to provide further evidence. Members were from both aborted and current clusters to increase validity. All cluster members had participated in government initiatives to facilitate clusters. Survey data was also collected from a wider range of clusters The survey results are the subject of another paper. The survey results are the subject of another paper.

9 Results – aborted clusters The magnitude of the score indicates the importance of the construct to the adoption decision. The sign of the score indicates the presence (positive) or absence (negative) of a particular construct.

10 Results – current clusters

11 Case study results and conclusions ConstructResult Conclusions CompatibilityPartially supported  Previous experience with successful clusters increases cluster adoption.  Members of aborted clusters do not believe that a lack of compatibility is an important factor in non- adoption, indicating that potential adopters with no previous experience require higher levels of trialability, result demonstrability and/or visibility to overcome this lack of experience. TrialabilityPartially supported  Failure to provide opportunities to trial the cluster substantially reduces cluster adoption.  Trialability is not important for current adopters. Result demonstrability Supported  Failure to properly demonstrate cluster benefits substantially reduces cluster adoption.  Adopters place some importance on result demonstrability.

12 Case study results and conclusions ConstructResult Conclusions VisibilityPartially supported  Failure to see other successful clusters substantially reduces cluster adoption.  Visibility is not important for current adopters. ComplexityNot supported  Complexity is not an important factor in cluster adoption, even if cluster members believe clustering is difficult.  Suspicion bias may affect this conclusion. Relative resource specificity Supported  Specificity is an important factor in determining when a cluster is the appropriate method for controlling the transaction. Clusters allow members to retain some control of the transaction (compared to a pure market transaction).  Clusters should not be limited to narrowly defined industries as it reduces the scope for developing resources of higher specificity. This finding reinforces the Porter’s (1998) conclusions.

13 Case study results and conclusions ConstructResult Conclusions Relative transaction frequency Supported  Clusters that facilitate increases in transaction frequency reduce costs, leading to greater relative advantage and cluster adoption.  Transaction frequency was important to most cluster members because they were often low-risk transactions for the cluster (such as group purchasing of supplies). Information and communication technology (ICT) Supported  is essential for cluster co-ordination.  Most clusters use web pages for communication and marketing.  ICT is important for facilitating cluster transactions but does not substantially affect the relative advantage or adoption of the cluster. Relative advantage Supported  Cluster members require knowledge about the resource value of other cluster members to determine the relative advantage of cluster adoption.  Current successful clusters require at least one resource that is unique (immobile and heterogeneous).