A striking contradiction of the internet revolution is that, although cyberspace allows firms to be located anywhere, they still seem to cluster together in global cities such as New York, London and Sydney (Castells, 2001). Four years after publishing a book proclaiming The Death of Distance, Frances Cairncross noted in the book's second edition that, ‘Economists, most of whom have long ignored or despised economic geography, are now taking a fresh interest in it’ and, after reviewing the social significance of proximity, she suggests that, ‘In these ways, distance is far from dead’ (Cairncross, 2001, p. 203). Distance, it seems, can be dead and alive at the same time!
In the case of ‘hot clusters’, such as California's iconic Silicon Valley, the advantages of participating in local communities of practice have helped to sustain the area's global significance: suppliers, knowledge workers and knowledgeable customers have been attracted by a robust reputation for innovation and new business opportunities. The benefits of being physically located within Silicon Valley are perceived to be worth the costs of relocation. However, the extent to which Silicon Valley can be used as a policy model, for establishing self-sustaining entrepreneurial networks in other areas, is controversial (Martin and Sunley, 2003; Newlands, 2003; Benneworth and Henry, 2004). For example, it is difficult to be clear about the difference between factors that helped Silicon Valley to become a successful cluster in the first place (‘getting going’) and those that help to sustain its success (‘success building on success’). Imitating the latter might not be a substitute for generating the former. Also, it is not always easy to see where the cluster stops and the rest of the world starts: apparently local activity might be connected to much more significant events elsewhere. Nevertheless, high-profile commentators such as Michael Porter (2000) have argued that the cluster model can be used to shape policy. Porter has acted as an adviser to the Organization for Economic Cooperation and Development (OECD), the World Bank and a number of national governments. According to Martin and Sunley (2003, p. 6), clusters have become a worldwide fad: a form of academic and policy fashion item.
Clusters typically fall into three broad groups. First are highly competitive, traditional, labour-intensive industries, which are highly concentrated, such as Italy's textiles and clothing industry. Second are high-technology industries that often cluster around new activities, such as biotechnology in San Francisco, semi-conductors in Silicon Valley, scientific instruments in Cambridge (UK) and musical instruments in Hamamatsu (Japan). Third, services, notably financial and business services – such as advertising, films, fashion design, and research and development activities – concentrate in a few big global cities, such as Los Angeles, Tokyo, London, Paris, Sydney and Shanghai. Globalisation increases the competitiveness of these local economies by attracting international firms, thereby strengthening the cluster. Innovation may be encouraged through greater interactions between firms, suppliers, users, production support facilities, educational and other local resources.
Today's extended access to transport and communication technologies allows even the smallest of high-tech start-up firms to grow in concert with overseas partners. Certainly, an important dimension to the movement of expertise emanating from clusters lies in so-called ‘brain circulation’ as knowledge workers move from one international centre of expertise to another. Such people include research scientists, new professional engineers, public relations executives, investment bankers, lawyers, real estate developers and creative accountants; management, financial, tax, energy, armaments, agricultural and architectural consultants; management information and organisation development specialists; strategic planners, corporate head-hunters and systems analysts, as well as advertising executives, marketing strategists, art directors, architects, cinematographers, film editors, production designers, publishers, writers and editors, journalists, musicians, television and film producers, and even a few global university professors (Reich, 1991). Transnational entrepreneurs, who spend significant time in different countries, form an important but often overlooked part of the globalisation process: they have experienced different contexts in the manner of insiders – although the degree of ‘insiderness’ might vary considerably, ranging from living a sheltered life in specially contracted complexes for expatriate workers, to becoming fully integrated members of local society.
As recently as the 1970s, only the largest companies had the resources necessary to grow internationally (Saxenian, 2002). Yet, start-ups in Silicon Valley and other hot clusters are often globally connected from the outset. By 1998, one-third of the engineers and scientists in Silicon Valley's technology workforce were born outside the USA, mostly to Asian parents – prompting the quip that ‘IC’ refers not only to integrated circuits, but to Indian and Chinese engineers (Saxenian, 1998). What was once a brain drain, from Asia to the West, appears to become more akin to a brain circulation as immigrant engineers variously return home to Taiwan, China and, more recently, India, to exploit transglobal communication links to collaborate with their domestically based contemporaries (Bresnahan et al., 2001; Saxenian, 2002).