92 Int. J. Globalisation and Small Business, Vol. 4, No.

1, 2010

Research note: clusters vs. networks – a

literature-based approach towards an
integrated concept

Alexander Bode*,
Tobias B. Talmon l’Armée and
Simon Alig
Darmstadt University of Technology,
Hochschulstraße 1,
Darmstadt 64289, Germany
Fax: +49 6151 166503
E-mail: bode@bwl.tu-darmstadt.de
E-mail: talmon@bwl.tu-darmstadt.de
E-mail: alig@bwl.tu-darmstadt.de
*Corresponding author

Abstract: The cluster concept has steadily increased its importance during the
past years – both from practitioners’ and researchers’ point of view.
Simultaneously, many corporate networks are established. Researchers from
different areas (business management, economics social and geographical
science) are trying to explain both phenomena. As a result of different
disciplines’ varying research objects, many definitions of clusters exist.
Furthermore, the terms cluster and network are often not clearly distinguished.
Some authors even merge the terms. Based on a profound literature review, this
paper structures the manifold definitions, differentiating between clusters and
networks and gives first practical insights on how to integrate the two concepts.

Keywords: cluster; network; cooperation; organisation; cluster-management;

Porter; Porter diamond; social network; value chain; industrial district; cluster-
initiative; social relationship.

Reference to this paper should be made as follows: Bode, A.,

Talmon l’Armée, T.B. and Alig, S. (2010) ‘Research note: clusters vs.
networks – a literature-based approach towards an integrated concept’, Int. J.
Globalisation and Small Business, Vol. 4, No. 1, pp.92–110.

Biographical notes: Alexander Bode is a Lecturer for Management Studies at

Darmstadt University of Technology (Germany). He is also Director of
Hessenmetall Cluster-Initiative at the Chair of Cluster and Value Chain
Management. He studied industrial engineering and focused on international
strategic management and mechanical engineering. Afterwards, he spent three
years as Lecturer at DHL-Chair of Global Supply Chain Management at the
Chinese German School for Postgraduate Studies at Tongji University
Shanghai (China). He received his PhD from Darmstadt University of
Technology. His research interests are in the fields of international
management, clusters and network management.

Copyright © 2010 Inderscience Enterprises Ltd.

 Research note: clusters vs. networks 93

Tobias B. Talmon l’Armée studied Business Administration with Electrical

Engineering at Darmstadt University of Technology (Germany). After three
years as Management Consultant, he joined the Chair of Management and
Logistics at Darmstadt University of Technology (Germany) as Research
Assistant and Doctoral Candidate. Additionally, he gains practical experience
as Cluster-Manager of the Hessenmetall Automotive-Cluster. His research
interests are in the area of clusters and networks and international management.

Simon Alig is a Research Assistant and Doctoral Candidate at the Chair of

Management and Logistics at Darmstadt University of Technology (Germany).
Moreover, he is Manager of the Hessenmetall Plastics-Cluster. He studied
Business Administration with Electrical Engineering at Darmstadt University
of Technology (Germany), EC Lyon (France) and Tongji University Shanghai
(China). His research interests are in the fields of innovation management,
networks/cooperations and clusters.

1 Clusters and networks: concepts for increasing competitiveness of

companies and regions?

The concept and terminology of clusters have strongly increased its importance within
the business economy, catalysed by the publications of Michael Porter. Porter defines an
industry cluster as geographical concentration of companies from related industries, and
institutions such as research centres and trade associations (cf. Porter, 1998, p.78). These
enterprises and institutions compete against each other, while collaborating
simultaneously in specific areas. Porter uses the term ‘coopetition’ for describing this
fact.
In recent years, clusters have expanded into business practice, particularly pushed
through public funding, resulting in a strong dissemination of the cluster terminology and
concept. For example, in the cluster of excellence competition (‘Spitzencluster-
Wettbewerb’) of the Federal Republic of Germany, a comprehensive logistics cluster has
been established. The logistics initiative in Hamburg is targeting to strengthen the
logistics capabilities within the area whilst providing comprehensive services to its
members. It is an agglomeration of more than 500 enterprises, research institutes and the
Hamburg government, which are cooperating to strengthen the region. In another
approach, the government of the Federal State of Hesse is funding efforts to develop a
cluster concept: the House of Logistics and Mobility in the Rhine-Main area. This
approach is more complex, far beyond a pure logistics cluster as it targets to bundle the
topics logistics, mobility and transportation under one roof, next to the Frankfurt Rhine-
Main airport. These examples show that there are many different designs for clusters and
a broad variety of approaches for implementation.
The understanding of the cluster concept depends on the public perception strongly
on the organisations, respectively people involved and their objectives. Additionally,
there are very different views regarding benefits which can actually be generated through
cluster activities (cf. Steinle and Schiele, 2002, p.850 et seq.). Very often cluster-
initiatives can only be kept alive through public funding, and the individual companies
involved in those clusters gain only limited benefits for themselves. Naturally, if the
participating companies do not see a perceivable benefit, they are hesitant, respectively
unwilling to finance the initiative. This, however, should be the mid- to long-term target
94 A. Bode, T.B. Talmon l’Armée and S. Alig

of each cluster-initiative (cf. Pfohl et al., 2010, p.87 et seq.) as the public funding is
restricted to a certain period of time.
In parallel to the emerging cluster concept, industries have more or less strongly
developed strategic networks, focusing on gaining competitive advantage (cf. Heusler,
2004, p.66 et seq.). They are characterised by complex, mutual, rather cooperative than
competitive and stable relations between their member companies (cf. Sydow, 1992,
p.315). A corporate network consists of a limited number of legally and financially
independent enterprises. Contrary to the cluster concept, the concentration on a specific
region is not a prerequisite for strategic networks. The existing relations between the
enterprises of a network are usually regulated on a contractual basis. Furthermore, an
organisational structure exists in terms of individuals involved (cf. Sydow, 1992, p.79
et seq.).
Practitioners as well as researchers often dilute the cluster and the network concept.
As a result of this inhomogeneity, there are huge differences in performance among
existing clusters and networks. The imprecise definition of cluster makes an
unsatisfactory starting point for any scientific knowledge progress. Some authors
complained about problems regarding the comparability of theoretical as well as
empirical conclusions, due to diverse terms of clusters (cf. Martin and Sunley, 2003,
p.29). Evidently, a standardised scientific dispute regarding the cluster phenomenon is
problematic if many aspects of different mode of action are consolidated, irrelevant of the
clusters’ diversity in reality (cf. Martin and Sunley, 2003, p.15). Martin and Sunley, e.g.
state that “[The cluster concept] is being applied so widely that its explanation of
causality and determination becomes overly stretched, thin and fractured” (Martin and
Sunley, 2003, pp.28–29). This in particular applies to the empirical findings: “The
empirical case for clustering […] repeatedly makes the mistake of jumping from
particular associations to general causality and applicability” (Martin and Sunley, 2003,
p.29). Therefore, it is necessary to develop a definition and typology (classification) of
clusters by means of constituent characteristics. As clusters and networks are used for
similar phenomena, it is reasonable to discuss the relationship between clusters and
networks to achieve a distinction between both and to derive a classification.
It is this paper’s target to classify the often similar concepts which are commonly
known as ‘cluster’ or ‘network’ and to develop a concept which integrates the different
approaches. To do so, this paper first discusses the different cluster and network concepts
based on a literature review. A broad understanding of the different concepts is necessary
and will be provided in Sections 2 and 3. In Section 4, similarities and differences of the
two concepts will be discussed. Based on this discussion and the initial results of a
research project, we develop the so-called ‘cluster with network characteristics’. This
integrates the most promising parts of clusters and networks into one concept with the
aim to provide a competitive advantage to the member companies. In Section 5, we
examine the practical relevance of our model with an explorative case study. The findings
help us to provide implications for policy makers, cluster-managers and enterprises.

2 Definitions of cluster

First and foremost, special attention needs to be put on the definition of a cluster, simply
because of its numerous and diverse directions of influence. According to Moulaert and
Sekia (2003, p.289), the concept cluster is characterised in the literature by a ‘conceptual
 Research note: clusters vs. networks 95

elasticity’, which so far has prevented the development of a ‘consistent cluster theory’
(cf. Alecke and Untiedt, 2005, pp.4–5; Maskell and Lorenzen, 2004, p.1002; Tichy, 2001,
p.184). The phenomenon cluster varies in every individual research disciplines (above all,
we have to mention the economic geography, the regional economics, the social sciences,
the political sciences and the economic sciences), depending on their own individual
research’s perspective. This leads to different definitions and explanations. Thus in
research literature, there is an opinion that a generally accepted definition of the cluster
term cannot exist (cf. Alecke and Untiedt, 2005, pp.4–5; Jacobs and De Man, 1996,
p.425; Wolfe and Gertler, 2004, p.1089).
Table 1 gives an overview regarding the different theoretical foundations for the
research object cluster, which are used in the different disciplines to explain the cluster
phenomenon. The theories and theoretical concepts which are applied in the different
disciplines express the different aims and models, which are used in the specific
disciplines. Theories in political and social science try to explain which governance
structures are optimal. From the perspective of regional economists and economic
geographers, the unit of analysis is the specific region which should profit from the
installation of a cluster. In business theory, those theoretical foundations are used to help
analysing the company or the network itself with respect to a competitive advantage.
Thus every discipline uses those theories which are to explain its specific research
objective. As all three disciplines have different aims, the used concepts are different and
therefore manifold cluster concepts expressed by different names – exist: Industrial
Districts, New Industrial Districts, Innovative Milieux, Regional Innovation Systems,
Learning Regions, Hot Spots or local Networks (cf. Brenner, 2000, p.18). Therefore, the
cluster concept can be seen as an eclectic theory formation, in which many different
(partial) approaches are connected (cf. Pantazis, 2006, p.38).
The emergence of cluster research dates back to the beginning of the 20th century,
initiated by Marshall – who examined the regional concentration of specialised industries,
identifying them as the ‘Industrial Districts’ (cf. Marshall, 1920, pp.240–242; Porter,
1999, p.217) – and Hotelling – a professor at the Stanford University, who used the term
cluster for an investigation for stability of competition (cf. Hotelling, 1929, p.56). Since
then, many research disciplines studied this and similar phenomena of regional
agglomerations (an explanation and an overview of the scientific historical connections
of the concepts are, e.g. Moulaert and Sekia (2003, pp.289–302), Thomi and Sternberg
(2008, pp.73–78) and Rocha (2004, p.368 et seq.), and delivered partly complementary
and partly contradictory concepts and explanations (cf. Gordon and McCann, 2000,
p.515).
Table 1 Explanation approach for the cluster phenomenon according to research discipline

Regional economics, economic

Social/political sciences geography sciences Business science
Network theory Agglomeration economics Evolutionary economics
Embeddedness approach Polarisation theory (sectional/regional) New institutional economics
Social capital Endogenous regional development New growth theory
Governance Geographical economics Knowledge-, innovation- and
learning-economics
Source: Extracted with minor alterations from Schramm-Klein (2005, p.536).
96 A. Bode, T.B. Talmon l’Armée and S. Alig

With the publication of the book The Competitive Advantage of Nations, Porter (1990)
significantly coined the terminology Cluster. He laid the foundation for ongoing interest
in the phenomenon cluster in business and political science until today (cf. Hofe and
Chen, 2006, p.3; Pantazis, 2006, p.1). Porter defines cluster as geographical
concentration of companies, specialised suppliers, service providers, companies in related
industries and institutions, such as universities, associations, research institutes or
standardisation institutions, all of them connected to one another in specific fields, whilst
simultaneously competing and cooperating (cf. Porter, 1998, p.197). Here, Porter uses the
cluster concept in line with his survey regarding the (trade-specific) competitive edge of
different nations (cf. Porter, 1990, pp.131–175). He analytically inferred – supported by
empirical research – that the competitive edge of a company is significantly influenced
by regional agglomerations and networking (cf. Elbert et al., 2008, p.3). He describes the
determinants of competitiveness with the so-called Porter Diamond, also known as
Porter’s Competitive Diamond (cf. Martin and Sunley, 2003, p.8). It exists of six
correlating factors: demand conditions, related and supporting industries, organisational
strategy, structure and rivalry, government and chance (see Figure 1). The more
developed and intensive the connections between the factors, the higher are
the productivity and competitiveness of the specific company. Porter argues, that the
interaction between the six factors intensifies, when firms are concentrated in clusters (cf.
Porter, 1990, p.131). Therefore, the Competitive Diamond became popular and known as
a tool for describing competitive advantages of clusters. Noticeable is the emphasis of the
positive effects of intense competition between companies upon the positive development
of their competitive edge, which is then transferred on the competitiveness of the
observed region. The weakness of the diamond is that it is very generic and does not
contain tangible facts for identifying clusters and determining the benefits of clusters.
However, it is quite suitable to structure the mechanism and processes coming to effect in
a cluster; thus we can use the diamond in our study in line with this paper’s aim.

Figure 1 The Porter diamond

Source: Porter (1990, p.127).

 Research note: clusters vs. networks 97

Besides Porter, several other researchers adapted the cluster definition for their specific
needs. Rosenfeld, however, highlights in his definition the possible synergies as a result
of geographical proximity: “A ‘cluster’ is very simply used to represent concentrations of
firms that are able to produce synergy because of their geographic proximity and
interdependence, even though their scale of employment may not by pronounced or
prominent” (cf. Rosenfeld, 1997, p.4).
Generally, Sydow and Möllering stress the benefits for companies and regions. They
define cluster as a regional agglomeration of companies with a mostly branch-oriented
focus that are economically advantageous for both the region and the individual
businesses (cf. Sydow and Möllering, 2004, p.265).
Hausberg et al. focus on the aspect of innovation and define clusters as empirically
verifiable concentration of players in a specific innovation environment (cf. Hausberg
et al., 2008, p.12). Van den Berg et al., however, base their definition of cluster on value
networking. Thus they define cluster as local networking groups of specialised
organisations which are interconnected via close-knit manufacturing processes based on
the exchange of goods, services and expertise, respectively (cf. Gupta and Subramanian,
2008, p.375; Park and Markusen, 1995, p.81 et seq.; Pietrobelli and Barrera, 2002, p.72 et
seq.; Van den Berg et al., 2001, p.187). A group of experts designated by the EU
Commission for the EU Project, ‘Enterprise Networks and Clusters’ (the EU project
should examine the ability of clusters to stabilise the productivity, the innovation power
and the competitive ability particularly of small- and medium-sized enterprises (cf.
European Commission, 2002, pp.9–10)), summarises in their final report in 2002:
“Clusters are a nebulous concept. It covers a variety of business structures and is used for
different purposes. Therefore, there are numerous different definitions but almost all of
them share the idea of proximity, networking and specialization” (cf. European
Commission, 2002, p.9).
With regard to the above-mentioned different definitions for clusters, it is fair to say
that there is no standardised definition for the cluster concept in literature. Presumably,
the reasons for the various definitions and explanations for the term cluster can be found
not only in the different research perspectives, which were addressed in the beginning of
this section, but also in the diverseness of the case studies in real life. It was demonstrated
that aside from the geographical concentration, numerous other characteristics can be
used to identify a cluster. These are evident in different clusters with dissimilar meaning
and expression and yet still define the cluster (cf. Jacobs and De Man, 1996, p.425).
Hence one can talk of a cluster-profile, which is to describe the specific characteristics of
each individual cluster. Therefore, there is one cluster focusing on the degree of
competition, or another cluster characterised by their close-knit value generating network
from small companies. Another form of a cluster is mainly found in research intense
dynamic industries, such as biotech. These firms benefit from thorough interactions with
scientific institutions (universities, research labs). Yet there are other clusters focusing on
the establishment of cooperative network relationships between companies to take
advantage of possible synergies.
Most definitions are kept very general. This makes them applicable to a wide range of
problems and in a way prevents precise criticism. However, this ‘advantage’ is the
greatest weakness of the cluster concept – including Porter’s diamond – that it still is very
general. Consequently, people use the term cluster not very precisely, leading to an
unclear understanding of the phenomenon (cf. Martin and Sunley, 2003, p.10 et seq.).
Martin and Sunley (2003, p.15 et seq.) point out that the assumption that regions compete
98 A. Bode, T.B. Talmon l’Armée and S. Alig

in similar ways than companies do is questionable. According to them, the basis of

Porter’s model may be questioned. The cluster concept is very diffuse as there are no
concrete figures about company density or type and intenseness of inter-company
connections that constitute a cluster, i.e. the whole cluster concept is described in a very
abstract manner. It is almost impossible to identify a regional cluster by hard facts. This
makes it difficult to investigate and compare clusters in a research project.

3 Terminology of networks

Many cluster definitions highlight the importance of networking between all cluster
players. According to Beckord, a cluster is a relationship system which includes the
production system (with vertical and horizontal linkages), as well as a lateral, an
institutional and an external cluster dimension (see Figure 2) (cf. Beckord, 2007, p.99).
Obviously, some researchers see a linkage between clusters and networks.
In this section, the definition of network will be examined more closely, given the
mentioned importance of networks for the understanding of cluster and the referencing of
networks in cluster literature. The term network is subjected for many scientific debates,
similar to the numerous debates regarding the definition of cluster (cf. Windeler, 2003,
p.35).

Figure 2 Cluster as ‘relationship system’

External Cluster-dimension
Integration of external impulses, pipelines Legend

Institutional Cluster-dimension Steps of value

Norms, values, control system chain
Lateral Cluster-dimension
Corporate service provider, financial service provider, network organizations

Production system
Local / regional
Marketing / companies
Distribution

(inter)national
companies

Production /
service creation
Vertical linkage
(supplier relation)

Horizontal linkage
(cooperation/
Preparation for network)
production / product
development
External vertical
link
((inter)national)
External
horizontal link
((inter)national)

Source: Extracted with marginal alterations from Beckord (2007, p.99).

 Research note: clusters vs. networks 99

3.1 Definition of (social) network

According to Mitchell, a social network is best defined by “a specific set of linkages
among a defined set of actors, with the additional property that the characteristics of these
linkages as a whole may be used to interpret the social behaviour of the actors involved”
(Mitchell, 1969, p.2).
Therefore, a network is a special structure of interaction between a group of players
(the protagonists can be a human or in the event of inter-organisational network
organisations with institutional senses, as well companies (cf. Windeler, 2003, p.36)),
which can be described best by the characteristics of their relations. Thus the
characteristic features determine the nature and form of the network (cf. Welge and
Al-Laham, 2008, p.678). The interactions between the parties involved can be roughly
categorised by content (e.g. products and services, information, emotions), form (e.g.
duration and closeness of the relationships) and intensity (e.g. frequency of interaction)
(cf. Sydow, 1992, p.78). Apparently, the network research pursues a relational
perspective (cf. Windeler, 2003, p.36).

3.2 Corporate networks based on value chain relationships

Based on Sydow’s definition mentioned previously, one can define a social network in
the form of a (inter-organisational) corporate network. An organisational structure of
economic activities, targeted to achieve the competitive edge, which is characterised by
complex reciprocal, rather cooperative than competitive and relatively stable
relationships between legally independent but economically interdependent enterprises
(cf. Sydow, 1992, p.79).
According to the transaction cost approach (cf. Williamson, 1990), the organisational
structure of the corporate network is an arranged, hybrid form of coordination for
economic exchange relations on the continuum between market and hierarchy (cf.
Sydow, 1992, p.78 et seq., 2006, p.393). Contrary to market cooperation, the corporate
networks are identified through cooperative rather than competitive practices. This way,
they can differentiate the market induced flexibility and commitment of the players
towards the hierarchical coordination within an organisation (cf. Siebert, 2001, p.10).
Miles and Snow (1986, p.432 et seq.) consider the corporate networks primarily as a
cooperational design based on value chain relationships and describe them as an inter-
organisational cooperation.
Sydow indicates that the specific design of the different networks significantly
differs, depending on their purpose and reason. By listing the diverse characteristics of
the individual networks, Sydow (2006, p.393 et seq.) tries to develop a typology. An
excerpt is listed in Table 2.
Sydow uses features like the control shape (hierarchically–heterarchically) as well as
the temporal stability (stable–dynamic) as the basis of typology of corporate networks
(see Figure 3).
100 A. Bode, T.B. Talmon l’Armée and S. Alig

Table 2 Approach on inter-organisational network typology

Network types Determination through resp. synonyms

Industrial–service network
Strategic–regional network
Local–global networks
Vertical–horizontal networks
Steady–dynamic networks
Hierarchical–heterarchical networks
Centred–decentred networks
Formal–informal networks
Open–closed networks
Social–economic networks
Proposed–emergent network
Primary–secondary network
Source: Sydow (2006, p.394).
Sector membership of the most network
corporations
Type of leadership and additional attributes
A real expansion of the network
Position of the companies in the value-added chain
Membership stability resp. stability of network
relations
Controlling according to the type of leadership
Degree of polycentricity
Formality resp. visibility of the network
Possibility to entering resp. exiting the network
Primary objective of the network membership
Type of emergence
Relevance based on the focal enterprise’s view

Figure 3 Typology of company networks

Source: With marginal changes extracted from Sydow (2006, p.396).

This typology differentiates between four types of networks: strategic networks, regional
networks, project networks and virtual enterprise (cf. Sydow, 2006, pp.395–399).
A strategic network is led by one or more focal companies strategically (for criticism
of Sydows term description of ‘strategic network’ (see Windeler, 2003, pp.45–50)).
Relatively stable vertical value chain relationships between the networking partners
characterise this type of network. Focal companies, however so-called ‘hub-firms’ (cf.
Sydow, 1992, p.81), are generally large enterprises focusing on the consumer. The
coordination of such networks is formally stipulated. The relationship structure is based
on hierarchical distribution of power differences instead of trust-based cooperative
agreements (cf. Windeler, 2003, pp.43–44). One typical example is the automotive
industry with the subcontracting networks guided by the automobile manufacturers. This
 Research note: clusters vs. networks 101

industry structure can be best described as pyramidal network. The leading automakers
coordinate the network in terms of their target markets, technologies and suppliers,
transferring some coordination tasks to their system suppliers. They, then, in turn
organise their subcontracting network into suppliers for components and parts.
Regional networks comprised most smaller and mid-sized companies are
characterised by regional agglomerations, the so-called clusters (cf. Sydow, 2006, p.397).
The regional cooperation is motivated by the desire for strengthening innovation and the
achievement of economies of scale. Contrary to the strategic networks, the regional
networks are not focally hierarchical, but polycentric hierarchical organised, and are
identified because they mainly focus on emergent strategy. This is also called the
collective strategy (cf. Bresser, 1989, pp.545–546), because the company-wide business
processes must meet on equal footing. Sydow (1992, p.47 et seq.) mentions the so-called
Third Italy (a region in middle north Italy), in particular in the Emilia-Romagna as a
place of regional networks, respectively the Silicon Valley and Baden-Württemberg
(Germany). He points out that the regional networks are often embedded in a strategically
guided international network. For example, Emilia-Romagna’s production networks also
act as a supplier to the company Benetton.
Project networks are characterised by a limited cooperation of the network players,
demonstrated in the construction, film and TV industry. The network structure can be
formed either hierarchical or heterarchical.
The virtual enterprise represents a company to the outside but it is a project network
only. To accomplish something specific, several companies work together using inter-
organisational information systems. This cooperation is timely limited. Examples,
therefore, can be found mainly in the IT industry, according to Sydow (1992, p.48 et
seq.). Another famous example for this approach is Nike, a leading manufacturer for
sportswear. The production of all goods is handled by subcontractors imbedded into the
virtual production network, whilst the headquarters located in Oregon focuses on
marketing, research and development only (cf. Berndt, 1999, p.122.).
To summarise, we can state that the corporate networks are used as one form of
coordination for the economic exchange of a value-added process between market and
hierarchy; that is why the term value network is used in Section 3.3.

3.3 Corporate networks based on social relationships

Aside from the inter-organisational corporate networks, primarily focusing on value-
network relationships, there is also a more general view, which considers networks to be
some form of cooperation, stressing the necessary trust of long-term social ties. Powell,
e.g. views corporate networks as self-contained organisational structures beyond market
and hierarchy, not concentrating on the aspects of efficiency (cf. Powell, 1990, p.300
et seq.).
In this case, the social networks are incorporated into the personal level of
entrepreneur and manager and aligned with the organisational level – as shown
previously – which is only consistent and important in terms of the trust aspect for these
networks (cf. Bluhm et al., 2003, p.90). Social integration (cf. Granovetter, 1985) is seen
as a vital factor in terms of regional business agglomerations, especially for smaller and
mid-sized companies.
Boos et al. highlighted the following specific characteristics of social networks (cf.
Boos et al., 1992, p.58): a joint thematic orientation or intention, personal attachment,
102 A. Bode, T.B. Talmon l’Armée and S. Alig

voluntary participation as well as the underlying exchange principle. Therewith the

necessity of a balance of exchange ratios and the network members in the form of a
reciprocal exchange connects with each other (cf. Boos et al., 1992, p.59).
The main area of concern of the network approach is the fact that the different
perspectives are very static and do not consider development over time. Moreover, the
network concepts focus on very specific details so that there is no general approach,
considering all necessary influencing factors at one time. From this paper’s perspective,
we come to the conclusion that the concept of value chain relationships is useful as it
might answer the question of which mechanisms in clusters provide a competitive
advantage.

4 Integrated approach: cluster with network characteristics

The overall literature consistently contradicts a correlation of clusters and networks,

respectively their distinction. While some sources strictly distinguish both from each
other, there are other researchers and practitioners that use them synonymously: The
handbook on the first cluster competition of the state of Hesse (Germany) refers to
‘cluster networks’ (cf. Arndt, 2008, p.1). Bessant and Tsekouras introduce cluster as a
regional type of learning network (cf. Bessant and Tsekouras, 2001, p.90). Traudt
suggests that modern networks are generally termed as clusters (cf. Traudt, 2008, p.3).
Whereas, the terms networks and clusters are used synonymously in the final report of
the Fraunhofer Institut, following a research regarding the network strategy of Sachsen
(Germany) (cf. Ossenkopf et al., 2004, p.71). Rosenfeld, on the other hand, clearly
distinguishes between networks and clusters (cf. Rosenfeld, 1997, p.9 et seq.). The
OECD and the EU Commission go along with his classification (cf. European
Commission, 2002a, p.9).
We consider it as necessary to discuss similarities and differences between the two
concepts in order to find an optimal model which integrates the most promising aspects
of both clusters and networks, as obviously both concepts have their strengths. In
Table 3, the differences between networks and clusters are described according to
Rosenfeld (1997). Rosenfeld distinguishes networks and clusters regarding six aspects:
1 purpose
2 openness to environment
3 control principles
4 value generation mechanism
5 competition
6 base of cohesion.
According to Rosenfeld (1997), the main differences are that networks are closed clubs
which are established to share complementary resources with the aim to cooperate in
order to make business together as one firm alone is not capable to handle. While clusters
are open, loose grouping of companies from related fields with similar competencies
which from time-to-time cooperate more intense to foster their common vision.
 Research note: clusters vs. networks 103

Table 3 Comparison of networks and clusters

Networks Clusters
Purpose Networks allow firms access to Clusters attract needed specialised
specialised services at lower costs services to a region
Openness Networks have restricted membership Clusters have open ‘membership’
Control Networks are based on contractual Clusters are based on social values that
agreements foster trust and encourage reciprocity
Value mechanism Networks make it easier for firms Clusters generate demand for more
to engage in complex business firms with similar and related
capabilities
Competition Networks are based on cooperation Clusters take both cooperation and
competition
Cohesion Networks have common business goals Clusters have collective visions
Source: With marginal changes extracted from Rosenfeld (1997, p.9).
The central constituent element of clusters – which is agreed upon – is the geographical
concentration of its players. It is evident in literature that the (competition-) relations
between the players are subject of ongoing discussions. Porter, especially, views the
competition as vital relationship characteristic to define clusters. However, even Porter
admits that although in competition, they still simultaneously join a cooperation in certain
areas; for this purpose, the term ‘coopetition’ is used (cf. Brandenburger/Nalebuff 1996).
Therefore, the relationship between the individual players of clusters can be anything
from competitive (respectively non-competitive) to cooperative.
As shown above, networks are characterised by the relations between the parties,
which are mainly of cooperative nature. The geographical expansion, however, is not a
constitutive characteristic of networks. Production networks, e.g. can span globally while
innovation networks between suppliers and customer can cover a smaller region (cf.
Henderson et al., 2002, p.436 et seq.; Sydow and Möllering, 2004, p.261). Networks may
prove to be an essential element of clusters (cf. Pantazis, 2006, p.27). They, may even,
are the characteristic feature of a cluster. Martin and Sunley (2003, p.16) visualises
the existence of social networks in the cluster as external effect, which can result from the
regional agglomeration of enterprises. Networks do not necessarily need to be an element
of cluster, for they are not a constituent attribute of a cluster. The presence of a cluster
does not necessarily lead to the establishment of a network (cf. Vieregge, 2007, p.235).
These observations lead to two possible parameters for classifying both clusters and
networks, which are illustrated in Figure 4:
1 Geographical expansion: a network can be at any point on the continuum between
global and regional, while a cluster is concentrated in a region.
2 Inter-company relations: while a network is initiated for a close cooperation,
companies within a cluster can cover the total bandwidth between cooperation and
competition.
Figure 4 shows the cluster and network grid with the above-mentioned parameters,
expansion and relation. It helps integrating both concepts: a cluster with intense
cooperation between the member companies (the bottom left box), the so-called cluster
with network characteristics is an approach which uses the most promising aspects of
both concepts. As prerequisite for generating competitive advantage (cf. Dyer and Singh,
1998, p.661 et seq.), the cluster with network characteristics is established among
companies from one industry which have overlapping but complementary assets. The
104 A. Bode, T.B. Talmon l’Armée and S. Alig

regional component facilitates the control, as people from one region see each other again
and they may easily loose their reputation; they will not so easily attracted by ‘free-
riding’. This concept is further explained in the following exploratory case study in
Section 5.

Figure 4 Cluster and network grid

5 Findings: case study on the Hessenmetall cluster-initiative

The following section illustrates how the understanding of the previously introduced
cluster with network characteristics has been developed. Our case study is based on
previous research and practical experience in line with the cluster-management activities
of the Hessenmetall cluster-initiative as well as research activities at the hair for cluster
and value-chain management at Darmstadt University of Technology. The research
project started in 2006. As a research object, we used the metal and electronics industry
in Germany. The case study method has been chosen to be able to make an in-depth study
of the implementation of clusters and their success factors (cf. Eisenhardt, 1989, p.534
et seq.; Yin, 2003, p.9 et seq.). This is necessary as there is no common perspective on an
ideal cluster/network design, as shown in the previous sections.
The core of our research project is an exploratory case study. In the exploratory case
study, we research the case of the initiation and implementation of three regional clusters
in the context of one cluster-initiative. All clusters belong to the metal and electronics
industry in Germany. The case has been studied for three years already. However, the
project is still ongoing. During this time, several supporting research methods, such as
study of documents, in-depth interviews and observations were used. An overview of the
research methods is given in Table 4.
The exploratory case study has been carried out to identify and understand the
mechanisms and processes which lead to a successful and sustainable cluster.
 Research note: clusters vs. networks 105

Table 4 Data collection for the exploratory case

Study of documents 49 documents:

í 27 meeting agendas and minutes
í 19 brochures
í 3 project plans
In-depth interviews 19 interviews with key informants in the project:
í 17 interviews with managing directors/senior executives of
(potential) members from the automotive, aviation and plastics
sector
í interviews with senior managers in chamber of commerce/trade
associations
In-depth observations 43 hr of observation meetings
í 13 hr in large-scale meetings of cluster-managers, company
representatives with cluster experience
í 30 hr in working group meetings of collaborative projects

The underlying goal of the practical part of the project studied in this paper was to find
the best suitable design for a successful cluster/network of companies in the metal and
electronics industry. The most promising approach was to develop a cluster with network
characteristics, combining the benefits of both types of cooperation. The entire industry
cluster – according to Porter’s definition – may develop into either a cluster with network
characteristics or a cluster with one or more subnetworks. Some companies, e.g. may join
a cluster to realise a research project together with selected cluster members, without
involving the entire cluster. In a cluster with network characteristics, however, all of the
involved companies have a common vision and are interlinked via a variety of working
groups on functional topics (e.g. R&D).
Regional networks are primarily developed within a regional industry cluster. They
mainly exist of small- and mid-sized companies, characterised by their spatial
agglomeration. Commonly, they develop into a decentralised network, because they lack
the strategic leadership of a single company. Due to the polycentric organisation, it may
originate in diverse companies.
To actually implement a network structure, turning a regional industry cluster into a
cluster with network characteristics, a cluster-initiative is required. Cluster-initiatives are
organised attempts to improve the growth and the competitive edge of clusters within a
region. In this case, cluster companies, governments and/or research institutions are
included (cf. Pfohl et al., 2010, p.90; Sölvell et al., 2003, p.31).
Generally, an external sponsor should start the initiative (e.g. regional policy makers,
association). The sponsor actively supports the establishment of a cluster, but then
withdraws from the operational activities. Typically, the financial support by a private
sponsor or public funding lasts approximately three to five years. Within this period, the
cluster-management as well as participating companies and institutions should manage to
generate a tangible added value, to ensure that the participating companies will continue
to finance the cluster activities (even after public funding has expired). The more intense
network structures are established by the cluster-manager the better the goal will be
achieved. The transition from a regional industry cluster to a cluster with network
characteristics through an active and successful cluster-management is shown in Figure 5.
106 A. Bode, T.B. Talmon l’Armée and S. Alig

Although the cluster-management causes additional costs, it is necessary as to drive the

initiative. As such intense inter-company cooperation does not evolve automatically
because of heterogeneous interests of the different stakeholders (cf. Steinle et al., 1998,
p.367 et seq.).
However, the cluster-management must abstain from coordination power of
hierarchy, due to the heterarchical and polycentric organisation. Therefore, it is eminent
to resort to integration of the strength of the regional cultures and institutions in order to
realise a common strategy. Thereby, the coordinating activities have to be supported by
the trust and mutual respect of diverse companies, acting as emancipated partners.
Intensive cooperation is required in order to establish adequate trust (cf. Pfohl et al.,
2010, p.90).
Whereas, the regional branch clusters focus on just a few cluster meetings to address
a broad target group (e.g. public podium discussions followed by the opportunity to
generate new contacts, respectively maintain the existing contacts), clusters with network
characteristics organise regular working group session. The number and main topics of
the working group parties are collectively determined by the companies. Main topics
could be sourcing, globalisation, human resources and/or mutual R&D projects. The
companies’ managing directors determine whom of their employees are to participate at
the working groups. To establish a trusty relationship within the working group, it is
important to ensure that the same persons participate in the working groups. Furthermore,
participants from the different companies should be on a peer level (e.g. all team leaders,
division managers, etc.). Scheduling, prepreparation and wrap-up work, as well as
moderation of the meetings, are done by the cluster-management. A supporting internet
platform should be set up, which will allow to exchange, share and, respectively, save
important information, such as contact details, protocols or interesting news. However, an
internet platform should only be used as a support measure and not become the centre of
the cluster-initiative. In the course of time, more and more bilateral ties are established
between the participants of the working-parties, respectively the companies.

Figure 5 Integrated approach: cluster with network character (see online version for colours)
 Research note: clusters vs. networks 107

6 Conclusion and implications

It was the paper’s target to classify the different cluster/network concepts and to integrate
both concepts into one concept, combining the most promising aspects of networks and
clusters. This goal is accomplished as, after a critical discussion of existing approaches
towards clusters and networks, we introduced a classification concept for both clusters
and networks (see Figure 4). This illustration already shows a possible link between
clusters and networks – an intense network cooperation within a regional cluster. First
empiric insights from a research project support the findings that the key to successful
cluster development lies in the generation of tangible results for members. According to
our findings, these results can be achieved through intense cooperation in project-specific
working groups. When these prerequisites are fulfilled, companies are willing to (also
financially) contribute to the services provided by a cluster-management.
Our findings provide implications for
1 policy makers, who financially support clusters
2 cluster-managers, who run a cluster or a network
3 corporate managers, who consider joining a cluster/network or are already member
of one.
Policy makers should, according to our results, put emphasis on implementing concepts
that aim at linking the participating companies in regular working group sessions. This
approach ensures that the members can achieve first tangible results very early. As a
result, companies might be willing to finance a cluster themselves so that public funds
can be reduced step by step.
Cluster-managers can learn from our results that a core element of successful clusters
is the combination of vision and quick wins. A vision is necessary to establish goal
congruency, quick wins, however, are prerequisites that members do not starve while
trying to achieve their visions.
Managers shall regularly and critically check whether the networks where their
company is participating provide adequate value add and whether their partners share a
common vision.
However, our study has still some limitations. The results cannot be statistically
generalised due to the research design. Moreover, our findings are intermediary results in
a still ongoing research project. As stated above, the cluster development requires a long
time. Therefore, a longitudinal analysis should be helpful to get a deeper understanding
of different cluster-organisation stages and sustainable successful cluster activities.
Further research is necessary when considering a theoretical foundation of the cluster
with network characteristics. The relational view (cf. Dyer and Singh, 1998) aiming at the
explanation of competitive advantage on network level seems to be a promising
approach, which could be applied to the cluster model developed in this paper. A
theoretical foundation will be necessary when examining statistically the success of this
cluster type. New research activities shall focus on differences in performance between
public and private funded clusters. Those who receive a private sponsorship may be more
customer-oriented, i.e. interested in member companies’ needs, as they are probably
monitored more closely than clusters which receive public money. Another important
limitation that makes further research necessary is that we focused on the metal and
electronics industry in Hesse, Germany. As according to Saxenian (1996), the tendency
108 A. Bode, T.B. Talmon l’Armée and S. Alig

to clusters depends on industry and region, one should investigate other clusters within
the same region as well as clusters in other regions.

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