The Next Silicon Valley? On the Relationship between Geographical Clustering and Public Policy

Abstract

Inspired by the success of geographical clustering in California, many governments pursue cluster policy in the hope to build the next Silicon Valley. In this paper we critically assess the relationship between geographical clustering and public policy. With the help of a range of theoretical insights and case study examples we show that cluster policy in fact is a risky\venture, especially when it is tried to copy the success of regional 'best practices'. Therefore, we advice policy makers to move away from the Silicon Valley model and to modestly start from a place-specific approach of 'Regional Realism'.

Keywords: Clustering, Geography, Innovation, Public policy, Austrian economics

JEL Classification: O2, R00, R5