Cognitive Coordination, Institutions and Clusters: An Exploratory Discussion

Posted: 24 Nov 2009

See all articles by Nicolai J. Foss

Nicolai J. Foss

Copenhagen Business School - Department of Strategy and Innovation

Mark Lorenzen

Copenhagen Business School

Date Written: 2003


It is argued that cognitive coordination plays acentral role for trust-based cooperation and communication among entrepreneursin a regional cluster. This analysisalso proposes an explanation for howand why cognitive coordination may be especially efficient within regionalclusters.Cognitive coordination, when applied to innovation processes,means that communication and knowledge sharing costs are lowered, which mayboost the rate of interactive innovation. A regional cluster functions as a structure of incentives that is defined byexplicit and implicit contracts, reputation, and competitive mechanisms. Italso facilitates cognitive coordination by defining specialized cognitivecategories and identifying certain dominant solutions to coordinationproblems. The analysis presents the cluster perspective, identifies the industrialactivity areas in which a cluster benefits from market coordination, anddiscusses horizontal and vertical relations between firms, and theincentive-related and cognitive aspects of coordination. Next, it addresses theprocesses of cognitive coordination, how entrepreneurs may build knowledgejointly with partner firms, and how shared knowledge may also be a cognitivesocial institution. It is argued that focal points often occur through analogymaking, which has both information and cognitive costs. A study of 54 furniture manufacturers in the Salling district of Denmarkillustrates how cognitive coordination may look and occur in a cluster. Thetheoreticalcase study showed how unplanned, decentralized coordinationtook place between independent firms. (TNM)

Keywords: Social learning, Information sharing, Furniture industry, Cognitive coordination, Analogy, Cognition, Horizontal alliances, Cooperation, Social networks, Incentives, Interfirm alliances, Transaction costs, Vertical alliances, Information networks, Trust relationships, Coordination, Knowledge transfer, Industrial districts, Communication, Clusters, Innovation process

Suggested Citation

Foss, Nicolai J. and Lorenzen, Mark, Cognitive Coordination, Institutions and Clusters: An Exploratory Discussion (2003). University of Illinois at Urbana-Champaign's Academy for Entrepreneurial Leadership Historical Research Reference in Entrepreneurship, Available at SSRN:

Nicolai J. Foss (Contact Author)

Copenhagen Business School - Department of Strategy and Innovation ( email )

Frederiksberg, 2000

Mark Lorenzen

Copenhagen Business School ( email )

Solbjerg Plads 3
Frederiksberg C, DK - 2000

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