1. Cluster Development and the
importance of Social Capital
Christian Felzensztein, PhD

2. Introduction
• Continuous research in the area of natural resource-based
clusters
•From comparative studies between countries (MIP 2007, JBIM
2010, LRP 2010)
•To comparative studies among regions within the country (JBM
2008, JBIM 2011)
•…and longitudinal studies of change in Clusters (IMR)
•Theoretical contribution and strong practical implications for
firms, trade associations and public policy

3. Purpose of this study:
This study reports on a four year longitudinal study that examined several
dimensions of and changes in, inter-firm international marketing cooperation
and social networks in an export-oriented cluster. It is used the emerging
country context in Latin America.
The study is specifically related to the issues of firm interaction among
competitors and relations for achieving an international marketing competitive
advantage.
Emphasis on the social networking and strategic elements that help to reinforce
those interactions at horizontal and vertical levels.
Following Porter (1998) regional clusters are based on the geographical proximity
of firms related to same industry.

4. 1. Geographic Co-location and Clusters
It is well known that co-location provides benefits from inter-firm linkages to
collective problem solving that helps firms to develop common understanding
of their business activities.
There are some issues of coopetition that we need to consider:
1. Clustered firms must cooperate while compete (Mesquita 2007)
2. Co-location influences cluster performance (Hervas-Oliver and Albors-Garrigos 2007, Frisillo
2007, Perry 2007, Tonoyan el al., 2010, Porter, Delgado and Stern 2010)
3. Other studies found that the effect of co-location on performance may be less important
than generally thought (Kahn and McDonough 1997; Kukalis 2010)
4. Trust is key for developing social capital and then inter-firm cooperation
Previous research based in the USA or Europe and in high-tech industries. Lack of
longitudinal studies
Theory Development

5. Previous studies: Location continues to be important for both starting-up
companies. Lack of research in the emerging Latin-American context.
The previous issues may be different if we study natural resources-based
industries, where the location of those natural resources in specific areas is the
main reason why companies co-locate. This is what Gulati (2007, p.15) calls as
´positional embeddedness´.
Since the network of firms changes over time, and especially young firms are
subject to those changes (Schutjens and Stam, 2003; Hakansson, et al, 2006), it
is possible to hypothesize that the externalities endowed by the cluster firms
are expected to enhance cooperation over time in order to save cost and to
improve their competitive advantage.
In particular, it is expected that externalities related with cost reductions will
increase over time since they enhance competitiveness in international markets
as a result of economies of scales.

6. 2. Social networks and inter-firm cooperation
Researchers engaged in “networks”, “clusters” and “innovation systems” all stress
how relationships and networks can be used to create new economic resources –
although what is understood by these networks is sometimes vaguely defined.
Even more optimistic interpretations are made by policy makers around the
world. (Waluszewski, 2005).
Social networks are key elements in both organisational and personal
relationships in embedded local firms (Johannisson, 1995). These networks can
also facilitate rich information exchanges that enable firms to learn about new
international alliances (Ahuja, 2000).
Formal and informal social networks require interaction. This interactional
context in social networks includes issues of trust and commitment.

7. 3. Some definitions
Inter-firm marketing cooperation: “the positive externalities that
create specific marketing benefits as a result of active participation
between co-located firms”.
This is a specific type of externality distinct from the externalities
traditionally used by economists (Brown et al., 2010; Felzensztein et
al. 2010).
Focus of the study: inter-firm international marketing cooperation
including contractual and non-contractual joint ventures, market
research activities and co-marketing activities such as joint
distribution strategies, co-branding and joint new product
development.

8. We propose two hypotheses:
H1: The importance firms place on inter-firm international marketing cooperation
is expected to increase over the life of the industry cluster
H2: Clustered firms will increase social networking activity over time to enhance
their inter-firm international marketing cooperation.

9. Methodology and cluster selection
We focused our cohort in the salmon farming cluster in Chile, which in 2008 its
exports represented by 32% of the world in this industry sector.
Presently, there are about 80 companies, highly localized in one region. The
number of firms has declined by about 30% since 2003.
A mail survey methodology was used. The questionnaires recipients were either
MD or marketing managers. The mail survey was sent during 2003 to the total
population of 115 companies. An effective 20% response rate was achieved in this
first stage.
The second stage was conducted four years later in 2007 when we tried to contact
the same cohort of firms of which 16 responded effectively, representing 14%
response rate in this stage.
The lower response rate is due to mergers and acquisitions + too many applications
for data collection in this industry.
We conducted personal interviews with MDs to get more insights from the results.

10. Chilean export-oriented clusters have traditionally evolved from a
‘bottom-up’ approach, where the cluster strategy has been led by
the companies, with minimal or no government intervention.
This model of cluster strategy differs from other international
examples where a ‘top-down’ approach is prevalent, e.g. Scottish
industry clusters that are led by the Scottish Executive, the
developmental agency for Scotland (Felzensztein et al., 2010).

11. Scales of measurement and questions:
Brown and Bell (2001); Granovetter (1973); Coote et al (2003)
The items were grouped into seven dimensions related to our two
hypotheses
Dimensions related to inter-firm cooperation (H1):
D1: general positive externalities
D2: marketing externalities
D3: importance of inter-firm cooperation in international marketing
D4: resources allocation
Dimension related to social networks (H2):
D5: formal and informal social networks
Additional dimensions:
D6: marketing activities in which firms want to get involved
D7: reasons for having inter-firm cooperation in marketing

12. Main ResultsMain Results
The composition of the sample was not significantly different (i.e. p>0.05) from the main sample
characteristics, except for the variable "percentage of annual sales from local market" which
showed a significant increase over time in the export-based firms.

13. • In the dimension of general positive externalities provided by
geographical co-location, two out of ten different variables
were found to significantly change over the four years period:
• “Access to a skilled labour pool” increased (M OldCluster= 3,13; M NewCluster=
3,75; p < 0,05)
• “Selling intermediate goods to other firms” decreased (M OldCluster=
3,57; M NewCluster= 2,87; p < 0,05).

14. • For the dimension of the importance of inter-firm cooperation in
international marketing, we found three of the five variables had
significant differences over time.

15. • This fifth dimension analyzed refers to both formal and informal
social networks. Two channels of communication between firms
were found to decrease significantly over time: “contact mainly at
an informal and social level” and “contact mainly at formal and
informal levels on a one to one basis”.

16. • Marketing activities in which firms want to get involved, we
found three of the eleven variables to increase significantly over
time. These were “Local advertising”, “Inventory holding”, and
“Market research”.
• Reasons for having inter-firm cooperation in marketing: showed
a significant increase in one variable, “Attract new customers”. All
other variables showed no significant changes.

17. Conclusions and managerial implications
Interestingly and unexpected, H1 and H2 2 are not supported by our results.
Findings suggest that firms are acting in a more individualistic way in areas where
international marketing competitive advantage can be threatened, while
cooperating in areas where their competitive advantage is not at risk.
This study show that only two different aspects demonstrated intensified
cooperation: 1. access to skilled labour pool and 2. joint product development.
Over time we found the trend is for less cooperation and more competition. This
is surprising as the literature on coopetition (Porter 1998; Soubeyran and Weber
2002) points to the positive advantages and externalities of inter-firm cooperation
for internationally oriented clusters.
Lesson for emerging Latin American economies, is the need for the Trade
Association to better engage in informal social interactions between the cluster
firms. This will increase the possibility of further inter-firm cooperation between
firms in the industry.