Local Clusters and Global Entrepreneurship: The significance of spatial and relational propinquity in new firm formation

Abstract

This paper explores the significance of local proximity for new firm formation in particular industries. Within the literature, entrepreneurs are viewed as critical to industrial cluster formation and development in regions, while at the same time clusters are assumed to foster entrepreneurship by providing established linkages and access to knowledge flows. Entrepreneurship is therefore modelled as an inherently local process within industrial clusters. However, given that firms, particularly in high-tech sectors, are often globally oriented the significance of local proximity both geographically and relationally is ambiguous. Therefore, the research questions addressed in this paper are; How "local" is new firm formation in an industrial cluster in terms of the networks created to establish and develop a globally-oriented firm and the influence of the cluster in the formation of such a firm? And how significant, if it all, is being located in a cluster for a globally-oriented firm? To answer these questions, globally-oriented firms within the medical technology cluster in Galway were analysed. Data was gathered from twelve interviews with entrepreneurs in the cluster. Analysis of this data shows that even though these firms are established to serve an international market from the outset, the entrepreneurs use the local cluster and local networks to facilitate them in accessing international networks. Locating in the cluster is found to be significant for the entrepreneurs in three main ways: access to a specialised labour pool, a quality of life factor that makes it easier to attract and retain labour and the international reputation of Galway as a medical device hub that facilitates entrepreneurs in establishing global networks. Moreover, local networks in the form of mentorship between serial and more inexperienced entrepreneurs were found to be particularly important for building the credibility of such start-up firms and their international connections.