Pontus Braunerhjelm and Karolina Ekholm Over recent decades, foreign direct investment (FDI) has become a major force in the global economy. The geographical pattern of capital formation, trade and technological spillovers across countries and regions, are to an in creasing extent determined by the strategies chosen by multinational firms (MNFs). Between 1982 and 1994, the rate of growth of the global FDI stock was more than twice that of gross fixed capital formation, the growth of sales by foreign affiliates of multinational firms well exceeded that of world exports, and, by 1994, the MNFs accounted for approximately 6 percent of world output (United Nations, 1997, pp. xv-xvi). The overall mechanisms behind this rapid internationalization in terms of multinational produc tion have been attributed to the dismantling of trade barriers and the deregulation of capital markets, together with the advances in information technology that have facilitated the coordination and monitoring of inter nationally dispersed production. This development carries two important implications: First, firms operate in markets characterized by much tougher competition than only a decade ago, and, second, countries and regions are involved in competition for production to a much larger extent than before. This book addresses questions related to the location and geographical dispersion of the activities by multinational firms, a topic which has be come of increasing concern to policy-makers."

Clusters - regional concentrations of related firms and organizations - are seen as being an important element of economic growth and innovation. But there is little understanding of how clusters come into existence, and little guidance provided on the role of policies that are conducive to the formation of clusters. Cluster Genesis focuses on these early origins of clusters. The case histories of well-known, established clusters, as well as more recently-developed clusters are discussed, including: The Hollywood motion picture cluster, Silicon Valley, Boston and San Francisco biotech regions, The Biotech industry in China, Medicon Valley in Scandinavia, The Irish ITC sector. Leading scholars contribute chapters examining cluster genesis, the divergent processes by which clusters arise, how multinationals contribute to cluster development, and how economic development policy may promote or hinder cluster genesis. Cluster Genesis uses a variety of methodological perspectives, examines a range of policy options, and draws on a number of rich case histories, and will be key reading for academics, researchers, and students of Economics, Innovation, Sociology, Geography, and Management Studies, as well as economic development officials and policy makers.

According to its proponents, the `new economy' is associated with sustainable growth, increased demand for labor and zero inflation. On the micro-level, this bright avenue into the future is propelled by knowledge capital, flexibility and new ways of organizing production, such as clusters and networks. Progress in information technology, together with massive deregulation on the national and the international levels, have been credited with setting this development into motion. The concept of the `new economy' has been rapidly embraced by politicians, as it seems to offer a way out of the traditional trade-off between unemployment and wage inflation. However, empirical evidence regarding the microeconomic mechanisms of the `new economy' is scarce. Knowledge Capital and the `New Economy': Firm Size, Performance and Network Production intends to narrow this gap by empirically analyzing the composition of knowledge capital and how knowledge capital is distributed across firms of different size. Moreover, the impact of knowledge capital on firms' profitability and international competitiveness is also examined. Finally, we compare cluster dynamics and the institutional set-up in Europe and the U.S., with the purpose of identifying regulations that seem to hinder a conducive environment for expanding and dynamic European clusters. The results of this study emphasize the role of knowledge capital and flexibility. Thus, irrespective of how sustainable the `new economy' turns out to be, the policy implications in terms of providing institutions that facilitate knowledge-enhancing economic activities, flexible markets and transparent incentive structures are undeniable. Countries that fail in this respect may find themselves trailing in the international growth and welfare rankings.

Pontus Braunerhjelm and Karolina Ekholm Over recent decades, foreign direct investment (FDI) has become a major force in the global economy. The geographical pattern of capital formation, trade and technological spillovers across countries and regions, are to an in creasing extent determined by the strategies chosen by multinational firms (MNFs). Between 1982 and 1994, the rate of growth of the global FDI stock was more than twice that of gross fixed capital formation, the growth of sales by foreign affiliates of multinational firms well exceeded that of world exports, and, by 1994, the MNFs accounted for approximately 6 percent of world output (United Nations, 1997, pp. xv-xvi). The overall mechanisms behind this rapid internationalization in terms of multinational produc tion have been attributed to the dismantling of trade barriers and the deregulation of capital markets, together with the advances in information technology that have facilitated the coordination and monitoring of inter nationally dispersed production. This development carries two important implications: First, firms operate in markets characterized by much tougher competition than only a decade ago, and, second, countries and regions are involved in competition for production to a much larger extent than before. This book addresses questions related to the location and geographical dispersion of the activities by multinational firms, a topic which has be come of increasing concern to policy-makers.

According to its proponents, the `new economy' is associated with sustainable growth, increased demand for labor and zero inflation. On the micro-level, this bright avenue into the future is propelled by knowledge capital, flexibility and new ways of organizing production, such as clusters and networks. Progress in information technology, together with massive deregulation on the national and the international levels, have been credited with setting this development into motion. The concept of the `new economy' has been rapidly embraced by politicians, as it seems to offer a way out of the traditional trade-off between unemployment and wage inflation. However, empirical evidence regarding the microeconomic mechanisms of the `new economy' is scarce. Knowledge Capital and the `New Economy': Firm Size, Performance and Network Production intends to narrow this gap by empirically analyzing the composition of knowledge capital and how knowledge capital is distributed across firms of different size. Moreover, the impact of knowledge capital on firms' profitability and international competitiveness is also examined. Finally, we compare cluster dynamics and the institutional set-up in Europe and the U.S., with the purpose of identifying regulations that seem to hinder a conducive environment for expanding and dynamic European clusters. The results of this study emphasize the role of knowledge capital and flexibility. Thus, irrespective of how sustainable the `new economy' turns out to be, the policy implications in terms of providing institutions that facilitate knowledge-enhancing economic activities, flexible markets and transparent incentive structures are undeniable. Countries that fail in this respect may find themselves trailing in the international growth and welfare rankings.

Clusters - regional concentrations of related firms and organizations - are seen as being an important element of economic growth and innovation. But there is little understanding of how clusters come into existence, and little guidance provided on the role of policies that are conducive to the formation of clusters.
Cluster Genesis focuses on these early origins of clusters. The case histories of well-known, established clusters, as well as more recently-developed clusters are discussed, including:
DT The Hollywood motion picture cluster,
DT Silicon Valley,
DT Boston and San Francisco biotech regions,
DT The Biotech industry in China,
DT Medicon Valley in Scandinavia,
DT The Irish ITC sector.
Leading scholars contribute chapters examining cluster genesis, the divergent processes by which clusters arise, how multinationals contribute to cluster development, and how economic development policy may promote or hinder cluster genesis.
Cluster Genesis uses a variety o methodological perspectives, examines a range of policy options, and draws on a number of rich case histories, and will be key reading for academics, researchers, and students of Economics, Innovation, Sociology, Geography, and Management Studies, as well as economic development officials and policy makers.