Cluster life cycles–dimensions and rationales of cluster evolution

We present a model that explains how the very cluster dynamics is both the driver for the movement of a cluster through a life cycle and the reason why this movement differs from the industry life cycle. The model is based on two key processes: the first is that the emergence, growth, decline and renewal of the cluster depend on the technological heterogeneity of firms; the second is that firms have a larger relative absorptive capacity, when they are in the same location, and thus especially localized learning changes heterogeneity: it leads to a technological convergence when learning takes place within the cluster and technological divergence, when learning takes place outside the cluster, yet in the same region. We derive hypothesis from the model regarding different phases of the cluster life cycle.