Customizing Clusters

Abstract

Western multinational corporations (MNCs) increasingly locate advanced functions, including product development and engineering, in emerging economies to gain access to lower-cost science and engineering (S&E) talent and specialized service providers. Over time, new S&E clusters have developed in emerging economies that are strongly oriented toward global MNC demands. This study investigates the role of foreign MNCs in the formation of these S&E clusters. It is proposed that pioneer MNCs promote the initial development of S&E clusters by customizing local institutions and business practices in accordance with their sourcing needs and based on their experience in other local business contexts, including their home country. As a result, these clusters may develop specialized resources and service capabilities that particularly attract follower MNCs of the same national origin that have similar sourcing needs. This study may inform both cluster formation research and policy making in emerging economies.