Divide and Conquer? Decentralisation, Co-ordination and Cluster Survival

This paper develops a simulation model of the behaviour of clusters in the face of bifurcation events in their environment. Bifurcations are understood as the regional equivalent to Schumpeterian creative destruction. The model investigates the role of decentralisation and co-ordination for the likelihood of successful adaptation by comparing adaptive performance of clusters exhibiting different degrees of decentralisation and alternative modes of co-ordination. Using Kauffman’s (1993) N/K model, it is found that there is an optimum degree of decentralisation with respect to cluster adaptability while different co-ordination mechanisms face a trade-off between speed and cluster-level optimality of results. In doing so, the model sheds light on an empirical controversy regarding the role of both factors for adaptation that has emerged between the Silicon Valley – Boston 128 comparison on the one and the Italian Industrial District experience on the other hand. Moreover, the identification of the roles played by decentralisation and co-ordination for cluster adaptability in changing environments could serve as guidance for future empirical research as well as policy initiatives.