ITIF Logo
ITIF Search
Fact of the Week: Technology Cluster Initiatives Raised Total Factor Productivity of Flemish Firms by 2 to 4 Percent

Fact of the Week: Technology Cluster Initiatives Raised Total Factor Productivity of Flemish Firms by 2 to 4 Percent

June 24, 2024

Source: Pierluigi Angelino, Dirk Czarnitzki and Astrid Volckaert, “Cluster policy, innovation, and firm productivity. An econometric assessment of the Flemish Spearhead Cluster program,” KU Leuven, Faculty of Economics and Business, Department of Management, Strategy and Innovation (MSI), MSI Discussion Paper, no. 2404 (May 2024).

Commentary: A recent working paper by Pierluigi Angelino, Dirk Czarnitzki and Astrid Volckaert analyzed the impact of Belgium’s Flemish Spearhead Cluster (SHC) initiative on firms’ innovation. The Flemish SHC initiative is part of the regional government’s broader cluster policy. The aim is to facilitate coordination between firms in targeted industries, research centers, and the government as a way to help spur innovation via subsidized research and development (R&D). In particular, the SHC consists of seven clusters, each of which focuses on a specific industry in which Flanders has a comparative advantage. Those industries are chemicals, materials, logistics, energy, food, blue economy, and healthcare. The results of the study suggest that the SHC policy has had a positive impact on firms’ innovation.

The data consisted of over 10,000 firms over the period of 2013–2020. The authors used total factor productivity (TFP) to measure innovation. With regard to firm characteristics, firms that were cluster members were on average, larger, older, and more capital intensive. The authors analyzed the impact of cluster membership using difference-in-differences analysis. They found that, at the level of individual firms, cluster membership was associated with about 3 percent higher TFP. They also noted that firm size did not play a significant role with regard to which firms benefited most from cluster membership. The impact of cluster membership ranged between 2.3 percent and 4.4 percent, depending on the model specification. These findings suggest that regional governments can play a positive role in incentivizing innovation by subsidizing R&D activities and by facilitating collaboration and networking between the private sector and research institutes.

Back to Top