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The ability of the US economy to generate new technology industries, such as biotechnology, provides support to the contention that liberal market economies (LMEs) have a comparative institutional advantage in generating radically innovative firms. However, the link between varieties of capitalism and innovation within LMEs has not been systematically explored. This chapter explores the link between institutions and the management of innovative competencies within a successful US biotechnology cluster — San Diego, California. It empirically examines whether national institutional frameworks within the US generate patterns of economic coordination in the areas of finance, employee incentive structures, and labor market organization that benefit firms, and are consistent with predictions of the varieties of capitalism approach. The policy context surrounding the US biotechnology industry is also discussed.

Germany has long been categorized as an organized or coordinated market economy. Moreover, a key prediction of comparative institutional theory is that Germany should perform poorly in radically innovative industries such as biotechnology. In the mid 1990s, the German government launched a series of wide-ranging public policies with the aim of developing a world-class biotechnology industry. This chapter examines these policies and evaluates their success in creating a sustainable biotechnology industry in Germany. German policies have created a large industry, in terms of the number of companies launched, in a short period of time. However, empirical evidence suggests that this industry has not become sustainable, in terms of generating adequate venture capital finance for companies or generating an active labor market for scientists and managers working within the industry. These problems are linked to long-standing institutional arrangements in the areas of finance, corporate governance, and labor market regulation, suggesting that the ability of governments to circumvent national institutional frameworks may be limited.

Regional economic development is shaped by many policies, which are implemented by national governments, regional and state governments, and local governments. But local economic development policies in Greater Los Angeles and the San Francisco Bay Area since 1970 had little to do with the economic divergence of these two regions. In reality, many so-called economic development policies have little to do with economic development as such, instead emphasizing land use changes and competition for sales tax revenue rather than industry and job development. Many of the problems with local planning and development policies in the United States in general are exemplified by the comparison of the San Francisco Bay Area and Greater Los Angeles.

Cluster policies have become very popular among policy makers over the last thirty years. Following the success of Silicon Valley and following the influential work by Michael Porter, clusters have come to be seen by many as the magical formula for regional development, innovation, and growth. They also appeared as a way to renew industrial policies fallen into disrepute. Most of the extant works on clusters are qualitative. These approaches are very useful but fail to put some numbers on the effects at play. This is what this book tries to do in the French case. France is interesting for this topic since there is a long tradition of strong government intervention regarding the location of economic activity and because French cluster initiatives are more or less unified across the country.

This chapter analyses empirically a public policy promoting industrial clusters in France. Cluster policies have become popular in many countries but have not been extensively evaluated empirically. The chapter uses data on production and employment for firms that benefited from the policy and for firms that did not, both before and after the policy started. It first shows that the policy selected firms in relative decline. Furthermore, the results suggest that the policy had no major effect either on their productivity or in terms of employment.

This chapter reviews the key arguments and findings of the book and draws conclusions regarding the implications for a relational economic support policy—a policy which focuses on economic agency and conceptualizes extra-regional linkages that connect territories with global resource and knowledge pools. In order to clarify this, it develops the foundations of a relational cluster policy. In addition, the chapter discusses the aspects of relational multidimensional cluster policies, such as vertical cluster dimension, horizontal cluster dimension, power relations, institutional cluster dimension, and external cluster dimension.

This chapter discusses the chaotic cluster concept, the mixed cluster phenomenon, and popular cluster policy in China. It argues that insertion into global value chains will bring opportunities for small local firms in Chinese clusters for learning and upgrading but multinational power may also dilute local ambition to creatively upgrade the production system by any means possible. An on-going problem for China’s industrial clusters — and one that needs to be urgently addressed — will be the transition from production capacity to capacity for innovation.

Innovation systems cannot be conceptualized without understanding the interactions between different actors in the system. These interactions take many different forms. The scholarly literature has studied them with broad or narrow notions. This chapter aims at providing an encompassing view of these different phenomena, putting them directly into the theoretical context of the innovation systems approach. This is done not only for the sake of conceptual clarification, but above all for identifying the concrete obstacles and deficiencies associated with these interactions that might plague the innovation system. This serves as the basis for distinguishing and classifying the wide diversity of network-oriented innovation policy instruments that governments have deployed through time. Just as in other chapters of this book, the unintended negative consequences created by the application of these instruments are also examined. Finally, the chapter puts forward a set of criteria for the design and redesign of these instruments.