INDUSTRY STUDIES ASSOCATION WORKING PAPER SERIES Network Dynamics in Regional Clusters: A New Perspective from an Emerging Economy

Regional clusters are spatial agglomerations of firms operating in the same or connected industries, which enable innovation and economic performance for firms. A wealth of empirical literature shows that one of key elements of the success of regional clusters is that they facilitate the formation of local inter-organizational networks, which act as conduits of knowledge and innovation. While most studies focus on the benefits and characteristics of regional cluster networks and focus on advanced economies and ‘hot spots’, this paper advances with the existing literature by analyzing network dynamics and taking an emerging economy’s perspective. Using longitudinal data of a wine cluster in Chile and stochastic actor-oriented models for network dynamics, this paper examines what microlevel drivers influence the formation of new knowledge ties among wineries. It finds that cohesion effects (reciprocity and transitivity) as well as firm-level heterogeneity in the knowledge bases influence the evolution of the knowledge network. Next, it explores how these micro-level network drivers influence the macro-level structural evolution of the local knowledge network. Empirical results have interesting implications for the cluster competitiveness and network studies literatures and the burgeoning literature on corporate behavior in emerging economies.