Industrial Cluster Involvement and Firm Performance:The Role of Organizational Learning of Clustering SMEs

An industrial cluster has been widely accepted as a territorial agglomeration of firms, which is effective for knowledge diffusion contributing to the national innovation system and regional development in an economy. Accordingly, a growing number of empirical works support the positive impact of industrial clusters on firm innovation or performance mainly by investigating differences in innovation and performance between clustering and non-clustering firms. These works have mainly focused on figuring out exogenous factors of clusters, such as infrastructural resources, labor pools, and local endowments, originating externally. However, the success of clustering firms also depends on endogenous factors including formal economic transactions and social interactions for the exchange of knowledge and information among members within industrial clusters. Although previous study has argued that firms are able to benefit from the knowledge spillover of the clusters, referring to learning regions, it is unreasonable to simply assume that positioning in the clusters would lead to active knowledge exchange among cluster members. In this context, organizational leaning is regarded as an effective instrument allowing firms to acquire, exploit, and refine external knowledge contributing to business performance. Despite the importance of organizational learning in clustering firms, our understanding of which learning initiatives are needed for small and medium-sized enterprises (SMEs) to take advantage of the spillover effect of industrial clusters has fallen short of practical and research demands. The primary purpose of this study is to empirically examine the possible linkages among industrial cluster involvement, organizational learning capability, and firm performance of clustering SMEs. Starting from reviewing the literature and its limitations, we propose research hypotheses as two fold: (1) clustering SMEs possessing high levels of industrial cluster involvement and organizational learning capability would produce better performance in business than those who do not, and (2) clustering firms’ capability for organizational learning would play a pathway linking between their involvement in industrial cluster and performance. In a sample of 258 SMEs within industrial clusters in Korea, we tested the structured research model consisting of traded and untraded interdependences for industrial cluster involvement, absorptive and transformative capability for organizational learning capability, and firm performance through hierarchical regression analysis. The results revealed that traded and untraded interdependences, the two constructs of industrial cluster involvement had positive effect on firm performance. The positive linkage of organizational learning capability, represented by absorptive and transformative capability, with firm performance was also confirmed. It was notable that organizational learning capability mediated fully the positive linkage between firms’ involvement in industrial clusters and performance. The primary contribution of this study is its attempt to provide a comprehensive approach in analyzing SMEs’ industrial cluster involvement in terms of their traded and untraded interdependences. Moreover, this study expands upon the importance of enhancing organizational learning and relevant capabilities from the perspective of clustering SMEs. Detailed implication and contribution of this study are discussed in the conclusions.