The Data Industry

CHAPTER 10CLUSTER EFFECTS OF THE DATA INDUSTRY

An industry cluster¹ is more than a simple aggregation of enterprises. It is a geographic concentration of interconnected suppliers, providers, and associated institutions in a particular field through a nested inter-organizational network of relationships. As such, it represents a “hybrid” economic sphere, somewhere between a marketplace and an organizational hierarchy.

Once an industry cluster is formed, resource sharing or technology diffusion will follow based on the internal division of labor, competition, and cooperation. The clustering of interconnected enterprises will generate revenues through lower transaction costs, thus create huge external competitive advantages for these enterprises and likely for regional economy and even national politics, society, and culture. Therefore the core task of an industry developing a cluster is to study the positive and negative regional effects as well as larger external institutional factors.

Although at the present time there is no known cluster in the data industry, based on the enterprise agglomerations types described in the previous chapter, we can infer what conditions might facilitate the formation of data industry clusters, and avoid blindly copying other clusters of unrelated industries.

10.1 EXTERNAL ECONOMIES

Externalities are a primary subject of neoclassical economics and the new institutional economics. Externalities can be divided by their positive and negative impacts ...