The Evolution of Hot Spots in the U.S. Biotechnology Industry

This study empirically tests Pouder & St. John\u27s propositions (1996) on the evolutions of geographic clusters, in the context of the U.S. biotechnology industry. We find that during the origination period of the cluster evolution clustered biotechnology firms exhibit higher cost economies and legitimacy in obtaining resources than non-clustered competitors. While, after the early period, such clustered firms\u27 advantage in resource access and innovations are statistically significantly declining. These findings evidence the decline of positive net benefits from geographic clustering over time. Given the inconsistent empirical results in the literature on whether there are positive net benefits to geographically clustered firms, this study sheds light on the importance of time dimension in geographic clustering to understand the net benefits of geographic clustering. Since economies and diseconomies of agglomeration change over time, the net benefits of geographic clustering can be time-variant, possibly leading to different empirical results if the evolution of geographic clustering is not appropriately considered. Accordingly, this study answers a call to empirical studies on dynamics of geographic clustering