INNOVATION-CLUSTER MODEL OF REGIONAL ECONOMY DEVELOPMENT: CONCEPTUAL FEATURES, BENEFITS, AND CONSTRAINTS

Abstract

The article focuses on exploring the role of innovation-cluster development models for regional economies, especially in terms of enhancing their competitiveness. The core argument is that the competitiveness of regions cannot rely only on specific products or sectors but is defined by the effective interaction of economic agents at the regional level. The key mechanism for such interaction lies in inter-sectoral complexes, or clusters, which bring together businesses, financial institutions, and research and educational entities, promoting a synergy between innovation and economic potential. This article explores the theoretical basis of clusters, specifically focusing on the concept introduced by M. Porter and M. Enright. M. Porter, the founder of the cluster approach, defined clusters as geographically localized groups of interconnected companies and cooperating and competing institutions to achieve common competitive advantages. It also addresses the concept of ‘smart specialization’, which guides the development of innovative clusters by capitalizing on the unique strengths of each region, emphasizing the modernization of traditional sectors and the incorporation of cutting-edge technologies. The innovation-cluster approach acquires special significance in the context of digitalization and information progress. It enables the aggregation of high-tech resources and innovations within particular areas, fostering the growth of local enterprises while also increasing the investment attractiveness of the regions. Clusters play an important role as cells of technological and social change, creating conditions for the development of new market niches and increasing export potential. Despite many advantages, innovation-cluster models have certain restrictions. One of the major challenges is the cluster disintegration probability due to external economic changes, as well as fluctuations in demand or changes at international markets. Furthermore, managing clusters can become complicated due to indistinct geographical and organizational boundaries, which hinder effective coordination of activities. Within this context, the prevalence of large transnational corporations may limit the involvement of small and medium businesses, which diminishes their interaction and collaboration within the cluster. It has been highlighted that innovation-cluster models should be viewed as the component of a wider regional innovation system that must evolve in alignment with the national economy. Considering both common and unique features of innovation clusters can provide the basis for crafting a successful regional development strategy, boosting their competitiveness, and fostering sustainable economic progress.