1 Up in the Air? A study of the factors driving firm participation in the social and economic life of a creative and digital cluster Roberto Camerani SPRU (University of Sussex) R.Camerani@sussex.ac.uk Juan Mateos-Garcia, Nesta/CENTRIM (University of Brighton) Juan.mateos-garcia@nesta.org.uk Draft copy: Please do not cite or circulate Last revised March 2013 Abstract Most explanations of the superior innovative performance of clusters rely on meso constructs like localised knowledge spillovers and business cultures which are argued to increase learning. Much less attention has been paid to examining empirically the micro behaviours underpinning firm collaboration (and spillovers). We contribute to a growing literature addressing this gap in the evidence base with data from a survey of 485 firms in a creative and digital cluster in England. We use multivariate multiple regression to estimate the association between two firm behaviours (business networking and knowledge exchange), and a comprehensive set of explanatory factors including their absorptive capacity and disciplinary specialisation, local trading and recruitment patterns, institutional proximity to other firms in the cluster, and economic performance. Although all these factors are shown to play a part in explaining local business networking and knowledge exchange, structural factors like local trade and recruitment are shown to be most important. The connection between knowledge exchange and private transacting raises questions about the extent to which any knowledge spillovers thus generated could be considered ‘externalities’ in the usual way. Our measures of economic performance are positively associated to knowledge exchange, and negatively associated to business networking. This finding highlights the importance of examining the economic and strategic dimensions of firm networking in clusters, and point at the existence of channels for localised knowledge exchange which are not open to all firms in the cluster, but only to a subset of them– the most commercially successful ones.