KNOWLEDGE, CLUSTERS, AND COMPETITIVE ADVANTAGE STEPHEN TALLMAN University of Utah MARK JENKINS Nottingham University NICK HENRY University of Newcastle-upon-Tyne STEVEN PINCH University of Southampton Researchers in international strategy are increasingly investigating the role of re- gional clusters as features of international industry, most concerned with the com- petitive role of clusters and the competitive interactions among cluster firms. We look instead at knowledge sharing between firms through the medium of untraded inter- dependencies—knowledge exchanged informally and without explicit compensation. We specifically address knowledge development at the firm and the cluster level and examine the role of knowledge stocks and flows in establishing competitive advan- tage for clusters and firms. Geographically defined regional clusters of firms that function as strategic entities in global industries are a matter of considerable interest to regional economic development agencies, corporate managers, and international strategy scholars. Cities, states, regions, and countries seek the formula to become world powers in high-technology industries. Multinational cor- porations look for the right clusters to locate plants, labs, and headquarters. Scholars ques- tion whether competitive advantage is sustain- able for a group of firms and wonder what mech- anisms might drive the phenomenon of cluster success. Porter defines what he terms a regional clus- ter as “a geographically proximate group of interconnected companies and associated in- stitutions in a particular field, linked by com- monalities and complementarities” (2000: 16). Economic geographers provide convincing evi- dence for the existence of clusters (which they more often term industrial districts) in a wide variety of industries and for the proposition that firms within industrial districts are often inordi- nately successful as a group (Amin, 2000; Maskell, 2001; Porter, 1998; Scott, 1988; Storper, 1993). In studies of strategic management, whether of sources of international competitive advantage (Porter, 1990) or of the structures of various industries, including information tech- nology (Bresnahan, Gambardella, & Saxenian, 2001; Saxenian, 1994), biotechnology (Zucker, Darby, & Armstrong, 1998), motion pictures (Miller & Shamsie, 1996), high-fidelity equip- ment (May, Mason, & Pinch, 2001), racing car production (Pinch & Henry, 1999), wine making, leather fashions, and many others (Porter, 1998), researchers have likewise found successful re- gional groupings of firms to be important for understanding patterns of competitive success in many industries. However, serious consideration of the forma- tion and role of regional clusters raises interest- ing concerns about unquestioning acceptance of these studies. On the one hand, from a geo- graphical perspective, clusters may just be about location and associated exogenous forces—resource endowments, demand, compe- tition, and infrastructure—that might be put in place by government. On the other hand, the We thank former associate editor Bert Cannella and our anonymous reviewers for their thoughtful and constructive suggestions on earlier versions of this article.  Academy of Management Review 2004, Vol. 29, No. 2, 258–271. 258