Cluster life cycle and diaspora effects: Evidence from the Indian IT cluster in Bangalore Petra Sonderegger a, ⁎, Florian Täube b a Indian Institute of Management, Bangalore, India b EBS Business School, Oestrich-Winkel, Germany article info abstract Article history: Received 27 January 2009 Received in revised form 23 August 2010 Accepted 24 August 2010 Available online 16 October 2010 The role of local clusters has been of interest to scholars and policymakers in international business alike. Research found that clusters enable a region to develop faster compared to dispersed economic activity, based mainly on a local concentration of competing and cooperating firms and sophisticated domestic demand. Locating in a cluster has certain benefits for firms stemming from pooling of human capital and supporting institutions varying by industry and international specialization. In this paper, we extend the local view of clusters and emphasize the complementary role of non-local linkages, in particular diasporas, illustrating our model employing the case of the evolution of the Bangalore IT cluster. The novelty of our paper lies in its longitudinal character. We are thereby able to identify how the roles of local and non-local networks differ across life- cycle phases; moreover, we find that diasporas can trigger or accelerate local development. We discuss implications for managers and policy makers. © 2010 Elsevier Inc. All rights reserved. Keywords: Cluster life cycle Diaspora Local networks “small ethnic worlds” Bangalore 1. Introduction Scholarship on the importance of clusters for the competitive advantage of firms emphasizes proximity and local conditions as determining factors (Porter, 1990; Tallman et al., 2004; Bell, 2005; Folta et al., 2006). In particular local social networks serve as a conduit for flows of (tacit) knowledge (Audretsch, 1998), resource mobilization (Stuart and Sorenson, 2003) and support institutions (Kenney and Patton, 2005). An important result for practitioners, cluster-based firms are shown to maintain a high pace of innovation and higher productivity compared to firms not located in clusters (Baptista and Swann, 1998). This locally-focused approach, however, has limited explanatory power for more recent (technology) clusters. For example, Saxenian and Hsu (2001) make the case that the Taiwanese diaspora in Silicon Valley leveraged alumni networks to develop Taipeh-Hsinchu as a semi-conductor manufacturing cluster. Similarly, US venture capital played a significant role in the development of IT firms around Tel Aviv (de Fontenay and Carmel, 2004). Ireland's IT industry grew partly thanks to the international division and specialization of labor (Arora et al., 2004). More recently, scholars of economic geography have begun to address the role of non-local factors for the development of clusters (Wolfe and Gertler, 2004) and firms therein, both SMEs (Chiarvesio et al., 2004) and multinational companies (MNCs) (Yeung et al., 2006). In addition, management researchers have paid closer attention to specific non-local linkages through diasporas (Nanda and Khanna, forthcoming; Oettl and Agrawal, 2008; Zaheer et al., 2009). While Oettl and Agrawal discuss diasporas as one form of international labor mobility, Nanda and Khanna (forthcoming) and Zaheer et al. (2009) explicitly investigate the role of diasporas and find them to be a substitute for (lacking) local networks or cluster capabilities. However, none Journal of International Management 16 (2010) 383–397 ⁎ Corresponding author. E-mail addresses: pcs2002@columbia.edu (P. Sonderegger), florian.taeube@ebs-siie.de (F. Täube). 1075-4253/$ – see front matter © 2010 Elsevier Inc. All rights reserved. doi:10.1016/j.intman.2010.09.008 Contents lists available at ScienceDirect Journal of International Management