The authors first present a macro-level background to the idea of ‘connectivity’, based on a review of the systemic view in the literature on innovation and industrial/business clusters, linking the two to demonstrate the relevance of organizational forms (clusters) to the innovation process. They then identify management considerations for organizing appropriate competencies and leveraging firm-specific assets, and outline management issues relating to externalities, innovation and the management of change – the essential elements of organizational learning. An ‘Organizational Learning System’ model is developed with a view to better understanding the innovation process of cluster-based SMEs. In light of this discussion, the authors offer an overview of innovation in UK firms based on an initial random survey of 6,000 small and medium-sized enterprises (SMEs). This is followed by two case studies of the industrial clustering process, with particular reference to examples of high-technology clusters in the UK, identifying some of the key factors connecting firms in the high-technology circuit. The paper concludes with a discussion of policy considerations, at the level of both the firm and government.
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