The competitive advantage of clusters: Cluster organisations and greenfield FDI in the European life sciences industry

•The relationship between cluster organisations and greenfield FDI is assessed.•Cluster organisations have only a small effect on attracting greenfield FDI.•Cluster organisations only help to attract lower-end foreign activities.

This paper examines the effect of cluster organisations on the international competitive advantages of clusters in the European life sciences industry. Data on coordinated cluster organisations are used to assess whether cluster development policies enhance the attractiveness of clusters to multinational corporations (MNCs). We estimate mixed logit models using a sample of 481 greenfield investments by life sciences MNCs in West-European regions during the period 2010-2013. Contrary to the beliefs of policymakers, our results indicate that both the presence of cluster organisations and higher-order activities of cluster organisations have only a small effect in attracting greenfield investments. In addition, cluster organisations help attract economic activities with less specific location requirements, such as production plants and sales and marketing offices. This finding provides valuable insights for policymakers, as investing public funds in cluster organisations is not found to attract high value-added business activities, such as those that occur in headquarters and R&D facilities, which are often the target of such investments.