A Service Centre Approach to Local Innovative SMEs: The Case of the Spanish Toy Valley Cluster

It is widely acknowledged that the ability of firms to compete in the new international context depends significantly on their capacity to innovate. Altering this capacity is a costly, risky process, especially for small- and medium-sized enterprises (SMEs) which face greater resource constraints than larger firms. This paper examines the interaction between geographical concentration of SMEs (clustering) and institutional support, and analyses the factors, which enable SMEs to adjust in order to service innovative, high-quality markets. Using a case study on the "Toy Valley" cluster in Spain, the impact of institutional support to innovation is assessed. In particular, we find that membership of AIJU (The Toys Institute) is associated with both higher levels of innovation and higher levels of growth compared to non-members within the same cluster. Clear policy lessons are then drawn for efficient institutional support.