Local clusters in global value chains: Exploring dynamic linkages between Germany and Pakistan

Recent research has underlined the importance of external linkages for industrial clusters. Suppliers and buyers within a global value chain offer important external ties for cluster-based producers not only in terms of the distribution of physical goods, but also for knowledge flows and innovation. Globalization has intensified such value chain links, connecting geographically dispersed producers to global markets. Yet, there is limited research on how local clusters enter global chains or on ties between clusters in the developed and developing world. This study addresses this gap. It uses the case of the global surgical instrument industry to analyse connections and differences between the industry's leading production clusters in Germany and Pakistan. Global standards, low-cost competition, and advances in medical technology raise challenges for both clusters. The paper explores the responses to these challenges. It distinguishes between knowledge and production links to illustrate differentiation in each cluster, diverging trajectories and continuing ties. © 2005 Taylor & Francis.