This article examines the impact of foreign investment on the evolution of industry clusters. We put forward a framework for analyzing industry clusters according to their dynamism and the life-cycle stage of the industry. Foreign investment has a mostly positive impact on cluster upgrading but presents some risks, particularly when the cluster in question has low dynamism. This contention is exploredfurther through an analysis of the Information Technology (IT) cluster in Stockholm.
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Julian Birkinshaw (2000) studied this question.