Cluster formation in small audiovisual markets is rarely a single institutional act. Cluster research conceptualises cluster emergence as a “practice of clustering” built around four key activities: catalysing, coordinating, configuring, and deliberating. Regional actors are shown to use these practices to articulate an envisioned cluster future and to develop shared understandings of how to work together, making some nascent agglomerations evolve into viable clusters while others stagnate. (Stephens & Sandberg, 2020) 19 

The following subsections analyse the practical stages through which a regional audiovisual cluster begins to take shape in a fragmented, SME-dominated environment. 

3.1. Defining objectives: from structural diagnosis to focused cooperation 

The articulation of clear objectives is a critical early step in establishing a regional audiovisual cluster. Research consistently shows that initiatives with a limited number of well-defined goals are more likely to succeed than those attempting to address multiple, loosely connected ambitions (Sölvell et al., 2003). Founders must identify whether the primary objective is to increase sectoral cooperation, strengthen political representation, improve regulatory positioning, facilitate export capacity, support product development, or enable innovation uptake. Without a clearly articulated purpose, a cluster risks becoming a symbolic structure rather than an operational mechanism. 

This is particularly relevant in small film markets, where limited resources require cooperation frameworks to be focused, practical, and directly linked to companies’ operational needs. Early-stage clusters that prioritise one or two concrete objectives, such as improving access to finance, strengthening production capacity, or enabling joint market entry - are better positioned to generate tangible value and sustain engagement over time. As a representative of the Catalan Audiovisual Cluster noted,: 

“It started not as a cluster, but as a space to speak about common problems. It became clear that being together was the only way to respond to digital change and structural uncertainty” (Catalan Audiovisual Cluster interview, 2025). 

In Wallonia, highly specialised companies similarly organised around shared regional strengths to consolidate entrepreneurial capacity and scale their market positioning by forming TWIST cluster. (TWIST Cluster interview, 2025) By contrast, the Aarhus Film City illustrates a top-down pathway, where public investment in infrastructure created the conditions for long-term ecosystem development. (Filmby Aarhus interview, 2025) 

Across these models, a consistent pattern emerges sustained engagement depends less on the origin of the cluster than on its ability to deliver concrete entrepreneurial benefits. Companies commit time and resources when cooperation directly addresses constraints they face individually: such as limited access to finance, fragmented production pipelines, or weak bargaining power in international markets. 

During the focused industry workshop held in Zagreb on 26 August 2024, conceived as an initiating stage of the Croatian cluster pilot, participants did not articulate a broad cultural or advocacy mission. The workshop brought together Croatian film producers and representatives of other segments of the production pipeline, including professionals engaged in production services and related audiovisual activities. The workshop was explicitly designed as a need-finding and structural diagnosis exercise aimed at identifying practical bottlenecks within the national production ecosystem and assessing readiness for structured cooperation. 

Discussions converged around specific structural constraints: 

• micro-enterprise dominance and limited internal administrative capacity, 

• fragmented production pipelines, 

• dependence on project-based public funding, 

• difficulty accessing EU-level innovation instruments, 

• limited strategic coordination between domestic production and service production spillovers. 

Instead of proposing a comprehensive reform of the sector, producers prioritised a narrow and pragmatic objective: strengthening cooperation along the production pipeline in order to improve capacity, facilitate joint access to EU funding instruments, and enhance long-term sustainability of domestic companies. 

Across cases, sustained engagement depended less on institutional design and more on the perceived relevance of cooperation for individual companies’ operational constraints. In Croatia, the initial step of cluster initiation therefore consisted not in creating an organisation, but in articulating a clearly bounded rationale for cooperation. 

3.2. Identifying core actors and structuring membership along the production pipeline 

Cluster formation in the audiovisual sector does not begin from predefined organisational schemes or policy templates, but from existing patterns of practical cooperation among companies. In the early stages of cluster initiative (CI) development, the initiating actor almost invariably builds on already functioning business relationships, most often among enterprises that cooperate along a shared value chain (Sölvell et al., 2003; Lis & Lis, 2013). The development of the Baltic Film and Creative Tech Cluster illustrates this logic clearly. The cluster did not emerge as a top-down policy construct, but as a response to a practical need to stabilise and sustain an already formed production pipeline. Informal cooperation among producers and their partners existed prior to cluster formation; the cluster initiative formalised these relationships into an organisational structure capable of supporting continuity, innovation, and access to shared resources beyond individual projects. A similar logic informed the Croatian pilot, where discussions during the Zagreb workshop revealed that cooperation needs were already embedded in daily production practices, and the proposed cluster was understood as a way to organise and strengthen these existing dependencies rather than invent new ones. 

Finally, cluster membership is voluntary but inherently selective. Cluster organisations typically define entry criteria based on geographical scope, sectoral focus, position in the value chain, innovation potential, or peer recommendation. Such selectivity protects the cluster from unfocused expansion and ensures that cooperation remains strategically coherent rather than inclusive for its own sake. 

These findings align with Porter’s conceptualisation of clusters as systems in which competition and cooperation coexist (Porter, 1998; 2008). In his work on clusters and regional competitiveness, Porter describes clusters as geographically proximate groups of interconnected firms and associated institutions linked through complementarities across industries and value chains. From this perspective, clusters function not as neutral networks, but as entrepreneurial infrastructures that enhance productivity, innovation, and competitiveness by enabling firms to share knowledge, specialised inputs, and institutional support. This understanding is particularly relevant for small, SME-dominated European film markets, where collective coordination can compensate for structural fragmentation and limited internal capacity. 

3.3. Establishing coordination without premature institutionalisation 

Effective coordination is a critical condition for cluster development, particularly in early phases. Cluster research highlights the role of a dedicated coordinator, often described as a facilitator or cluster manager, in organising activities, mediating interests, building trust, and mobilising resources (Sölvell et al., 2003; Lindqvist et al., 2013). In practice, this coordinating function requires an identifiable organisational anchor. Cooperation does not sustain itself without a cluster organisation (CO) acting as a legal and operational entity responsible for facilitation, coordination, and representation. In project-based sectors such as film, where collaboration is frequent but continuity is weak, the CO provides the missing link between episodic cooperation and sustained collective capacity. “Without someone holding the process together, cooperation remains a series of one-off conversations rather than a shared trajectory” (BFCT interview, 2025). 

The coordinator role typically evolves over time. In early stages, it is often assumed by a founding actor and later formalised as the cluster matures. However, coordination alone is insufficient without sustained member engagement. Research identifies commitment - both strategic and operational - as a key success factor (Lis & McPhillips, 2016). This includes co-creation of priorities, participation in working groups and joint projects, engagement in international activities, and financial contribution. In SME-dominated sectors, such engagement is essential, as clusters often function as intermediaries enabling access to innovation and funding instruments beyond individual company capacity. 

This bottom-up logic is also explicitly articulated by the TWIST Cluster (Wallonia), which describes its governance model as demand-driven: 

“It's a very bottom-up approach also. So anytime we create a working group it has to come from a demand from our members. And it's not always easy to make it work, but we try to have at least one member or one enterprise that is taking a leading role in this because the idea is not us telling them what they're supposed to work on. We are a small team so we cannot really coordinate five, six, seven working groups. We have to have at least one enterprise leading that. So for example, we have one on AI and we have an enterprise that is a consultancy specialising in the use of AI to manage data, etc., and they would take a leading role in that.” 

The Catalan Audiovisual Cluster similarly describes its internal structure as fluid and member-driven, organised around thematic commissions that evolve over time: 

“Well, we are five people working in the cluster administration. They are hired by the cluster. And then we have, of course, the board members and the general assembly. It’s open to participation, structuring in different commissions according to the topics of interest. They have been evolving through time. Some of them just die because they don’t make sense anymore, and some of them reappear with time or new commissions appear. So this is quite ups and downs, let’s say. Sometimes they work very well. For example, right now we have one to promote women in tech. This is working very, very well right now, but some others just don’t work.” 

Recent studies further emphasise the stabilising role of leading enterprises and public authorities in maintaining cluster cohesion and preventing fragmentation (Hervas-Oliver & Albors-Garrigos, 2008; Belussi, 2015; Parrilli, 2019). Coordination thus functions less as administration and more as a mechanism for sustaining relational density, shared responsibility, and collective identity. 

The Croatian pilot consciously adopted a staged approach. Rather than immediately establishing a legal cluster organisation, participants explored provisional mechanisms of coordination. The draft Memorandum of Intent (MoI) prepared after the workshop serves as an intermediate instrument: it formalises intent and outlines shared objectives without imposing rigid governance structures. This sequencing aligns with the cluster initiative model, in which institutional density grows incrementally. Lis & McPhillips (2016) emphasise that member commitment—strategic and financial—must precede heavy institutionalisation. Croatia’s approach reflects an attempt to balance two risks: 

Over-formalisation before value creation → low engagement.

Insufficient coordination → fragmentation and stagnation.

By prioritising facilitation and trust-building, the pilot attempts to consolidate relational density before transitioning to a legally anchored cluster organisation. 

3.4 Formalisation of intent: The Croatian cluster initiative memorandum 

Following the Zagreb workshop, participating stakeholders agreed that the transition from exploratory dialogue to structured cooperation required an intermediate formal instrument. Rather than immediately establishing a legal cluster organisation, a Cluster Initiative Memorandum of Intent (MoI) (annexed to this deliverable) was drafted as a pre-institutional framework. 

The Memorandum does not constitute a legally binding organisation. Instead, it performs three structural functions: – it articulates shared objectives and scope of cooperation, – it defines provisional coordination principles, – and it signals collective intent towards gradual institutionalisation subject to funding and governance capacity. 

In cluster initiative theory, such instruments function as trust-building devices. They reduce ambiguity, clarify expectations, and create a minimal coordination architecture without triggering premature bureaucratisation. 

The Croatian MoI therefore represents the first formalised milestone in the cluster initiation trajectory. (In Annex) 

3.5. Funding alignment and early operationalisation 

Since the early 2000s, clusters have been recognised as strategic instruments for innovation, SME support, and regional development, and are therefore supported through dedicated EU and national funding programmes. 

In practice, cluster organisations rely on mixed funding models, typically combining four main sources: (1) membership fees, (2) governmental funding at national, regional, or local level, (3) project-based funding, primarily from EU programmes, and (4) income generated from services such as training, consulting, or brokerage activities. 

Empirical evidence from the Global Cluster Initiative Survey (GCIS) (2012) demonstrates that public funding plays a decisive role in the early development phases of cluster initiatives, accounting for approximately 54% of total revenues. As clusters mature, reliance on public funding tends to decrease, while own-source revenues increase, particularly through membership fees and service-based income (Sölvell et al., 2003; Lis & Lis, 2015). 23 

Across the EU, project-based funding represents the dominant financing mechanism, especially in small and medium-sized markets. Many clusters initially rely on national or regional structural funds, while participation in large-scale international programmes, such as Horizon Europe or Euroclusters, typically becomes feasible only once sufficient administrative capacity and coordination structures have been established. This sequencing reflects the transformation of cluster initiatives from project-based entities into more stable, membership-based organisations over time. This sequencing is not merely procedural but entrepreneurial: project-based cooperation allows companies to collectively absorb risk, engage in innovation-oriented activities, and build organisational capabilities without committing to irreversible investments. 

At the same time, membership fees generally remain a secondary but symbolically important source of income, reinforcing commitment and long-term engagement. For example, the Baltic Film and Creative Tech Cluster reports that membership fees account for approximately 10–20% of its annual budget, depending on the year. Complementary public support from national or local authorities further stabilises cluster operations and enables strategic continuity. 

Taken together, these findings underline that effective funding strategies for cluster organisations depend on alignment with EU and national policy frameworks, gradual diversification of income sources, and the development of organisational capacity. In small European film markets, where private investment capacity is limited, public and project-based funding remains essential, particularly in the early stages of cluster development. 

3.6. Managing structural tensions in small markets 

The Croatian case illustrates an additional dimension characteristic of small European film markets: the coexistence of international service production growth and fragile domestic production sustainability. Since the introduction of the rebate system in 2012, Croatia has attracted high-profile international projects, generating significant local expenditure and strengthening technical capacity. Yet stakeholders increasingly debate whether service production spillovers sufficiently benefit domestic companies. This dual economy dynamic produces structural tension: crew availability constraints, price increases, and misalignment between internationally oriented service work and long-term domestic development. In such contexts, cluster formation can function as a mediating infrastructure. By organising SMEs across the production pipeline, a cluster can facilitate knowledge transfer, align skills development strategies, and improve strategic coordination between service inflows and domestic production needs. 

Comparative cases reinforce this logic. Lithuanian cluster representatives describe their organisation as an “innovation catalyst,” enabling SMEs to participate in Horizon and other EU instruments that would remain inaccessible individually. Catalonia emphasises transversal integration of traditional audiovisual production with technological innovation and video game development, recognising that sector boundaries are increasingly porous. 

For Croatia, the production pipeline emerged as the most coherent organising principle precisely because it addresses both fragmentation and structural imbalance. The pilot situates cluster formation as a practical mechanism for strengthening entrepreneurial capacity within a constrained market environment. 

3.7. Concluding observation on the Croatian pilot 

The Croatian initiative remains at an early stage. The formal cluster organisation is yet to be established. However, the observable sequence structural diagnosis, objective definition, identification of core actors, provisional coordination, funding exploration, and intermediate formalisation corresponds closely to documented cluster initiative dynamics in European policy and research literature. The case demonstrates that in small, SME-dominated film markets, cluster formation is not a matter of institutional imitation. It is a process of aligning structural necessity, stakeholder readiness, and carefully sequenced organisational steps. Croatia thus serves as a practical test environment for understanding how regional audiovisual clusters can begin to emerge under conditions of fragmentation and limited capital accumulation.