Application of Porters Diamond Model of Competitive Advantage in Identifying Innovative Potential of Regions

Using Porter's diamond model of competitive advantage, the paper aims to identify innovative potential of small and medium sized enterprises located in two regions of structural change: Brandenburg in Eastern Germany and Lubuskie Voivodeship in Poland. A crucial intention of the authors is to demonstrate a catalyst effect of industrial cluster formation on firm innovation propensity and sustained regional development as well as to make entrepreneurs and local policy makers more conscious about advantages of reciprocal interactions.