Chapter 7: Clusters and CompetitionNew Agendas for Companies, Governments and Institutions

What Are Clusters?

• Today’s economic map of the world is characterized by “clusters.”

• A cluster is a geographic concentration of related companies, organizations, and institutions in a particular field that can be present in a region, state, or nation.

• Clusters arise because they raise a company's productivity, which is influenced by local assets and the presence of like firms, institutions, and infrastructure that surround it.

Historical and Intellectual Antecedents:Cluster Theory

First

• “Externalities of specialized industrial location”Principles ofEconomics, 1890, Alfred Marshall

Past

• Attention to geography or location has been minimal.

Now

• Clusters constitute an important multi-organization form,• Central influence on competition• prominent characteristic of economy.

Location and competition

• Location affects competitive advantage through its influence on productivity and on productivity growth.

• Prosperity depends on the productivity with which factors are used and upgraded in a particular location.

Cluster and Developing Economies

• The development of well functioning clusters is one of the essential steps in moving to an advanced economy.

• Firms must often vertically integrate.

• Backward

• Forward

• Economic activity concentrated around large capital cities.

• This pattern inflicts high cost in terms of productivity.

• Congestion

• Bottlenecks

• Inflexibility lead to high administrative cost

Internal trade and investment

Cluster and Competitive Advantage:Clusters affect competition

First

• Increase the productivity

Second

• Increase capacity for innovation

Third

• Stimulating new business to support innovation and expand the cluster

Cluster and Productivity

- Access to specialized input and employee

- Access to information

- Complementarities

- Access to institutions and public good

- Incentives and performance measurement

The Birth, Evolution and Decline of Clusters

Birth

DevelopmentDecline

Cluster versus industrial policy

• Industrial policy Given the importance of scale. Supported through subsidies. Eliminating destructive or wasteful internal competition. Selective protection from imports. Restricting foreign investment. The goal is to gain a larger share for a particular nation. Aim to distort competition in favor of a particular location

Cluster versus industrial policy

• Cluster policy Focus on removing constraints to improve their productivity.

Welcome foreign firms that enhance cluster externalities and productivity.

All activities in nation contribute directly to local employment and investment.

Open the local market to imports that boost local efficiency. Upgrade local demand condition and stimulate rivalry. Do not emphasize market share but dynamic improvement.

Government influences on cluster upgrading

Cluster and overall economic policy

• Coordination among transportation systems, energy networks, and other areas among neighboring countries can benefit productivity.

The corporate role in cluster development

• The role of trade associations and collective bodies.

• Corporate location.

Private Sector Influences on Cluster Upgrading

Organizing Cluster Development Initiatives

• A shared understanding of competitiveness and the role of clusters in competitive advantages.

• A focus on removing obstacles and easing constraints to cluster upgrading.

• A structure that embraces all clusters in a nation or state

• Appropriate cluster boundaries.

• Wide involvement of cluster participants and associated instutions.

Micro clusters in Catalonia

• History

• 13% of the Spain’s population

• 20% of GDP, 40% is Industrial Export.

• Product: furniture and wooden toys, agricultural machinery, jewelry, leather, knitting, processed meat, publishing and consumer electronics.

• Antoni Subirá

• Catalonia’s Minister of Industry in 1989.

• Apply the methodology to find details about strengths and weaknesses of Catalonia’s Industry.

• Trade & Commerce were reorganized

• Local Consult firm lead the series of cluster initiatives

Micro clusters in Catalonia

• Received new and more productive dialogue between government and Business.

• Broadcast sector wider in Catalonia

• Subsidies and tax cuts

• Region’s industry has benefited form cluster perspective

• The SME has numerous firms

• Improve the market access of cluster upgrading

• More research, new Technology

First

• Identified the cluster’s problems and opportunities• Find the basic concept of cluster upgrading

Second

• Study process of the consensus vision of cluster’s future

Third

• Create strategies and action steps for fulfill the vision• Specific individuals were identified to lead the action

initiatives

Process of Change Results

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