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Article Excerpt
Introduction
The creation of clusters as a mechanism for economic growth is becoming a popular option among policy makers around the world. The evolution of this field can be traced back to the work of geographers on "localisation of economic activities." The contribution by geographers can be traced back to von Thunen's "The Isolated State" (von Thunen, 1826). The analysis focus is on land rental, explaining how agricultural production and the usage of land tend to agglomerate around a city.
The mentioned work was then followed by Marshall's (1890) "industrial districts" framework, which links firms' locations with economic performance, where firms choose to cluster at a certain location because of externalities advantages that can be derived from there. Other reasons for the observed phenomenon of geographically concentrated industrial activities include scale-economies considerations such as reduction of production and delivery costs (Weber, 1909), as well as the ability to become dominant players in the world markets for products such as furniture, shoes, and musical instruments, wherein the ability to innovate are key competitive characteristics (Becattini, 1990; Brusco, 1982, 1990; Dei Ottati, 1994). Harris (1954) and Pred (1966) both discuss the point that when firms choose a certain location because of identified benefits like access to markets and suppliers, conditions start evolving, resulting in improvements which are then enjoyed by all the other firms at the location. This strand of economic geography literature documents the impact of proximity on regional economic performance.
Perhaps more importantly is the contrast it makes with less active economic regions. Christaller (1933) observed that highly active locations are surrounded by areas with significantly low market activity. This is because of the fact that the spillovers from the active central region decrease with distance. Losch (1940) then proposed that economic activities can only be undertaken at a certain limited number of locations depending on the availability of economic resources at each location. Obviously, more than mere proximity is required to achieve a certain level of success.
In the 1980s the development in "Third Italy" drew a lot of interest. The studies noted the strong economic development in the areas of northeast and central Italy, compared with the lower performing region in southern and northwest Italy, also called "Second Italy." Northwest or "First Italy" is the traditionally rich region, which was seen to be experiencing a downturn. The significant developments in "Third Italy" were characterized by a concentration or clustering of firms in specific locations according to industrial sectors.
The interest sparked by "Third Italy" has led to other numerous cluster studies in various other countries: Germany (Semlinger, 1993), the United States (Porter, 2001; Saxenian, 1994), Japan (Friedman, 1988), New Zealand (Ffowcs-Williams, 1997), and Norway (Hauknes, 1999). The growing literature on clustering strayed into strategic management's view. The following section looks at the interest of using clusters as a way to generate strategic competitive advantage. These studies showed the promise of clusters to be a source for a nation's competitiveness. Interest in creating and managing clusters thus became imperative.
Michael Porter's "Competitive Advantage of Nations" (1990), which highlighted the powerful potential of industrial clusters, proposed the "diamond model," which explains the industrial dynamics that can improve a firm's performance externally. This is a key event in the evolution of the concept, as Porter's successful marketing of the cluster has pushed it to the front of research and policy arenas, spawning a significant spurt of cluster initiatives across the globe.
This study was initiated because of the desire to gain an understanding of the global cluster phenomenon. In spite of the popularity of the cluster strategy, the commonly used frameworks are not without critics. Later in this paper, in the fourth section, it is argued that the most popular framework--the "diamond model"--could not always explain the difference between a successful and lackluster cluster. The key toward understanding such a difference is a clear understanding of how a cluster works. In order to do so, the definition of what a cluster is must first be clarified. Thus, the first section of this paper provides the definition of a cluster, as well as a good understanding of the workings or the dynamics of a cluster. The fourth section looks at the various cluster policies and initiatives that have been practiced up to now in order to point out a piecemeal understanding of clusters from a variety of approaches that seem to have been recorded as a mixed bag of hits and misses. Thus, the fifth section, wherein the criticisms of the cluster "diamond" framework are reviewed, provides the basis for the research question driving this paper--how to bridge the gaps or failings of the major/popular cluster framework, and what initiatives used by cluster managers around the globe would thus enable them to have a framework that is sufficient to enable them to sustain and develop their clusters into becoming the economic engines for growth they had hoped for?
It is the belief of this paper that the existing popularly used frameworks are not enough to allow cluster developers and policy makers to attain insights that can enable them to design and take measures toward ensuring the desired synergy to materialize. This paper argues that a more comprehensive framework is needed to diagnose and perhaps either repair a weak cluster or tweak an already successful cluster to the next level. Policy makers and cluster developers would benefit more with a tool that provides a comprehensive analysis and understanding of individual clusters according to each unique context. Such deep understanding of the cluster would pave the way toward the formulation of initiatives that not only would help toward the creation of a cluster but, more importantly, would ensure its dynamic performance that is both sustainable and that has further growth potential.
The paper ends by proposing that such a need can be met through an understanding of the cluster lifecycle and the dynamics impacting on a cluster's performance. This framework is argued to be more holistic in the sense that it addresses the two major needs for effective cluster management. First, it provides the ability for one to understand that each cluster is unique in terms of their growth trajectory, wherein different stages of lifecycle will require different strategies. Second, instead of providing the "battleground" view of the Porter's model, which looks at clusters from the perspective of a single actor, the framework provides a "helicopter view" of all the actors in a cluster. The policy maker can be served better by these two paradigm shifts, as their objective is after all, an entire cluster's performance rather than an individual actor within a cluster.
Defining Cluster
What does the "cluster" concept mean? Porter (1998) pointed out that contrary to the global development trend of globalization; location is becoming more important, especially in organizations' efforts to secure competitive advantage. Porter here can be seen as echoing Marshall's (1890) discussion on "the concentration of specialized industries in particular localities."
Economic geographers like Scott (1998), Amin and Thrift (1994), Harrison (1992), Harrison, Kelley, and Grant (1996), Markusen (1998), and Asheim (2000) also discuss the subject. They came up with concepts such as local industrial specialization, spatial economic agglomeration, and regional development to discuss the trend. Furthermore, numerous terminologies have been suggested to define the concept--"industrial districts," "new industrial spaces," "territorial production complexes," "neo-Marshallian nodes," "regional innovation milieux," "network regions," and "learning regions." However, these concepts were received with less widespread acceptance and application than when compared with those offered by business managers.
The most popular concept to date is the "cluster" concept proposed by Porter (1998). He defined cluster as "geographic concentrations of interconnected companies, specialised suppliers, service providers, firms in related industries, and associated institutions (for example, universities, standards agencies, and trade associations) in particular fields that compete but also co-operate" and as "a form of network that occurs within a geographic location, in which the proximity of firms and institutions ensures certain forms of commonality and increases the frequency and impact of interactions." The concept was further strengthened by his diamond framework (see Figure 1).
[FIGURE 1 OMITTED]
Rosenfeld (1997) highlighted the importance of the ability to produce synergy by and among the organizations. Feser (1998) suggested that what defines a cluster is not only the firms but also the "supporting institutions." Roelandt and den Hertog (1999) described cluster as a value-adding production chain. Simmie and Sennett (1999) proposed that clusters could be better analyzed by looking at the supply chains. Enright (1996) defines clusters based on proximity between the organizations. To sum it up, according to Van der Berg, Braun, and van Winden (2001), "Tile popular term cluster is most closely related to this local or regional dimension of networks ... Most definitions share the notion of clusters as localised networks of specialised organisations, whose production processes are closely linked through the exchange of goods, services and/or knowledge."
The number of definitions reviewed clearly demonstrated that there is no single unified definition existing that can be adopted. However, it can be seen that there are groups of definitions that share similarities--spatial-based, industrial sector-based, and measured variables-based definitions. Furthermore, it can be seen that there are a number of recurring or common themes--link to performance, geographical concentration and/or proximity, cluster actors, and linkages and interrelationships--which might be suggesting toward a convergence among the experts on how clusters are being viewed (Almeida & Kogut, 1997; Audretsch & Feldman, 1996a, 1996b; Cooper & Foha, 2000; Enright, 1996; Feldman, 2001; Feldman & Francis, 2003, 2004; Feldman, Francis, & Bercovitz, 2005; Feser, 1998; Maggioni, 2002; Prevezer, 1997; Porter, 1998; Rosenfeld, 1997; Roelandt & den Hertog, 1999; Simmie & Sennett, 2001; Van der Berg et al., 2001).
For the purpose of this study, a cluster is thus defined as:
* a set of actors (firms from at least one industrial sector, agencies, and institutions) that have commonalities and complementarities;
* a significant geographical concentration of the actors giving rise to close proximity between actors leading to linkages and interactions through formal and informal setups between the actors, agglomeration economies, and high social capital;
that
* characteristically, besides the various economic activities, undergoes a significant level of knowledge/technology-intensive activities that promote transfers as well as spillovers; and
* collectively makes a significant impact on the larger economy (regional or national).
Understanding Clusters
As mentioned previously, the definition of what a cluster is provides a foundation for understanding how a cluster works. The review of the literature revealed that a cluster is largely defined by four different common aspects of emphasis as highlighted in the definition adopted for this study. However, it was found that a helpful way to understand the four aspects that define cluster, and thus provide ourselves with a clear understanding of a cluster, is by using the human body as a metaphor for these four aspects. The reason a human body metaphor is used is because the framework proposed at the end of this paper is intended to be a diagnostic tool enabling policy makers to prescribe targeted solutions. The following section will discuss the metaphor in order to provide clearer appreciation of the workings of clusters.
Cluster Actors: The Organs
The review on...
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