Academic journal article Business: Theory and Practice

Cluster Concept in Policy Planning Documents: The Cases of Latvia and Northern Cyprus

Academic journal article Business: Theory and Practice

Cluster Concept in Policy Planning Documents: The Cases of Latvia and Northern Cyprus

Article excerpt

Introduction

The founder of modern cluster theory, Michael E. Porter (1990, 1998a, 1998b, 1998c, 2000) initially defined a cluster as a group of interconnected industries, while in his later studies the definition was enhanced and a cluster was defined as a geographic concentration of interconnected companies and institutions working in a common field (industry), and the companies are both interrelated and supplementary. Economic theoreticians suggest considering also other indicators when defining a cluster: cooperation links, geographic aspects, product assortments, sizes of companies, etc. According to Knooringa and Meyer-Stamer (1998), a cluster is one of the types of cooperation. Horizontal and vertical cooperation are specific to a cluster (Pachura 2010; Cook 2010). A cluster is a group of geographically close companies (Saxenian 1994) that often produce the same product (Arthur 1990; Sorenson, Audia 2000) and the companies share the same development vision and supportive infrastructure (Cooke, Huggins 2003). A cluster is a system that makes links between the private and governmental sector (Shakya 2009). H. Rocha and R. Sternberg (2005) propose three cluster dimensions: geographic co-location (companies are located in one region); a network of cooperative companies (companies have official, social, and economic links among themselves) and a network of cooperative organizations (not only companies are interconnected, but also various governmental and nongovernmental organizations, including educational institutions).

Economic theoreticians outlined several regional cluster dimensions. First, a regional cluster is composed of companies engaged in one industry. A company engaged in one industry is complemented by interconnected companies and institutions, thus forming formal and informal links between companies, governmental institutions, nongovernmental institutions, financial institutions, educational and research institutions, and other institutions (Porter 1998a, 1998b, 1998c, 2000; Saxenian 1994; Shakya 2009; Rocha, Steinberg 2005; Rocha 2004). All the mentioned factors are united by the regional or geographic dimension which ensures that companies and institutions are located geographically close to each other. The geographical aspect is the most important prerequisite in cluster development (Porter 2000; Delgado et al. 2010, 2011). The definition of regional cluster arises from the dimensions mentioned by the authors: a regional cluster is a form of informal cooperation and interactions among companies of one industry, in which interconnected and complementary companies, scientific, educational, and governmental institutions and other institutions, located in the same region, are involved (Garanti 2013; Garanti, Zvirbule-Berzina 2013a).

Both economic theoreticians and practitioners and the EU and national institutions concerned are aware of the role of regional clusters, thus economic development based on regional clusters is fostered by means of policy and strategic planning documents at the international, national, and regional level. The authors of the present research review the policy planning processes in two different countries--Latvia and Northern Cyprus. The country context is new and the authors have several reasons for this choice. First, Latvia was a country of the former Soviet Union that regained its independence in 1991 and experienced economic growth since then. After joining the EU in 2004, its economic growth was even faster, besides, the accession to the EU contributed to the ideas of economic growth based on knowledge and clusters that were introduced in policy and strategic planning documents at all the levels within a short period. By addressing the significance of cluster-based economic development in policy planning documents, presently a strong IT cluster has emerged in Riga region and several new clusters (including in the forest, furniture, and food industries) are presently in the stage of early development. …

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