Academic journal article Management Revue

Bridging the Institutional Void: An Analytical Concept to Develop Valuable Cluster Services

Academic journal article Management Revue

Bridging the Institutional Void: An Analytical Concept to Develop Valuable Cluster Services

Article excerpt

Public policy and cluster management face a common challenge in developing sustainable clusters. Many clusters report difficulties acquiring membership fees once the governmental subsidies come to an end, which brings doubts as to the cluster management's capabilities and likewise to the public policy design. This paper applies the theory of institutional voids and elaborates a theoretical framework to identify cluster services. It shows that analyzing the specific institutional environment of the cluster enables the identification of valuable cluster services. As the identified institutional voids impose a competitive disadvantage on the companies, such services will increase their willingness to pay. Therewith, the article combines cluster literature and institutional theory to draw synergies on participation incentives.

Key words: cluster services, institutional voids, small and medium sized enterprises; participation incentives, competitive advantage

(JEL: D02, 125, 017, J24, L14, L25, L26, P33)

Introduction

Porter (1998) detailed that the affiliation to a cluster contributes to the competitiveness of single firms since this increases productivity, enhances innovation and stimulates new businesses. His research entailed an extensive increase of cluster initiatives and cluster strategies by governments, reproducing Porter's research (FromholdEisebith & Eisebith, 2005). Nevertheless, many of these clusters are said not to be sustainable as they face difficulties acquiring membership fees once the governmental subsidies come to an end (Brown et al., 2007).

However, clusters have the potential to direct their services to voids in the institutional environment. Thus, copying Porter's approach is not adequate; but if the services the cluster provides are targeted at institutional voids encountered by the companies conducting business in such environments, they will reduce competitive disadvantages and thus generate incentives to participate in the cluster and pay for such services.

This paper will provide detail on such environments of less efficient institutional setups. The concept of institutional voids is introduced and elaborated to specify certain aspects of such environments. The paper then elaborates a framework based on institutional voids that supports the definition of specific services needed by the companies. This framework is required on a conceptual level to efficiendy address policy development. The original framework was developed for the context of transition economies. The author lived in this context for three years and worked on cluster development. Nevertheless, it is believed that this framework can be applied to other contexts. The difference will be in the deepness and level of the institutional voids even though their sources will be similar.

Thus, the paper contributes to the cluster literature in combining it with institutional theory. It provides a theoretical framework to analyze the institutional environment a cluster is placed in and to develop tailor made cluster services out of this analysis.

The concept of institutional voids

New institutional economics tells us that "institutions determined the performance of economies" (North, 1990, p. 137), implying that the key to superior economic performance is having efficient institutions. Efficient institutions are those that solve problems of measuring and enforcing connected to a transaction at the lowest possible transaction costs. Furthermore, institutions are efficient if they include incentives to create and enforce property rights as the cornerstone of human interaction (North, 1990).

Generalizing these observations leads to the conclusion that transaction costs in environments with less efficient institutional setups are higher since they lack efficient formal constraints that guarantee contract enforcement and profitable markets. The lack of such formal constraints is in turn commonly substituted by informal mechanisms (North, 1990). …

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