Academic journal article Competition Forum

Evaluation of Cluster Competitiveness: Review, Framework and the Methodology

Academic journal article Competition Forum

Evaluation of Cluster Competitiveness: Review, Framework and the Methodology

Article excerpt

(ProQuest: ... denotes formulae omitted.)

INTRODUCTION

Over the last three decades, cluster thinking has achieved a remarkable breakthrough in the economic policy agenda, academic circles and among the business community. Clusters represent geographical concentrations of interconnected firms and associated institutions in a particular field linked by commonalities and complementarities (Porter, 1998), which together are capable of producing synergy (Rosenfeld, 1997). An unrestricted search on Google in February 2015 on 'Cluster Competitiveness' generated 1, 49, 00,000 hits. Notably, the resultant pages are of prominent institutions like the World Bank and cluster promoting institutions, such as the US Cluster Mapping Project, European Foundation of Cluster Excellence, etc. The credit for this immense popularity of clusters and their association with competitiveness goes, largely, to Michael Porter. Porter (1990) stressed that the root to competitive advantage lies at the level of clusters.

The World Economic Forum (WEF) that constantly evaluates the competitive landscape of leading nations of the world considers the contribution of clusters to be topical in the national competitiveness. According to WEF's annual Global Competitiveness Report (GCR), "the state of cluster development' in a country makes a variable under the pillar 'business sophistication.'" It is note-worthy that business sophistication and innovation are among the most significant pillars and sub-indices of the Global Competitiveness Index devised by the WEF. The ardour for clusters can also be gauged from the linkages the concept has with a wide variety of contemporary phenomena. For example, cluster development is considered to provide a way out of the 'missing middle' problem typical to small and medium enterprises (SMEs) operating in the developing countries. In some cases, clusters have been identified as a reason behind fostering regional innovations, internationalization, and so on.

The concept is so engrossing that it has attracted the attention of both governments as a policy instrument and of firms, as a strategic option. Governments in most nations are embracing the idea of promotion of clusters. The literature is full of studies on cluster development from advanced and emerging nations. To quote an example of the influence of clusters, Zeng (2010) gives credit to industry clusters as the major driver behind the unprecedented growth of China in the past four decades. China's second position after Italy, which was the pioneer in implementing clusters (originally industrial districts) on the state of cluster development among 144 countries in WEF's GCR (2014-15), proves this fact. The growth trajectory of an emerging nation like China demonstrates that Michael Porter's vision of clusters as the engines of state, regional, industrial and national competitiveness is glorious.

The analysis of 'cluster competitiveness' is still limited. Ample studies undertaken on clusters are mostly unidirectional (presented in the literature review section). These studies generally attempt to test the theoretical contributions/benefits of clustering, more particularly the impact a cluster has on firms' performance. Porter (2000) urged that clusters be viewed as a separate unit of analysis. Since the new prototype of viewing competitiveness is 'clusters', the holistic evaluation of cluster competitiveness becomes a necessity. Measurement of cluster competitiveness is significant, because it assists in assessing the degree of competition a cluster is exposed to vis-a-vis other clusters in the similar industrial sectors. Clusters also influence the local business environment. Motoyama (2008) stresses that when clusters are spread across regions; it becomes crucial for policy makers to ask why Cluster A in Region X is better as compared to Cluster B in Region Y?

Competitiveness reflects the economic prowess of an entity, be it firm, industry or a nation. …

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