Clusters and Competitive Advantage_2 potx

Defining clusters: industrial districts, networks and clusters Although the variety of clusters makes it difficult to define the conceptprecisely, there is no shortage of definitions in

One of the main purposes of the present study is to add to knowledge ofand the literature on clusters in the developing world by examining thephenomenon of clustering in Turkey, which is classified by the World Bank

as a middle-income developing country

Defining clusters: industrial districts, networks and clusters

Although the variety of clusters makes it difficult to define the conceptprecisely, there is no shortage of definitions in the literature According toHill and Brennan (2000, p 66), for instance, a cluster is ‘a geographic con-centration of competitive firms or establishments in the same industry thateither have close buy–sell relationships with other industries in the region,use common technologies or share a specialized labor pool’ This is similar

to the definition adopted by Rosenfeld (1995, 2000), who sees a cluster as ageographically bounded agglomeration of related firms that together are able

to achieve synergy Redman (1994, p 37) includes institutions as well anddefines clusters as a ‘pronounced geographic concentration of productionchains for one product or a range of similar products as well as linked insti-tutions that influence the competitiveness of these concentrations’ For ‘industrial districts’, a term that is sometimes used interchangeablywith ‘clusters’ in the literature, Pyke and Spengenberger (1990, p 2) provide

the following definition: ‘[Industrial] districts are geographically defined ductive systems, characterized by a large number of firms that are involved

pro-at various stages, and in various ways, in the production of a homogeneousproduct’ According to them, small and often family-owned firms, innova-tiveness and entrepreneurial spirit, interfirm cooperation and flexible productivenetworks are common features of such districts Another definition comesfrom the new industrial districts (NIDs) literature, which focuses on the set

of locational characteristics implied by flexible specialization: a district is aspatially concentrated cluster of sectorally specialized firms, with a strongset of forward and backward linkages, a common cultural and social back-ground linking economic agents and creating a behavioural code, sometimesexplicit but often implicit, and a network of public and private supportinginstitutions (Rabelotti, 1995) Biggiero (1999), on the other hand, defines indus-trial districts as ‘regional hyper-networks’, or ‘networks of firm networks’.Similarly, industrial districts are defined as a network of small andmedium-sized enterprises within geographically defined production systems(Asheim, 1994) Meanwhile for Brusco (1990, pp 14–15), industrial districtscomprise ‘a cluster of firms producing something which is homogeneous inone way or another, positioning themselves differently on the market Thus,the district could be defined as being a cluster, plus a peculiar relationshipamongst firms.’

As a final example, Markusen (1996a) sees an industrial district as a tially delimited area of trade-oriented activity with a distinctive economicspecialization Markusen classifies ‘sticky places’ (districts that demonstratedresilience in the postwar period in advanced industrialized countries) into fourbroad categories: Marshallian industrial districts (with an Italian variant); huband spoke districts (such as Boeing in Seattle and Toyota in Toyota City);satellite industrial platforms (such as the US Research Triangle Park); andstate-anchored industrial districts (such as a military base or a universityinfluence on the development of some districts) According to Markusen, manylocalities exhibit elements of all four models Silicon Valley, for instance,can be considered an industrial district in electronics, but it also has severalimportant hubs (including Hewlett Packard and Stanford University) as well

spa-as hosting large branch plants of US, Japanese, South Korean and Europeancompanies (including IBM, Hyundai, Samsung and NTK Ceramics) Further-more it is the fourth largest recipient of military contracts in the country

In Markusen’s view, therefore, it is wrong to concentrate solely on Italian-type,small-firm industrial districts as ‘sticky places’ are the complex product ofmultiple forces, including corporate strategies, industrial structures, profitcycles, state priorities and local and national politics

From the definitions reviewed above, two broad questions emerge: is it anecessary condition for a cluster to be a small-firm agglomeration, and is it

a necessary condition for a cluster to be geographically concentrated? Thesequestions have to be answered in order to differentiate clusters from industrial

districts and networks Amin and Thrift’s (1999) analysis of two districts –Santa Croce in Tuscany and the City of London, the former specializing inleather shoes and bags and the latter in financial services – is of special rele-vance in respect of the first question Santa Croce is a successful small-firmdistrict that targets the fashion-conscious end of the market Meanwhile theMarshallian structure of the City of London has undergone considerablechanges since the 1960s in that large corporations – including many multi-nationals – now have offices there Importantly, however, the concentration

of financial services has persisted, which – along with many other examples,such as car production in Detroit – signals that geographic concentration isnot peculiar to small and medium-sized enterprises Another interestingstudy that reinforces this point is Saxenian’s (1994) work, which comparesthe high technology cluster on Route 128 near Boston with Silicon Valley inCalifornia The former is dominated by vertically integrated, large companiesthat prefer to maintain control over their technology and innovations This

is manifest in the fact that companies along Route 128 are located in large,self-contained, campus-like areas In contrast Silicon Valley has a history ofindependent, ‘garage-based’ entrepreneurs It is necessary to remember at thispoint that the definitions of industrial districts cited above usually emphasizethe predominance of small and medium-sized enterprises, although it is not clear

in the literature whether this is a necessary condition for industrial districts With regard to the question of geographic concentration, many researchers,starting with Marshall (1949), have cited geographical proximity as a keycharacteristic of districts (for example Pyke and Spengenberger, 1990; Asheim,1994; Van Dijk, 1994) According to Asheim (1994, pp 93–4), ‘what distin-guishes an industrial district from other industrial agglomerations with strongexternal economies such as the Perrouxian development poles or the Japanesejust-in-time production systems is precisely the existence of agglomerationeconomies’ The latter is therefore a common feature of industrial districtsand geographic clusters, but not necessarily of networks Instead a network

is defined in more general terms as a set of high-trust relationships that areusually contractual and explicit ‘In contrast to clusters, networks are generallybased on a group of firms with restricted membership and specific, oftencontractual, business objectives The members of the network choose eachother; they agree explicitly to co-operate in some way’ (Brown and McNaughton,

2002, p 27) Based on this definition, it can be argued that network relationsare usually more cooperative in nature than are relations among cluster par-ticipants, for which competitive forces are also emphasized For example Porter(1998) points to the intense rivalry in clusters According to him, clusters offertransaction cost advantages without imposing the inflexibilities of verticalintegration or the management challenges of creating and maintaining formallinkages such as networks, alliances and partnerships (ibid., p 214) Whatcan be deduced from the above is that a network usually involves explicitand formal links among firms that are often cooperative in nature Whether

or not these are necessary conditions for networks, however, is again notentirely clear What is clear is that firms in a network are not necessarily tied

to the same location, while a cluster is a form of network that is situated in

a particular geographic location Following this rationale, clusters can be seen

as ‘localized networks’ (Van den Berg et al., 2001) involving geographically

concentrated firms from a particular sector with links that can be bothcooperative and competitive in nature Defined as such, it appears that clus-ters are a form of network, whereas industrial districts are a form of cluster Although there are certainly network relations amongst firms that are notgeographically restricted, the focus of the present study is on the role of thelocal environment in shaping competitive advantage in geographically con-centrated industries In this regard Porter’s (1998, 2000) definition exactlymatches the purposes of this study, and hence we shall define clusters asgeographic concentrations of interconnected companies and institutions in

a particular field (Porter, 1998, p 197).11 They include specialist suppliers,specialized infrastructure, other service providers and associated institutions(including universities, standards agencies and trade organizations), and alsoextend to customers and firms in related industries.12 As a final note, in many

of the definitions provided in the literature, clusters are implicitly seen asdynamic, successful and competitive This brings us to the focal point ofthis study: the theorized link between clustering and competitiveness

Clusters and competitiveness

The debate on the competitiveness of locations begins with the fundamentalquestion of whether all clusters are successful Surprisingly this question hasreceived little attention in the literature One notable exception is Amin (1994),who investigates the attributes of successful versus unsuccessful clustersbased on two Italian case studies: Santa Croce in Tuscany and Stella inNaples Santa Croce is a competitive cluster where fashionable leather shoesand bags are made, while Stella is a footwear cluster in an area with highunemployment and widespread poverty Interestingly, Amin argues thatmany of the characteristics of the Stella firms are similar to those whichhave made the clusters in Third Italy so successful For example the firms’owners are master craftsmen, the production process can respond quickly tochanging market signals, the existence of family businesses and communityties permits labour flexibility, the lack of job opportunities mean cash savings,and agglomeration and product specialization attract buyers and sellers ofraw materials and machinery According to Amin, however, the specialistshoe makers in Stella are not competitive since they have not formed them-selves into a locally networked economic system (ibid., p 62) Instead, anddespite their agglomeration, they are isolated from each other so there are noexchanges of ideas, spin-offs and economies of scale through specialization.Rather the artisans of Stella carry out ‘the tasks of the whole corporation

internally, but without any scale advantages or resources’ (ibid., p 62) Incontrast Santa Croce has a typical Marshallian industrial structure, withentrepreneurial, institutional and social interdependencies

According to Amin, firms in successful clusters act like a collective brain,although what contributes to this and why unsuccessful clusters persist arenot made clear in his analysis What is clear is that the same conditions thatare associated with internationally competitive clusters are also typical ofsome rather unsuccessful ones The main reason why these are not covered

in the literature is simply that they have had little publicity The answer tothe question posed at the beginning of this section is therefore ‘no’ – not allclusters are competitive The following subsections will discuss alternativeviews on how and why some clusters manage to become competitive whileothers do not

Flexible specialization: a sure route to competitiveness?

A stream of research called ‘the flexible specialization approach’ focuses on theorganizational features of the regional economy and highlights the embedded-ness of economic relations in broader social and political contexts The mainargument (Piore and Sabel, 1984) is that there has been a transition fromFordism to post-Fordism over the past two decades and a new post-Fordistlandscape has emerged: new industrial spaces containing small firms withspecialized, flexible production.13 This perspective has fuelled studies on theadoption of flexible manufacturing techniques and the link between industrialorganization and agglomeration Proponents of flexible specialization arguefor vertically disintegrated and locationally fixed production, derived fromexamples such as Silicon Valley (high-tech), Third Italy (semirural) andHollywood (inner city) (Amin and Thrift, 1999) In light of his study of indus-trial districts in Emilia-Romagna, Capecchi (1990) argues that the definition

of industrial districts should include flexible specialization as a necessarycondition, together with the presence of small and medium-sized enterprises(SMEs)

There are, however, strong criticisms of the view that flexible production is

a sure route to competitiveness According to Amin and Robins (1990, p 199),for instance, this view represents ‘a kind of anti-Fordist utopia’ and ‘animposing orthodoxy’, since ‘we are being asked to believe that the very laws

of capitalist development are becoming, as it were, Marshallian (as opposed toFordist)’ In their view Fordism has far from disappeared, and the tendencyfor localized agglomerations is in fact paralleled by a countervailing tendencyfor transnational networks It is therefore multinational corporations thatare the real shakers and shapers of the world economy According to thisrationale, it is possible that clusters such as ‘Santa Croce will come to performonly specific tasks in an internationally integrated value-added chain, thusrisking a shake out of firms dependent upon tasks no longer performedlocally’ (Amin, 1994, pp 59–60) In response to Amin and Robins’ (1990)

criticisms, Sabel et al (1990, p 230) state that proponents of flexible

special-ization have never claimed that all agglomerations can be viewed as flexible

production systems Sabel et al cite the Prato cluster as an example: this

cluster ‘has survived, even flourished, on the ashes of a number of crises inits history The current crisis – competition by large firms in some marketsserved by the district – might simply push the district into doing what it hasdone several times in the past: move up the price-performance curve byspecializing in higher quality items and leave the middle-range products tothe large firms’ (ibid., p 234) Thus the argument that larger corporationsand multinationals are of determining importance is regarded as overrated

As suggested by Bellini (1996), the experience of Third Italy seems to offerirrefutable evidence of the possibility of an alternative, socially progressivepath of capitalist growth, providing an intellectual base for a number of micro-interventions at the territorial level In the early 1990s, however, there was

a shift in the focus of research when some potentially negative effects offlexible production were brought to light Harrison (1994), for instance,pointed to the adverse effect that corporate flexibility might have on labourpractices in light of evidence that the use of child labour and the exploitation

of immigrants were becoming more common in some small and medium-sizedenterprises in Third Italy as global competition intensified Malizia and Feser(1999, p 224), on the other hand, underlined that cooperation betweencontracting firms did not necessarily imply an even playing field betweenpartners

It is possible to bring the transaction costs approach to bear on the flexiblespecialization debate This perspective focuses on the activities of the typicalfirm and presumes that if transaction costs are high the firm will choose tointernalize its operations Also, in a region that is relatively underdevelopedthe firm may have no choice but to handle most of its basic functions in-housesince the market may not be large enough for other companies to focusexclusively on producing the intermediate inputs or services needed Theflexible specialization approach, on the other hand, builds on the fact thatthere are dynamic external economies in districts, and the related benefit ismanifested in reduced costs, enhanced productivity and superior innovation.These opposing views are likely to continue to compete in shaping not onlythe debates in academia but also the organization and location of production

To conclude, the flexible specialization perspective has a normativedimension in that industrial districts have effectively been defined as placeswhere the dominant industries employ flexible production methods and arehighly competitive On the methodological side, what this means is that fewresearchers have conducted studies on the incidence of flexibly specializedclusters that are struggling in terms of performance In the absence of suchempirical studies, one might gain the impression that the type of industrialstructure and organization highlighted in the flexible specialization literature

is a guaranteed route to sustained competitiveness This is of course a rather

limited picture (Malizia and Feser, 1999, p 235) In the United States, forinstance, there are strong, resilient clusters that are not flexibly specialized(Porter, 1998, 2000) Such clusters have been understudied, as have ones thatare flexibly specialized but not competitive Storper (1999) thinks that althoughthe flexible specialization debate is theoretically powerful, empirical investi-gation covering a wider sectoral base is needed to determine whether or notthe experience is specific to Italy In Storper’s view there are deep historicalroots associated with the Italian districts that are difficult to generalize toother competitive cultures, such as the Anglo-American ones

Overall, although it is by no means certain that localized flexible ization is a sure route to competitiveness (Malizia and Feser, 1999, pp 237–8),

special-it is undeniable that the flexible specialization perspective has enabled us todevelop a more sophisticated understanding of clusters, where not only marketsand industries but also industrial organization, interfirm business relationsand the social situation can be instrumental in success (see Chapter 2 for adiscussion of this issue from the viewpoint of the management literature)

An approach that shares a common thread with the flexible specializationperspective is the socioeconomic approach, which emphasizes the specific rolesplayed by the social situation and politics We shall consider this in the fol-lowing subsection

The parts played by the social situation, trust and politics

This perspective is concerned with social, cultural and institutional influences

on the competitiveness of clusters Brusco (1996), for instance, argues that theimportance of knowledge accumulation exceeds that of capital accumulation.According to him, two types of knowledge are of particular importance inthis respect; namely codified knowledge (scientific and technical knowledge

in scientific journals, technical reviews and textbooks, whose conventionsand language are universal and known to the scientific community) and local

or tacit knowledge (embedded in the minds, imagination and skill of peoplewho live side by side and swap news and experiences when workingtogether) The latter type of knowledge is acquired by seeing how otherpeople do things, a process that is better managed in a local system (ibid.)Becattini and Rullani (1996, p 167) attribute special importance to a localsystem’s ability to integrate codified and contextual knowledge, and arguethat this makes the cluster concept essentially socioeconomic and thus

a ‘disciplinary hybrid’, combining economics, sociology, geography and trial organization In a similar vein, and building on the fact that phenomenathat persist over time possess some internal logic that cannot yet be explained infull, Becattini (1990) calls for a ‘socioeconomic notion’ that will link neo-classical, Marshallian and Marxian thinking According to him, ‘better equi-librium in analysis cannot be reached without the direct contribution of thenon-economists’ (ibid., p 38) Only then can we understand what leads to theconstruction of a strong image that evokes feelings of identification and

indus-belonging, ‘giving substance to expressions such as “the response of Prato”

to the lira devaluation’ (Becattini and Rullani, 1996, p 172) In contrast to thisline of thinking, Lissoni (2001) points to the possibility that even in clustersdominated by small and medium-sized firms, knowledge may be highly codi-fied and firm-specific, rather than flowing freely throughout the cluster The idea that economic action is embedded in the structures of local socialrelations paved the way for a related body of work on the role of social capital

in reducing transaction costs and facilitating network formation (Granovetter,1985) According to this literature, close social networks and thus proximitycan help social capital to develop (Brown and McNaughton, 2002) A lead-ing scholar in this field, Putnam (1993), argues that areas with low levels ofsocial capital, which in the case of Italy are concentrated in the south, haveslower rates of economic development than those with high levels of socialcapital, which are concentrated in the central and northern parts of the country.According to Putnam, repeated interaction and trust enhance social capital,and it is likely that there will be a high demand for law enforcement in areaswith low levels of social capital as a result of heightened distrust Of course it ispossible that other communities will exhibit a different type of social capital(Flora and Sharp, 1997) Cohen and Fields (1999), for example, examinedsocial capital networks in Silicon Valley and found that the understanding

of social capital influenced by Putnam’s (1993) ideas (which refer to thecomplex of local institutions and relationships of trust among economic actorsthat evolve from unique local cultures) does not fit the situation in SiliconValley Specifically, ‘networks of civic engagement’, which Putnam sees asfacilitating the activities of politics, production and exchange, have playedlittle role in Silicon Valley For instance it is not possible to say that businessrelations in Silicon Valley are embedded in family structures, given that SiliconValley is a world of strangers and newcomers Moreover there is no deephistory to speak of For Cohen and Fields, Silicon Valley is an economicspace built on a very different kind of social capital, where the pursuit ofeconomic objectives relates specifically to innovation and competitivenessand there is virtually nothing in the history of Silicon Valley to connectthese networks of innovation to civil society The high incidence of lawyers,accountants and auditors is presented as an indicator of the limited degree

of informal, familial and communitarian trust in Silicon Valley, while therapid turnover of employees reveals a commitment to innovation ratherthan to any particular company Cohen and Fields conclude that there is trust

in Silicon Valley, but it is of a specific kind This commercially valuable andperformance-focused trust is the building block of Silicon Valley’s ‘particularbrand of social capital’

Another dimension is the role of work and politics in the competitiveness

of clusters According to Brusco (1996), competitiveness and worker pation are closely linked He argues (rather dramatically) that the clusters

partici-in Emilia-Romagna show that cluster firms have at least solved some of the

key problems of large companies, that is, ‘How to involve workers andindeed all production people generally in the productive process, how tosecure the participation of workers and technicians, how to storm worldmarkets with products that are the creation not only of the hands but also ofthe heads and hearts of those that have made them’ (ibid., p 154) Trigilia’s(1990) emphasis is on the related issue of local political subcultures Followingthe institutional perspective, he examines two locales with similar socioeco-nomic but different political structures: the ‘red’ Valdelsa (furniture andglass) and the ‘white’ Bassano (shoemaking) The results of Triglia’s researchshow that not only social components such as the extended family and thelocal community, but also specific political components such as industrialrelations and the activities of governments in respect of the Catholic andcommunist subcultures have played a part in the continuing competitivesuccess of the clusters studied Regardless of its being ‘red’ or ‘white’, a politicalmovement that actively defends the collective interests of the local societyseems to matter

Innovative milieu and untraded interdependencies 14

Schumpeter (1934) stressed the importance of the past trajectory of a locale

as a sign of its future innovative capacity Accordingly the likelihood of thenext wave of an innovation to take place in its original area of development

is quite high In this regard, Lagendijk and Charles (1999) call for a distinction

to be made between scholars who emphasize the role of networking in aparticular sociocultural context, as captured in the term ‘innovative milieu’,and those who adopt the more institutional concept of ‘regional innovationsystems’ For the former, the growth of a locally embedded innovation system

is essential in shaping the social routines and strategies of actors in theregional economy, whereas the latter pay more attention to the development

of and interaction between specific technology-oriented organizations such

as universities and research centres (ibid., p 129) Borrowing from Storper(1997, p 16) however, there are a large number of universities around theworld but ‘there is a much smaller number of Silicon Valleys’, which sug-gests that there must be other necessary conditions for the development ofinnovative clusters (Brown and McNaughton, 2002)

An innovative milieu supports the development of such conditions cifically, based on the concept of knowledge spillovers in clusters, the milieuapproach focuses on the ways in which a local socioeconomic network createsfavourable conditions for innovation and competitive capacity: ‘local factorssuch as business services, public support, infrastructures, skilled labor andventure capital must be successfully woven together in order to sustain andsupport innovation’ (McDonald and Vertova, 2002, p 45) A closely relatedconcept is the ‘learning region’, in which a collective learning process byfirms takes place via social and business networks and becomes embedded

Spe-in the region (Camagni, 1991) This can also be lSpe-inked to knowledge creation

and the importance of tacit and codified knowledge in this process, as cussed above According to this approach, globalization has triggered a shift

dis-in the sources of competitive advantage towards dis-innovation and thusknowledge-based economic activity In turn, knowledge-intensive economicactivities have a high propensity to cluster within a geographic region sinceknowledge is generated and transmitted more efficiently in a local system(Audretsch, 1998)

According to Storper (1999), this approach is paralysed by the circularityinvolved in its analysis: innovation occurs because of a milieu, and a milieuexists in regions where there is innovation Instead, what really generateregion-specific assets and thus govern the sustainability of a cluster’s com-petitiveness are ‘untraded interdependencies’ Storper argues that a regioncan be seen as ‘a nexus of untraded interdependencies’ among three systems:the labour market, the input – output system and the knowledge system

A process of becoming specific that is in operation in such regions, implythat ‘there is only one Silicon Valley if one wants to be “in the know” forthe most advanced innovations in semiconductor technology’ (ibid., p 213).The same logic can be extended to explain why some clusters persist andmaintain their competitiveness over time That is, there are webs of user–producer relations and untraded interdependencies, and localization ofthese is frequent The region is then key in the supply architecture for learn-ing and innovation (ibid., p 214) The literature, however, is inconclusiveabout the conditions that lead to the emergence of an innovative milieu oruntraded interdependencies in a locale (see Chapter 2 for the managementliterature’s view on how clusters foster innovation)

Is it just an accident of history? Path dependency and the lock-in

phenomenon

This approach investigates how and why a cluster emerges in a given locationand looks at the conditions associated with its subsequent development.Understanding how certain standards or technologies persist despite thefact that they might not be optimal has been the special concern of someresearchers (David, 1985; Arthur, 1985) Regarding the initiation of a cluster,several authors (Marshall, 1949; Myrdal, 1957; Scott, 1988; Krugman, 1991a)emphasize the role of ‘historical accident’ That is, the initial pattern maysimply be an accident of history, and once established a self-reinforcing loopmight occur (Martin, 1999) Thus the initial pattern becomes locked into anarea for economic and sociocultural reasons.15 Once a locale has become acentre of activity the lock-in effect comes into operation, and even if exogenouscircumstances change (perhaps reducing the attractiveness of the site) economicagents may not want to move away and forgo the benefits of agglomeration.History, then, might be a determining factor in the spatial pattern of economicactivity A connected idea is related to sunk costs and how these bear upon

the spatial configuration of the firm, and thus upon the geography ofeconomic activity (Clark and Wrigley, 1997)

Another dimension of the issue is how the location of an agglomeration isdetermined, given that it is typical for many locations to be candidates forhosting an agglomeration In this regard the possibilities range from pureaccident and the existence of small initial differences (Henderson, 2000), tochance events that are partly shaped by the conditions prevailing in thebusiness environment offered by a location (Porter, 1990) Porter argues thateven inventions, which might change the competitive prospects of anindustry as well as the location in which it is concentrated, are more likely

to occur in places that are conducive to their development, the conditions

of which are specified in the diamond framework (see Chapter 2 for adetailed discussion of this) Hill and Brennan (2000), on the other hand,argue that it matters little why an industry locates in a certain place; what iscrucial is whether or not the conditions prevailing in the earliest stage of itsdevelopment begin to generate cluster economies In short, despite the factthat many studies conclude that ‘history matters’ (Arthur, 1986), it is notclear which industries will become locked in and which will not, and hencewhether history does or does not matter (Enright, 1990) Rauch (1993), forinstance, asks, whether history matters only when it matters a little

Negative externalities and the possible dissolution of clusters

This final subsection considers a rather overlooked aspect of the tiveness of clusters: negative externalities So far we have concentrated onthe positive externalities associated with agglomeration Pulling in the oppositedirection, however, are forces of dispersion The main concern in this respecthas traditionally been the impact of congestion on firm costs and performance(Brown and McNaughton, 2002, p 24) The effects of an increase in the costand supply of immobile factors (rents and labour costs in particular) might

competi-be serious enough to cause firms to relocate There is also a possibility that

a cluster might be locked into the rules and routines of the past, thus missingany new chances of upgrading What might be even more damaging is thatsuch a situation, which Porter (1998) calls ‘groupthink’, might be exacerbated

by a tendency to exclude newcomers or outsiders, as suggested in the socialcapital literature (Brown and McNaughton, 2002, p 25)

It has been argued that there is a tendency for clusters to disperse as theygrow (ibid.) Relatedly, Dei Ottati (1994) emphasizes the destructive aspects

of price competition, which are more evident in a cluster environment thanelsewhere She suggests that formal institutions should intervene to preventcompetition from degenerating into destructive forms Otherwise the result-ing disequilibrium might produce a chain reaction, and if the destructiveforces are sufficiently intense and prolonged a change of organizational model(that is, dissolution of the cluster) might be unavoidable Yet another forcethat might contribute to the dissolution of clusters is the globalization of

economic activities in general and the impact of multinational enterprises

in particular (Amin and Robins, 1990)

Overall, what the above discussion reveals is that very different stances, both economic and non-economic, might have an impact on thestructure and competitiveness of clusters Accordingly the foundations ofsuccess are rather different in, say, the clusters of Baden-Württemburg,where there is ‘a Darwinian competitive pressure’, than in the clusters ofThird Italy, where there is a significant role for non-economic factors as well(Staber, 1998).16 The various explanations of why a cluster might becomecompetitive and sustain its competitiveness include those related to theorganization of production (for example flexibly specialized small and medium-sized enterprises), the social and political context (for example the partplayed by trust, social capital and institutions) and the existence of relationswithin the cluster that pave the way for innovation, learning and untradedinterdependencies There is also a possibility that both the initiation andthe subsequent development of a cluster might be an accident of history, withthe cluster then being locked into the region Finally, the opposite forces ofdispersion should also be taken into account None of these explanations,however, can explain fully why certain clusters are competitive while othersare not Specifically, contrary to what the flexible specialization approachenvisages, there are competitive clusters that are not flexibly specialized andflexibly specialized clusters that are not competitive, as discussed above Onthe other hand, although the part played by the social and political situation

circum-in general and extensive collaboration among cluster participants circum-in ticular might be important to the success of some clusters, such as those inThird Italy, this cannot explain the success of prominent clusters such asSilicon Valley Similarly, the explanations that tie the competitiveness of

par-a cluster to innovpar-ation, lepar-arning par-and untrpar-aded interdependencies do notsufficiently clarify why some clusters manage to become innovative and/ordevelop untraded interdependencies while others do not Hence despite thefact that the numerous approaches in the literature have improved ourknowledge of the clustering of economic activity, we still lack a comprehensivetheory that can explain the competitiveness of clusters in full One likelycontributor to a more complete understanding of the competitiveness ofclusters is a relative latecomer to the area; namely the unique perspectiveoffered by the management discipline, which is the subject matter of thenext chapter