Introduction on business clusters

Michael E. Porter is the Bishop William Lawrence University Professor at The Institute for Strategy and Competitiveness, based at the Harvard Business School.

What are clusters

Clusters are geographic concentrations of firms and organisations working in related activities. They have been defined by Porter (1998) as geographic concentrations of interconnected companies, specialized suppliers, service providers, firms in related industries and associated institutions in particular fields that compete but also co-operate. They are often rooted in a single locality, but their boundaries will not always correspond to local administrative areas. They exists across the full array of tradable sectors although they often do not correspond to a single manufacturing or service sector as recorded by standard industrial classification. 

 Clusters Dynamics | Click on the image to watch the video

 Cluster Policy | Click on the image to watch the video

Cluster Management 1 |  Click on the image to watch the video

Cluster Management 2 |  Click on the image to watch the video

Clusters versus Networks Characteristics

Networks	Clusters
Networks allow firms access to specialised services at lower costs	Clusters attract needed specialised services to a region
Networks have restricted membership	Clusters have open membership
Networks are based on contractual agreement	Clusters are based on social values that foster trust and encourage reciprocity
Networks make it easier for firms to make complex products	Clusters generate demand for other firms with a variety of similar and related capacities
Networks are based on cooperation	Clusters take both cooperation and competition
Networks have common business goals	Clusters have collective visions

 

Source: Small Business Clustering: Accessing Knowledge through Local Networks / Dr Patrice Braun / Pam McRae-Williams / Professor Julian Lowe / Centre for Regional Innovation and Competitiveness / University of Ballarat, Australia

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Michael Porter: "Reshaping Regional Economic Development: Clusters and Regional Strategy" (form 2: 50)

Cluster benefits

Encouraging entrepreneurship

• Supporting spin-outs
• Leading a transition to the entrepreneurial university
• Supporting the launch and growth of start-ups

Stimulating innovation and collaboration

• Fostering SME-research collaboration
• Encouraging collaboration: within the cluster and between clusters
• Encouraging enterprise networks
• Better marketing of products

Coordinating public human capital

• Strengthening public-public and public-private partnerships
• Encouraging evolution in cluster activities

Ensuring quality human capital

• Updating education and training to meet the requirements of the cluster
• Ensuring availability of talent locally
• Ensuring the appeal of the area and a good quality of life

Facilitating access to financing

• Encouraging private investment
• Facilitating access to public funding
• Creating forums to seek financing 

Reducing congestion and social division

• Addressing congestion and inequalities resulting from the emergence of the cluster
• Creating mechanisms to inform the community about the activities of the cluster

Source: Clusters, Innovation & Entrepreneurship, edited by Jonathan Potter & Gabriela Miranda

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Clusters: Powerful engines of economic development in Europe - business planet

 

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The clusters concept | India example

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The cluster in Lerida helping to boost international sales - business planet

Research & editing by George Gkekas | Brand & Business Development