The Power of the Cluster: A Dialogue Between Practice and Theory

Author: Yao Xiangjun
Publisher:
Publish Date: 2006-06-01
Features: The concept of "cluster" has yet to form a unified definition. "Cluster" is also known as "industrial cluster," "firm cluster," "regional cluster," "local production system," "new industrial region," and other terms, all defining the same economic phenomenon from different perspectives. The definition by Michael Porter, a professor at Harvard Business School, is: an industrial cluster is a geographical agglomeration of interconnected firms and institutions in a specific field. The upstream of a cluster includes suppliers of raw materials, components, machinery, equipment, and services, as well as suppliers of specialized infrastructure and related services. It extends downstream to sales channels and customers, and horizontally to manufacturers of complementary products and firms related in technology, skills, or shared inputs. Finally, many clusters also include government and other relevant institutions, such as universities, standard-setting organizations, think tanks, vocational training institutions, and chambers of commerce, which provide specialized training, education, information, research, and technical support. From Porter's definition of clusters, we can derive two key characteristics: industrial interconnectedness and spatial agglomeration. The unity of industrial interconnectedness and spatial agglomeration makes clusters distinct from internal network organizations of firms—they are externalized network organizations—and from general economic regions (such as ordinary cities)—where numerous firms and institutions exhibit close industrial ties. Industrial clusters have long existed and have expanded in scale and number since the Industrial Revolution. However, in the modern development of capitalism, with the concentration and monopoly of capital, the increasing large-scale and highly modernized production, and the constant attention drawn by emerging large companies, giant companies, and multinational corporations, the development of small and medium-sized enterprises has long been neglected. In the late 1970s and early 1980s, facing a global economic crisis, some regions showed signs of economic decline: large companies went bankrupt, a large number of workers lost their jobs, and people's quality of life relatively declined. At the same time, many industrial districts with concentrated small and medium-sized enterprises demonstrated remarkable growth momentum, attracting worldwide attention. Foreign economists have been concerned with the phenomenon of industrial clusters since the 19th century, from the external economy theories of Marshall and Krugman to the agglomeration economy theories of Webb and Hoover, all emphasizing the advantages of industrial ties and specialized division of labor brought by geographical concentration. Porter incorporated industrial clusters into the analytical framework of competitive advantage theory, pioneered the new competitive economy theory, and led the study of industrial clusters to become a trend in contemporary world economic research. By the late 20th century, industrial clusters had become a shared focus of economic geography, economics, management, and sociology, and had drawn great interest from decision-making and industrial planning departments. The United Nations Industrial Development Organization (UNIDO) and the Organization for Economic Cooperation and Development (OECD) have vigorously promoted and popularized cluster strategies. The reason industrial clusters have attracted such high global attention lies in their strong vitality and competitiveness. In the United States, there are approximately 380 industrial clusters, employing 57% of the labor force and creating 61% of the national output. Among them, Silicon Valley in California is home to tens of thousands of high-tech firms, accounting for 40% of the nation's sales. In Italy, over 70% of manufacturing, more than 30% of employment, and over 40% of exports are achieved through industrial clusters, with the northeastern and central regions ("Third Italy") being typical. The textile, home appliance, jewelry, food, and metal fiber clusters in these regions have formed an important national competitive advantage. India has about 350 industrial clusters, with export products accounting for 60% of the nation's total, among which the IT industry in Bangalore alone accounts for 25% of exports. Other regions, such as Baden-Württemberg in Germany, Oenak in France, Jutland in Denmark, Sm?land in Sweden, and Barcelona in Spain, have also demonstrated outstanding performance with their industrial clusters. The immense power of industrial clusters has been fully validated in China. In regions with favorable economic environments, industrial clusters often thrive, and their regional economies frequently show strong growth. Cluster economy has become one of the most dynamic economic forces in China. P8-9