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Industrial Clusters and Micro and Small Enterprises in Africa
India’s Ludhiana cluster, firms try to economize their operations by developing an extensive system of local subcontracting and task-based specializations that help to lower costs and spread risks. This extensive division of labor attracts upstream and downstream industries to the region, such as finishing services, distribution providers, and capital goods producers, which over time have deepened the region’s industrial structure (Tewari 1999). Clusters in more mature stages produce technologically more advanced products than clusters in incipient stages, and their products are often exported to international markets, where they face global competitors. Those clusters are affected directly by developments in trade policies, such as import liberalization and increased competition with imported products. Competitiveness in export markets is crucial for those clusters with regard to both price and quality. While producing technologically more advanced products or higher-quality products allows firms in clusters to expand their market access to nonlocal markets, including export markets, some aspects of industrial organization related to backward and forward linkages play a pivotal role in facilitating market expansion. As noted by Sonobe and Otsuka (2006a) for Asian clusters or by Oyelaran-Oyeyinka and McCormick (2007) for African clusters, tradermanufacturer networks play a pivotal role in linking cluster-based products and nonlocal markets. Sonobe and Otsuka (2006a) note that some cluster-based innovation is driven by merchants (as opposed to producers or engineers). A trader network is particularly effective when clusterbased producers are located in specifically confined or zoned areas (Akoten and Otsuka 2007). Using survey data of local micro and small garment producers in several clusters in Nairobi, Akoten and Otsuka (2007) show that well-educated and highly socially networked tailors who are capable of producing a certain quality of product are likely to link up with traders to become micro manufacturers over time, suggesting that transactions with traders enable micro manufacturers to outperform tailors, helping to transform the mode of industrial production in developing economies. Unlike clusters in the early stage of industrialization, more mature clusters—the Sialkot surgical instrument cluster in Pakistan, Sinos shoe cluster in Brazil, and the shoe cluster in Guadalajara, Mexico—tend to be forced to perform to global standards in matters not just of costs, but also of quality, including timely responses to new developments in market access (in particular, nontariff barriers) in export markets. In these