cluster government policy; curriculum disconnected from cluster needs; and high degrees of protectionism. These factors impede upgrading and productivity improvements and innovation. Noteworthy, a changing trend is occurring as exports of high-value products (horticulture, livestock, cut flowers and organic products) now make up almost half of all developing country exports, far more than the 21% for traditional tropical commodities such as coffee, cacao, tea or cotton (World Bank, 2009).
5.2.1 CLUSTER LIFE CYCLE Clusters are both the result of evolutionary and constructive forces.117 Analysts have found that most clusters form independently of government action and sometimes despite it. Further, they do not emerge by chance but are responses to the existence of some location advantage/s which provide the impetus for firms to emerge and agglomerate. Such advantage may be natural resource endowment; strong infrastructure; specialised skills; or research capacity in a particular field. For example, the Dutch transport cluster emerged as a consequence of a network of water ways and the Massachusetts cluster as a result of research being done at Massachusetts Institute of Technology.118 Policy imperatives can also provide the incentive for clusters to emerge. In Israel, for example, the goal to become self-sufficient in food in a hot environment with water scarcity led to the development of the country’s irrigation equipment cluster. Clusters can also emerge as a result of related clusters. The San Diego, California golf equipment cluster evolved because of the Southern California aerospace cluster which created new materials which it was discovered could produce golfing material superior to steel. Clusters can also develop around a single large lead firm which acts as the nucleus around which firms agglomerate to meet the needs of the lead firm.119 Porter’s research has estimated that once a cluster emerges, it takes 10 years to develop the depth to enjoy real competitive advantage, and the rate at which it achieves this is linked to the efficiencies in the diamond factors. As the number of firms grows, suppliers of specialised inputs are attracted; institutional support expands (specialised training, research, infrastructure and financing); and new firms emerge. And as the cluster’s contribution to the economy is recognised, it can increasingly leverage government policy in its favour. The cluster can then move to the stage of internationalisation, exporting into foreign markets and sourcing generic inputs from cheaper distant locations. As related clusters begin to intersect, diversity of learning emerges, further stimulating innovation. This was the case with the German home appliance and built-in kitchen clusters allowing Germany to gain a higher share of world markets. If the interconnections of the diamond are strong and co-reinforcing, the cluster can continue in a competitive state for decades. On the other hand, the cluster can start to decline. Unless the firms in the cluster are nimble enough to quickly source and adapt to changes, competitive advantage shifts to another location. This was the case with the golf equipment cluster where new materials from the aerospace cluster rendered the use of steel shafts by the New England cluster obsolete, shifting the competitive advantage to the San Diego California golf cluster where the new technical skills and materials were readily available.
5.2.2 CLUSTER CLASSIFICATIONS Clusters are characterised by inter-firm relationships. First, there is the “Marshallian” type which comprises many roughly equal firms that compete with one another and engage in arm’s-length transactions but do not intentionally cooperate. Second, there is the “network model” which is named after the Northern Italian industrial districts and consists of firms that are roughly equal that both compete and cooperate. Third, there is the “hub and spoke” type, characterized by a single large firm providing the substantial market for local suppliers and which generally sets the conditions for their relations (e.g., Toyota or Boeing). Fourth, there is the “satellite platform” type which comprises collections of branch plants located closer to markets and low-cost labour. Fifth, there is the “state-sponsored” type which exists because of government spending, usually military spending or government research laboratories.120
5.3 CLUSTERS, PRODUCTIVITY, INNOVATION, NEW BUSINESS FORMATION AND VALUE CHAINS A cluster in a context of a fully developed diamond where the synergies amongst the constituent parts are strong represents a complete innovation system. An economy characterised by high productivity and innovativeness would comprise a series of such eco systems with degrees of interconnections between the various diamonds or clusters.
Ibid., 226. Alberto Pezzl, “Clusters as a Tool for Competition Reinforcement: Its Support Framework at European Level and the Example of Catalonia,” The Competitiveness Institute (TCI) Network (2015): 12. 119 Porter, On Competition. 254. 120 These are discussed in greater detail in Porter, On Competition. 253-256. 117 118
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