Clusters And Their Development Essay

1510 words - 6 pages

1. IntroductionThis report begins with a short background description of where the idea of industrial clustering came from and a summary of industry cluster characteristics. Next it outlines the potential advantages and disadvantages clusters provide regional economies. In conclusion, I will summarise by advising whether or not Development Agency should concentrate its resources on development of clusters.2. BackgroundMore than hundred years ago Alfred Marshall came up with the idea that a success of national economy does depend on the development of localised concentrations of industrial specialisation. He stated that during 19th century, Britain's economic growth was a cause for the development of several examples of localised industries. Recently, Michael Porter updated Marshall's concept of industrial localisation, "...in particular his identification of contemporary local agglomerations, based on a large-scale empirical analysis of the internationally competitive industries for several countries, has been especially influential."3. Industry cluster characteristics"Professor Michael Porter summarised the concept of clusters as follows:A cluster is a critical mass of companies in a particular field in a particular location, whether it is a country, a state or region, or even a city. Clusters take varying forms depending on their depth and sophistication, but most include a group of companies, suppliers of specialised inputs, components, machinery, and services, and firms in related industries. Clusters also often include firms in downstream industries, producers of complementary products, specialised infrastructure providers and other institutions that provide specialised training, education, information, research, and technical support, such as universities, and standard-setting agencies. Government agencies that significantly influence a cluster can also be considered a part of it."Each cluster is unique as a result of differences in industry sectors, number and sizes of firms, purchase-sale linkages, and extent of firm's internal cooperation and interaction.According to Markusen (1994) four general types of clusters have been identified:"Marshallian clusters" usually consist of locally owned, small and medium-sized businesses, which specialise in craft-based, high technology, or producer services industries."Hub and spoke clusters" are dominated by one or several large firms surrounded by smaller suppliers and related activities. There is cooperation between small and large firms, generally on the terms of the large firms."Satellite platforms" are industry clusters dominated by the branches of large, externally based and relatively independent firms. A small amount of trade carries out amongst the cluster's branch, and the occurrence of by-product activities is relatively small.Finally "state-anchored industry clusters" are regions where the local business structure is dominated by a public or non-profit organisation. For example,...

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