Evaluate the Cluster Development Approach

Evaluate the cluster development approach

Recently the concept of 'clusters' is one that has become an extremely important feature of policy-making across both OECD and developing countries. Many people argue that the rise of globalization has actually increased, rather than decreased the importance of location, and that improving the competitiveness of regions is the key to improving the competitiveness and growth of the national economy. The concept is also associated with the increasing importance of the 'knowledge economy' (Martin & Sunley, 2001), which is seen to be the key for advanced nations to further develop. It is thought that the processes which help achieve this type of economy; technological know - how, innovation and information creation, appear to be best achieved when development is regional. Therefore policymakers have made a cluster development approach imperative for economic success. This essay will first analyse the favoured cluster development approach, which has been prescribed by Porter. It will then give three arguments explaining why the approach is currently misguided; firstly the cluster concept itself is 'misguided', secondly it leads to poor policy prescriptions and finally it can lead to social exclusion.

It is first important to define what the cluster development approach centers on. Whilst there has been extensive academic debate on the subject, the UK government has focused on Porter's analysis of a cluster in its guidance on developing policy. Porter (2000, p.15) defined clusters as 'geographic concentrations of inter-connected companies, specialized suppliers, service providers, firms in related industries, and associated institutions in a particular field that compete but also co-operate'. He also stressed how upgrading clusters can help increase innovation and productivity, and this links back to the idea of advanced nations drive towards a knowledge economy. The document 'Business Clusters in the UK: a First Assessment (http://webarchive.nationalarchives.gov.uk/+/http://www.dti.gov.uk/clusters/map/) published in 2001 was the first UK wide systematic approach to assessing the importance of clusters, and identified business groupings and networks as an important aspect of economic development (Atherton, 2003). Tulley and Berkeley (2004) argued that the document sees a cluster based approach as essential to promoting regional competitiveness and driving regional development. Peck and McGuinness (2003, cited in Tulley and Berkeley 2004, p.41) argued that the key feature of the cluster development policy is to reduce dependency on low value added sectors and move to knowledge based, high technology and high value added economies. As a result Regional Development Agencies (RDAs) in the UK had to identify and map the key clusters in their individual regions where the growth potential would be the highest. McDonald et al (2007) argued that Porter style views on cluster development have had a strong influence in a wider geographical context as well and particularly in the U.S and European countries. McDonald cited a study by the European Commission (p.40), which showed that 21 European countries found that the main thrust of the policies was to encourage the development of networking between firms and supporting agencies in clusters, and to develop local supply chains. The study finally concluded that established clusters with deep networks were desirable, and as a result policies should be geared towards enabling existing and potential clusters to develop the above characteristics. Colgan (2003) argued that Porters analysis provided a good understanding of the nature of clusters, and helps identify the factors that form and sustain them. However McDonald et al (2007) disagrees with this, and believes that Porter type view of clusters are not universally regarded as being sufficient for policy purposes. Martin and Sunley (2003, p.2) agree with this argument and claim that '...the mere popularity of a construct is by no means a guarantee of its profundity'. This essay similarly will adopt a skeptical position on this approach to cluster development.

The first argument, which supports the idea that a cluster development approach is misguided claims that states that the concept of a cluster is 'chaotic' (Martin & Sunley, 2003, p.11). McDonald et al (2007) stated that the main criticism of the Porter approach is that it takes a reductionist view that is too simplistic to provide the type of information required to develop effective cluster policies. Each cluster possesses unique traits and therefore requires policies that are tailored to these traits.

Martin and Sunley (2003) discuss the 'chaos' of the concept in depth. They believed that the term is incomplete, and has 'definitional and conceptual elasticity' (Martin & Sunley 2003, p.11), meaning that the term can be used to mean a variety of different things. Whilst some many view this versatility and applicability a positive trait, they view it to be problematic due to it equating different types of economic activity, processes by which they are done, and special scales of economic localization under a universalistic notion. This can lead to the wrong policy prescriptions being proposed for clusters. A potential issue with the ease of use of the concept can mean that different analysts, clients and policymakers can use the idea in different ways to suit their own purposes, and so the concept has no real basis of standardization or uniformity. Nauwelaers (2001) argued that the 'very openness of the cluster concept is at the same time its weakness', and Baker & Colgan (2003) agree, claiming that the extreme popularity of the term will run the risk that it becomes so used in such different circumstances that it will be applied to nearly every region and area of economic activity, that it will lose whatever analytical and predictive power it has. This could perhaps lead to a loss of credulity for the theory, which may in turn lead to its demise. Martin and Sunley also discuss the lack of clear boundaries in both the industrial sense and geographical sense. Questions that arise from these lack of boundaries ask important concerns like; 'at what level of industrial aggregation should a cluster be defined', and 'how strong do these linkages between firms have to be'. Porter himself gives no guidance in defining clear clusters and argues that clusters can 'vary in size, breadth and state of development' (1998a, p.204) (FIND THIS). As a response to these concerns posited on the theory, Gordan & McCann (2000) (FIND ARTICLE REFERENCE FOR THIS) tried to define the concept of