Cluasters and the New Economics of Competition

CLUSTERS AND THE NEW ECONOMICS OF COMPETITION

MICHAEL PORTER

PORTER GIVES REASONS WHY THE CONVENTIONAL WISDOM ABOUT HOW COMPANIES AND NATIONS COMPETE SHOULD BE RE-THOUGHT

IN THEORY OPEN GLOBAL MARKETS AND FASTER COMMINICATIONS AND TRANSPORTATION SHOULD LESSEN THE ROLE OF LOCATION IN COMPETITION

BUT WHY ARE THE PROBABILITIES OF FINDING A WORLD-CLASS MUTUAL FUND IN BOSTON MUCH HIGHER THAN IN OTHER PLACES?

THE SAME CAN BE SAID OF TEXTILE COMPANIES IN NORTH CAROLINA, HIGH PERFORMANCE AUTO COMPANIES IN SOUTHERN GERMANY AND THE FASHION SHOE COMPANIES IN NORHTERN ITALY

THESE EXAMPLES AND MANY MORE SHOW THE WORLD TODAY IS DOMINATED BY CLUSTERS. THESE ARE CRITICAL MASSES IN ONE PLACE OF UNUSUAL COMPETITIVE SUCCESS IN PARTICULAR FIELDS

A CLEAR EXAMPLE FAMILIAR TO ALL IS GIVEN BY SILICON VALLEY AND HOLLYWOOD, WHICH ARE THE BEST KNOWN CLUSTERS

CLUSTERS ARE NOT UNIQUE. THEY ARE INSTEAD HIGHLY TYPICAL IN THE WORLD ECONOMY. THEY ARE GEOGRAPHIC CONCENTRATIONS OF INTERCONNECTED COMPANIES AND INSTITUTIONS IN A PARTICULAR FIELD

CLUSTERS INCLUDE, AMONG MANY OTHER LINKS, SUPPLIERS OF SPECIALIZED INPUTS SUCH AS COMPONENTS AND MACHINERY, AND PROVIDERS OF SPECIALIZED INFRASTRUCTURE

CLUSTERS EXTEND TO: (1) CUSTOMERS, (2) MANUFACTURERS OF COMPLEMENTARY PRODUCTS, AND (3) TO COMPANIES WITH SIMILAR SKILLS, TECHNOLOGY AND INPUTS

CLUSTERS ALSO EXTEND TO GOVERNMENT, UNIVERSITIES AND OTHER INSTITUTIONS THAT PROVIDE SPECIALIZED TRAINING OR RESEARCH

A CLUSTER’S BOUNDRIES ARE DEFINED BY THE LINKAGES AND COMPLEMENTARITIES ACROSS INDUSTRIES AND INSTITUTIONS THAT ARE MOST IMPORTANT TO COMPETITION

THUS COMPETITIVE ADVANTAGE IN THE GLOBAL ECONOMY LIES IN LOCAL KNOWLEDGE, RELATIONSHIPS AND MOTIVATIONS THAT DISTANT RIVALS CANNOT MATCH

WHAT HAPPENS INSIDE COMPANIES IS IMPORTANT, BUT CLUSTERS SHOW THE BUSINESS ENVIRONMENT OUTSIDE COMPANIES IS EQUALLY IMPORTANT

THIS IS WHY EFFORTS BY RUSSIA TO BUILD THEIR OWN SILICON...