Cluster Theory

Cluster Theory and the Small Business

206 - 228

Cluster Theory and Practice: Advantages for the Small Business Locating in a Vibrant Cluster

Adrian T.H. Kuah Huddersfield University Business School Huddersfield UK

Abstract: This paper seeks to review the state of knowledge to this much talked-about paradigm, first made famous by Porter (1990). Clusters are a striking and common feature in today’s economy. Nonetheless, this phenomenon is not exactly new and has been the object of attention from a wide variety of social scientists for much of this century. In the last ten years, this phenomenon has attracted renewed interest from academics, practitioners, and the British Government - who have become aware of its central importance in competitive strategy. An understanding of clusters adds an important dimension to the more commonly debated role of personal contact networks in the success of entrepreneurial small business.

INTRODUCTION The marketing-entrepreneurship interface has rightly considered the role of personal contact networks to be fundamental to the successful survival and growth of the small business (see, for example: Carson et al, 2000; Chaston, 2000; Shaw, 2000; Hill and McGowan, 2001; Shaw, 2002). Equally some of these personal contact networks will be enacted within an industrial district, or to use the contemporary phrase as popularised by Porter (1990) – a cluster. There may well be substantial advantages for the new entrepreneur in setting up in an established cluster, and concomitant disadvantages in not locating in such an environment. In their role as sub contractors, small firms will find business within the cluster, whilst in their role as aggressive opportunity seekers the turbulence and dynamism in the cluster will throw up opportunities to be sought. Indeed the origin of a cluster may well be the initial location decision made by entrepreneur. In 1989, the garage on Adison Avenue, Palo Alto, in which Hewlett and Packard started...