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Paradoxically, the enduring competitive advantages in a global economy lie increasingly in local things-knowledge, relationships, and motivation that distant rivals cannot match.

CLUSTERS AND THE NEW ECONOMICS Of COMPETITION

BY MICHAEL E. PORTER

N

ow THAT COMPANIES can source capital; goods, information, and technology from around the world, often with the click of a mouse, much of the conventional wisdom ahout how companies and nations compete needs to he overhauled. In theory, more open glohal markets and faster transportation and communication should diminish the role of location in competition. After all, anything that can he efficiently sourced from a distance through glohal markets and corporate networks is availahle to any company and therefore is essentially nullified as a source of competitive advantage.

Michael E. Porter is the C. Roland Chiistensen Professor of Business Administration at the Harvard Business School in Boston, Massachusetts. Further discussion of clusters can be found in two new essays-"Clusters and Competition" and "Competing Across Locations" - in his new collection titled On Competition (Harvard Business School Press, 1998}.

HARVARD BUSINESS REVIEW

November-December 1998

77

CLUSTERS AND THE NEW ECONOMICS OF COMPETITION

But if location matters less, why, then, is it true that the odds of finding a world-class mutual-fund company in Boston are much higher than in most any other place? Why could the same be said of textile-related companies in North Carolina and South Carolina, of high-performance auto companies in southern Germany, or of fashion shoe companies in northern Italy? Today's economic map of the world is dominated by wbat I call clusters: critical masses-in one place-of unusual competitive success in particular fields. Clusters are a striking feature of virtually every national, regional, state, and even metropolitan economy, especially in more economically advanced nations. Silicon Valley and...