Summary
Regional clusters have gained great popularity with international development agencies, local authorities, planners, and corporate strategists, as a means of achieving greater competitiveness and economic growth. A considerable body of work has rendered strong theoretical and empirical support to the cluster approach and governments have poured in enormous amounts of funds to promote and facilitate cluster strategies. Yet, not all clusters are sustainable. This paper pulls together insights from knowledge management, strategic management as well as social network, social identity, and social exchange theories to provide a comprehensive understanding of the socio-political dynamics of clusters. Specifically, it is argued that the competitiveness of regional clusters can be compromised by the development of a homogeneous macroculture, social identity discrepant, power imbalance, market rationalization, lack of untraded interdependencies and overwhelming negative externalities.
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Extract
Cluster Competitiveness: The Six Negative Forces
Introduction
Regional clusters have been touted as a way of achieving growth through increased operational efficiency, faster innovations and more successful entrepreneurial startups (Krugman, 1991; Scott, 1998; Martin & Sunley 1998; Porter 1998). Many case studies show that clustering enhances competitiveness because of collective efficiency and cohesive network relationships that develop (Bartelman, Caballero & Lyons, 1994; Martin & Ottaviano, 2001; Nadri & Schmitz, 1999; Rabellotti, 1999; Schmitz, 1995). The agglomeration literature generally underscores positive cluster dynamics that generate positive self-reinforcing feedback loops, leading to further growth and higher profitability. As such, many governments try to promote the development of regional clusters by offering tax benefits, financial incentives, and infrastructural facilities to encourage foreign multinational corporations and entrepreneurial firms to relocate in favor of their clusters (Schmitz, 2000; World Bank, 2000).Spatial competitiveness is the ability of a regional economy to not only attract and keep viable business enterprises with stable or increasing market shares, but also to sustain or enhance the living standards of its residents (Storper, 1995; Begg, 1999). Regional economies compete among themselves based on their competitive advantages such as superior technology, state-of the-art infrastructure and institutional capital, or comparative advantages such as wage flexibility and exchange rate favorability (Camagni, 2002). As such, the competitiveness of regional economies may change over time (Gardiner, Martin & Tyler, 2004).To ensure sustainable inflow of resources, clusters compete with one another to attract finance, entrepreneurial talent and managerial capabilities by developing cluster-specific knowledge assets, creating superior market value, offering promising innovative capability, and providing up-to-date infrastructure. Clusters do not stand in splendid isolation. Rather, they are pitched against one another by dynamic competitive forces in an ongoing battle for scarce resources. Regional economies that face competitive or comparative disadvantages may become trapped in "spirals of relative decline" when their firms find it ...See the full content of this document
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