Forming Regional Cluster Like the Way of Region Development

Forming regional cluster like the way of region development.

Azhimova Elena, Ing.

PhD-student, Brno university of technology,

Abstract.

Consideration of questions of clusters formation are especially actual. Market reforms in economy have led to need of creation of new economic mechanisms. In that field one from the possible ways may be forming cluster in developing region.

Key words.

Cluster, industry clustering,industrial complexes, pure agglomeration, social networks.

Discussion.

The existing regional structure of the industrial enterprises represents not structured community of the enterprises of various organizational-legal forms and the types belonging various proprietors. As a result leaving of the state from among shareholders of the enterprises has led to loss of real levers of management that can be leveled by formation corresponding of clusters.

Thus, the extremely actual is consideration of problems of perfection of mechanisms of development clustersin the market environment.

There are plenty of various theories of formation and development of competitiveness, one of which is the theory of cluster managements of economy. This theory is widely used in the developed countries. Classical examples successful clustersare groups of the companies in the field of information technologies in Silicon Valley, telecommunications in Helsinki, manufacture of films in Hollywood. The term “cluster”became popular among economists from the end of 80th years. The concept of clusterrepresents the perspective tool for the analysis of economy of the region, a forming new sight at a role of regional authorities, the enterprises and other organizations aspiring increase of the competitiveness.

Application of the cluster method most actually on a regional level owing to necessity of close contact between participants of cluster, that assumes some territorial restriction.

The concept of the clustermanagements of regional economy gets special interest in a view of strengthening a role of the foreign trade activity in social and economic development of the regions, promoting economic growth. As allows to define the priority branches having economic potential and promoting increase of competitiveness, to reveal factors and the elements influencing a degree of development of competitive advantages through a prism of the external economic competitiveness.

The basic arguments of use the cluster method of regional economy management are:

1) high coordination with character of a competition and sources of achievement of competitive advantages;

2) effective maintenance of functioning of interbranch communications; distribution of technologies, skills and information;

3) an opportunity of realization of internal specialization and standardization;

4) minimization of expenses for introduction of innovations; presence in structure кластеровflexible enterprise structures - the small enterprises promoting formation of innovative points of growth due to a high degree of specialization at service of concrete industrial production.

The concept of agglomeration economies, or industry localization, has existed in economic literature since the publication of Alfred Marshall’s Principles of Economics in 1890.

While the idea of industry clustering has been present as a theoretical concept for some time it has only been popular as an economic development strategy in recent decades. Largely the result of its re-introduction in works such as Michael Porter’s The Competitive Advantage of Nations (1990) and Paul Krugman’s Geography and Trade (1991), the idea of encouraging competitiveness and facilitating economic growth through the establishment and maintenance of industry clusters has become a popular topic of study in academic literature (Henry, Barkley and Zhang 1997; Barkley and Henry 1997; Gibbs and Bernat 1997; Ellison and Glaeser 1997 and 1999; Kim, Barkley, and Henry 2000; Porter 2000 and 2004; Gabe 2003).

The success of clusters both s an analytical concept and as a local development policy has grown partly thanks to the ‘cluster theory’ developed from a business and management approach by M. Porter. Porter argues that cluster participation is an important contributor to competitiveness and competitive advantage, emphasising that clusters can influence competition by increasing productivity, innovation, flexibility and new business creation in order to achieve competitive advantage (Porter, 1998a, 1998b, 2000,2003).

In Porter’s model, four interrelated attributes influence productivity in a particular industry: factor conditions; demand conditions; related and supporting industries; and firm strategy, structure, and rivalry.

1. Factor conditions. The region’s position in factors of production, such as skilled labor or infrastructure, necessary to compete in a given industry.

2. Demand conditions. The nature of the region’s demand for the industry’s products or services.

3. Related and supporting industries. The presence or absence in the region of internationally competitive supplier industries and related industries.

4. Firm strategy, structure, and rivalry. The conditions in the region governing how companies are created, organized, and managed, and the nature of domestic rivalry (Porter, 1990, p. 71).

Each of these broad attributes has a mix of categories that contributes to the overall influence of the attribute depending on how efficiently and effectively they are deployed.

For example, factor endowment contains categories such as human resources, physical resources, knowledge resources, capital resources, and infrastructure. Firm strategy, structure, and rivalry include goals (both company and individual), the national priority/prestige of business, sustained commitment, and intensity of domestic rivalry.

Because clusters represent a more accurate unit of analysis for economic developers, are more specific than general categories such as manufacturing or agriculture, and better capture the specific needs (technologies, supply/demand issues, accessing skilled workers, etc.) of those involved, groups such as the National Governor’s Association have identified clusters as a prime target for strengthening state and regional economies and as a more efficient way for governments to focus their time and monetary resources thereby increasing efficiency (Porter 2000).

Clusters can be as simple as a geographic collection or concentration of similar industries, sometimes on a scale as small as a single town. However, they more often cover a much larger area and involve “interconnected companies, specialized suppliers, service providers, firms in related industries, and associated institutions in a particular field that compete but also cooperate” (Porter 2000, 15, emphasis added)

The first generic advantage of clusters is a productivity gain arising fromaccess to lower cost and better quality inputs from suppliers locatedtherein (Porter, 1997, 1998a and 2000; Baptista, 2000). The traditionaltreatment of these agglomeration economies rests on costminimisation dueto proximity to inputs and/or consumers. Firms within the cluster obtainhigher productivity because of better or cheaper access to specialised inputs, employees, information and institutions. Clusters also turn manyinputs that otherwise would be costly into public or semi-public goods, sincefirms gain free access to many resources such as skilled labour, advice,technology, infrastructure, educational programmes, information, trade fairsor the reputation of a location (Porter, 1998b, 2000 and 2003). Finally,clusters facilitate the existence of complementarities between activities ofthe participants, such as joint marketing (as in trade fairs, trade magazines,marketing delegations), firm referrals or products for the consumers(creating buyer value in service delivery, product design, logistics andafter-sales service).

The second main advantage attributed to clusters is the enhancementof innovation and flexibility, resulting from interaction between customersand suppliers thanks to their proximity (Piore & Sabel, 1984; Porter, 1990,2000). These agglomerations facilitate flexibility, granting access toquicker sources of new components, machinery, services, or any othernovel element required for firm restructuring (Porter, 2000).

Innovation isalso favoured by this greater capacity of adaptation to changes, gettingquicker access to customer preferences and favouring the production ofcustomised goods and services (Amin & Thrift, 1992). In addition, thetransfer of skilled personnel between firms facilitates knowledge transfer and cluster participants gain exposure to changing technologies, machinery, service concepts or know-how, enabling faster innovation (Porter,1990, pp. 73–74, 82; Cooke, 2001; Porter & Ackerman, 2001; Braga &Gerry, 2002, p. 3). Another key source of innovation is the competitivepressure coming from other firms within the cluster due to the possibility ofconstant comparison, which creates a continuous pressure to improve performance (Porter, 1990, pp. 82–83; Glaeser et al., 1992). This strengthcan also be reinforced through relationships with other entities in the clusters that Porter calls ‘Institutions for Collaboration’, such as universities, chambers of commerce or technology institutes, facilitating the process of continuous learning and innovation (Porter, 2003).

Finally, Porter argues that clusters promote the creation of new business thanks to locally available information about innovative potential andmarket opportunities. There is a greater incentive for entry because thereis better information about opportunities within the cluster. Individualsworking within a cluster can more easily perceive gaps to fill in products orservices (Porter, 1998b, 2000). Required assets, skills, inputs and staff areoften readily available at the cluster location, waiting to be assembled into anew enterprise. Therefore, barriers to entry (and exit) are lower thanelsewhere since all of these factors reduce the perceived risks of entry/exit (Porter, 1998a, 1998b).

The literature contains many attempts to classify clusters,among which was selected the three categories presented by Gordonand McCann: industrial complexes, pure agglomeration and socialnetworks (Gordon & McCann, 2000). One must acknowledge that actual clusters contain elements of more than one of these ideal types (Gordon& McCann, 2000; Martin & Sunley, 2003, pp. 19–20), but this classification is still useful to show the diverse nature of clusters and howadvantages and particularly risks of clusters differ according to the typeof agglomeration.

The first type is the model of industrial complexes, a static and predictable model characterised by an identifiable set of firms, whichmaintain stable relations among them. The benefit of this type of clusteris limited to the minimisation of the spatial transaction costs (distancecosts). Therefore, it is a private, closed club with restricted benefits onlyfor its members (not for the area as a whole), which do not have animpact on the growth of rents. Examples of this type of clustersare automotive engineering or petrochemicals (Gordon & McCann, 2000,pp. 519–520).

The model of pure agglomeration is the cluster described by Marshall,Hoover, Jacobs and Mills, characterised by an atomised, competitive,unplanned, dynamic environment in which externalities are available to allfirms present in the area. The main advantages of the pure agglomerationare three Marshallian locational economies (Henderson, 2003).

First, theformation of a local labour pool in a particular industry, which createsexternalities such as human capital skills developed for a particularindustry, balanced local efficiency-wage levels, an efficient search and job-matching mechanism, and, as a consequence of all these advantages,higher productivity within firms in the cluster (Gordon & McCann, 2000; Harrison, 1992).

Secondly, these clusters can contribute to building a localpool of expertise and know-how and to create local infrastructure ofspecialised services, facilities and appropriate distribution networks(Amin & Thrift, 1992; Gordon & McCann, 2000, p. 516). Innovation isalso facilitated by a maximisation of the information flows, through labourmigration and informal contacts between workers of firms within the cluster(Cooke, 2001; Gordon & McCann, 2000; Porter, 1990, pp. 80–86). In pureagglomerations, these advantages are open to all firms and the price to payfor them is higher rents, preventing free-riders from emerging.

The third type of clusters are social networks (Granovetter, Amin, Scott),which rely on the sociological literature and are based on inter-firm personalrelations, which are closely bound up with larger-scale aspects of socialstructure and are founded on trust (Granovetter, 1973, p. 1377, 1992;Gordon & McCann, 2000). This trust-based behaviour is key in promotingcooperation and labour flexibility, risky cooperative and joint ventures andcommon initiatives in order to achieve mutually beneficial goals(Granovetter, 1973; Harrison, 1992). This type of clusters includes networksa ` la Manuel Castells, in which geographical distance is not a barrier anymore. This type of cluster facilitates the neo-Marshallian nodes in whichmembers benefit from good communications and links with other national orinternational nodes (Amin & Thirft, 1992). The strength of this type ofrelationships is the level of ‘embeddedness’ of the social network,particularly thanks to strong norms and integration within clusters. Thebenefits of social networks are just partly capitalised in rents, so there is apotential for degradation as a result of the action of free-riders. Some realexamples of social networks as defined in the sociological literature areEmilia-Romagna (Italy) or Santa Clara (California) (Gordon & McCann,2000).

Wins from successful cluster development not only the nearest environment. Clusters carry out the role of points home market growth and base of the international expansion for all national economy.

Conclusions

High competitiveness of the country keeps on strong positions separate of clusters. On the contrary, behind their limits even the most developed economy can yield mediocre results. In it the explanation of already mentioned fact, that, say, the same Japan is covered, having powerful automobile, electrotechnical, electronic firms, essentially lags behind in chemical and pharmaceutical sectors and is absolutely weak in space sphere.

Let's emphasize also one more essentially important circumstance: stimulation of clusters mechanisms of growth of competitiveness for the last half a century repeatedly became a basis of promotion of the whole countries in elite of the most developed countries of the world. Most a vivid example of sharp growth of the international competitiveness on the basis of the state support clusters is experience of Finland. According to the ratings made under orders of the World economic forum, Finland last years on a regular basis borrows the first places as in a rating of perspective competitiveness (Growth Competitiveness Index), and in a rating of current competitiveness of the countries (Business Competitiveness Index), overtaking such leading industrial powers, as the USA, Japan, Germany. Thus the policy of rise of competitiveness in Finland absolutely officially leans on кластерную the theory (Porter’s “Diamond” model", advanced by the Finnish economists due to inclusion of the block "The International business activity ").

Traditional economic development policy has focused on individual needs of specific firms and industries. Cluster policies deal with firms and industries as a system.

Proponents of cluster policies focus on developing a strategy that will encourage an efficient allocation of limited resources available for regional economic development, provide a tool for industry recruitment, and encourage diversification of the industry base. Given limited resources available for economic development, it is critical that government allocate these resources in the most efficient way possible in order to meet the needs of established and growing industries. By identifying clusters and understanding specific needs (e.g., infrastructure or work force needs) of the industries within the clusters, government can build on existing strengths in the region and provide more appropriate assistance to businesses. This is in contrast to many current policies, which direct resources at the industries the region hopes to attract, regardless of whether the existing environment is conducive to the development of these industries.

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