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«Inaugural-Dissertation zur Erlangung des Doktorgrades des Fachbereichs Wirtschaftswissenschaften der Johann-Wolfgang Goethe-Universität Frankfurt am ...»

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Similar to the concept of the milieu and the district, the cluster is defined as consisting of enterprises, suppliers and related institutions producing in the same or a complementing sector, which are connected over networks within a specific region. Clusters for Porter are ―critical masses - in one place - of unusual competitive success in particular fields‖, its boundaries determined by ―linkages and complementarities across industries and institutions that are most important to competition‖, but which do not necessarily coincide with national borders.311 As other forms of agglomeration economies, also the cluster is regarded to increase competitiveness and productivity by supporting innovativeness and attracting more businesses to the cluster. It is an ―alternative way of organizing the value chain‖.312 To be a cluster, a region needs sufficient resources and know-how to stand out Walter, 2004, p. 35.

Storper, 1995, p. 203f.

For example in Ramazotti, 2010.

Porter, 1998, p. 78f.: ―Clusters are geographic concentrations of interconnected companies and institutions in a particular field. Clusters encompass an array of linked industries and other entities important to competition. They include, for example, suppliers of specialized inputs such as components, machinery, and services, and providers of specialized infrastructure. Clusters also often extend downstream to channels and customers and laterally to manufacturers of complementary products and to companies in industries related by skills, technologies, or common inputs. Finally, many clusters include governmental and other institutions - such as universities, standards-setting agencies, think tanks, vocational training providers, and trade associations that provide specialized training, education, information, research, and technical support‖.

Porter, 1998, p. 80.

from its competitors. It also requires a long-term perspective to develop and maintain its competitive advantage. It needs to produce goods that are either unique in quality or innovativeness because then they can be sold with a price premium. Porter specifies three types of clusters, namely the so-called techno cluster that is concentrated on high-end technology and often associated with universities or research centers (a famous example is Silicon Valley). The second is the historical know-how-based cluster that has its knowledge accumulated over a long time period and has a strong tradition in production; the last is the factor endowment cluster that is successful due to a comparative advantage related to its location.

Porter specifies his definition of the cluster in the so-called diamond model,313 which determines how a region can increase its competitiveness and why this might be the case.

The model is primarily aimed towards business strategy and government advice. Porter lists four determinants of national advantage, namely the factor conditions, which means the factor endowment and the level of skilled labor and infrastructure; the nature of demand for the products; the status of related and supporting industries; as well as firm strategy, structure and rivalry. These factors are often represented in ‗Porter‘s diamond‘, a diamond-shaped graph that interconnects the elements of this structure. It is a mutually reinforcing system. Additionally, Porter names the government as significant factor, but also ascribes chance not a small role either, as it accelerates the development process of a region. The listed factors are not necessarily path-dependent or even natural or inherited as they might develop and change by government programs, innovations or socio-cultural changes.314 The core of Porter‘s argument is the rivalry between regions and enterprises that results in high quality products and innovation, supported by state policies such as infrastructural investments, subsidies and research and education political measures at the local, but also national level315: ―Clusters affect competitiveness within countries as well as across national borders. Therefore, they lead to new agendas for all business executives not just those who compete globally. More broadly, clusters represent a new way of thinking about location, challenging much of the conventional wisdom about how companies should be configured, how institutions such as universities can contribute to competitive success, and how governments can promote economic development and prosperity‖.316 The Porter, 1990, p. 71ff.

Porter, 1990, p. 162ff.

Porter, 1990, p. 81, 126ff.

Porter, 1998, p. 78.

performance of one company is correlated to that of competitors and other participants of the value-added chain, including customers.

However, the term cluster is not exclusively employed for Porter‘s concept. It is also used as generic term for spatial agglomerations of economies. The OECD, for example, mentions it in a more broad definition: ―Large companies can shape environments – SMEs typically can only operate within them... [and] gain strength by cooperation and collaboration...through clusters [of]...formal and informal networks...anchored in their local communities‖.317 This definition puts it more in the line with the concept of the industrial district, analyzed below. Industrial districts “[T]he small and medium-sized firm industrial districts in Western Europe…each tells a different story of how trust became, for it, a fact of life; and the only common feature of these stories is that none could be reproduced elsewhere precisely because each dependent on an improbable chain of fortuitous local circumstances”.318 The industrial district is a concept first developed by Alfred Marshall.319 He used it to analyze locally bounded socio-economic systems in Great Britain. Later it has been adopted by Giacomo Becattini320 for the Italian case (see also chapter 6.4.2). Marshall defined it as consisting of ―many social advantages‖ as artisans are ―intelligent and selfreliant‖ because they have escaped ―the dominion of custom‖.321 Today, it is defined by certain stylized facts that include a flexible production that meets the final demand and variable different needs of global clients, production in a large number of small- and medium sized firms in a naturally and historically limited geographical territory, or what Becattini calls ―a socio-territorial entity‖322 and Marshall describes the following way: ―When an industry has thus chosen a locality for itself, it is likely to stay there long: so great are the advantages which people following the same skilled trade get Definition taken from Dörsam and Icks, 1997, p. 2 Sabel, 1992, p. 215f.

Marshall, 1919, esp. p. 267-77, also Marshall and Marshall, 1888, p. 46ff. He also refers to it as ―manufacturing district‖ or ―localization of industry‖. A summary of his thoughts on industrial districts can be found in Belussi, 2009. ―Marshall noted the apparent importance of industrial localization in looking at English industrial regions of the 19th century, noticing the intangible dimensions of localization, as evidenced in his famous comment about the secrets of industry being in the air. Though Marshall made reference to the technological dynamism of English industrial districts, he did not clearly distinguish between localization as a means of reducing production costs under conditions of market uncertainty and localization as an underpinning of the technological trajectory of an industry‖, Storper, 1992.

Becattini, 1979.

Marshall and Marshall, 1888, p. 47.

Becattini, 1990, p. 38.

from near neighborhood to one another―.323 The local enterprises produce in the same broadly defined industrial branch with the same kind of production process but at different stages of this process, which Marshal calls ―main industry‖ and ―auxiliary‖ or ―subsidiary industry‖ in vertically integrated sectors: ―[S]ubsidiary trades grow up in the neighborhood, supplying it with implements and materials, organizing its traffic, and in many ways conducing to the economy of its material…the economic use of expensive machinery can sometimes be attained in a very high degree in a district in which there is a large aggregate production of the same kind, even though no individual capital employed in the trade be very large. For subsidiary industries devoting themselves each to one small branch of the process of production, and working it for a great many of their neighbors, are able to keep in constant use machinery of the most highly specialized character, and to make it pay its expenses…‖.324 An industrial district is regarded as a special case of the innovative milieu described above, but the line to strategic networks is blurry.325 However, it differs from the latter concept in being more than just a cluster of atomistic companies in one locality. Necessarily connected to the concept of the industrial district is the embeddedness of its economic activity as well as the significance of trust.326 It differs from the concept of the innovative milieu in not only being an instrument to overcome uncertainty. In the past, solving this problem was possible for single companies, but in the global economy of the 20th century uncertainty could only be overcome by co-operation as best practice.327 Thus, the innovative milieu is „a set of territorial relationships encompassing in a coherent way a production system, different economic and social actors, a specific culture and a representation system, and generating a collective learning process―.328 An industrial district is heavily characterized by the collaboration between business and social sphere which means that the local community plays a decisive role for the functioning of the district and social cohesion is a important component of the district‘s vitality.329 However, it differs from other types of economic region in that the industrial process dominates. ―Self-containment and the progressive division of labor‖ result in an ―increasing surplus of final products‖ that has to be sold on the global market. Hence, it ―requires a Marshall, 1920, p. 271.

Marshall, 1919, p. 288, similar in Marshall and Marshall, 1888, p. 52f., Pyke and Sengenberger, 1990, p.


Ambrosius; Petzina and Plumpe, 2006, p. 10f.

Dörsam and Icks, 1997, p. 27f.

Dörsam and Icks, 1997, p. 29f.

Camagni, 1991, p. 140ff.

Ramazotti, 2010, p. 959.

permanent network of links between the district and its suppliers and clients‖.330 Consequently, a district consists of a mixture of firms, of which some sell directly to a (global) market and some act as sub-suppliers producing components without clear boundaries and a separation between producer and supplier as a firm can be both. By working together, the often family-owned small-scale firms can achieve economies of scale by lending out expensive machinery or subcontracting to a competitor if an order is too large for one firm or business is low.331 Enterprises can be categorized as final firms that produce the final good, stage or phase firms that specialize on one stage in production and complementing firms that provide supplemental products or services.332 Nevertheless, the division of labor is localized but not restricted to one firm neither is it distributed over a general market as the firms of the district are firmly rooted within a certain area.333 It is a concept closely related to that of flexible specialization already analyzed above.

The individual steps of the production process need to be separable in time and space as they are often distributed within local networks and mostly are not standardized.334 However, the relations to a local supplier are typically long-term in nature which has the advantage to be able to rely on contextual, tacit knowledge and adaptability of the local subcontractor.335 Related to this, workers have acquired a specialized knowledge of production and although they frequently change the workplace within the district to find an occupation most suitable for them, the knowledge is still not lost for the district as such as it is still part of the ―local pool of skill‖.336 Knowledge is rather treated as a public good, resulting in an, how Marshall puts it, ―industrial atmosphere‖ that has its secrets in form of ―skill and the taste required for their work…in the air, and children breathe them as they grow up‖.337 Elsewhere he says: ―The mysteries of the trade become no mystery; but are as it were in the air…Good work is rightly appreciated, inventions and improvements in machinery, in processes and the general organization of the business have their merits promptly discussed: if one man starts a new idea, it is taken up by others and combined with suggestions of their own; and thus it becomes the source of further new ideas‖.338 Entrepreneurs Becattini, 1990, p. 38, 40.

Pyke and Sengenberger, 1990, p. 2ff.

Walter, 2004, p. 42.

Becattini, 1990, p. 40.

Becattini, 1990, p. 41, Li and Li, 2007, p. 29ff..

Walter, 2004, p. 42.

Pyke and Sengenberger, 1990, p. 5f.

Marshall and Marshall, 1888, p. 53, Marshall, 1919, p. 284ff.

Marshall, 1920, p. 225.

and workers meet each other in informal places like bars and restaurant and thus acquire information on new technology and innovations. It is also a way to spread knowledge. This can only work, if all members of the district have principally the same goals, hence, the success of the district as a whole.339 The free flow of information also means that information on new employees is easily available at very low cost. Overall, this makes an industrial district a space where workers find their skill acknowledged and appreciated. ―[A] localized industry gains a great advantage from the fact that it offers a constant market for skill.

Employers are apt to resort to any place where they are likely to find a good choice of workers with the special skill which they require; while men seeking employment naturally go to places where there are many employers who need such skill as theirs and where therefore it is likely to find a good market. The owner of an isolated factory, even if he has good access to a plentiful supply of general labor, is often put to great shifts for want of some special skilled labor; and a skilled workman, when thrown out of employment in it, has no easy refuge‖.340 However, a large fraction of workers are on a continuum between homeworkers and part-time workers in addition to waged workers, self-employed and entrepreneurs, which links the production process to the family structure of the district.

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