It is widely accepted that technological change underpins a global economy and that geographic location and concentration is of foremost importance for regional development and competitive advantage. The realities of global competition require an understanding on the local level of global markets and the complexities of interactions with multiple stakeholders along global supply and value chains. There is increasing evidence that the performance of existing enterprises is significantly improved by networking and clustering. Especially for small- to medium-size enterprise (SME) owners, which play an important role in the economy of countries, local networks represent a potentially complementary response to insecurity arising from global economic developments. In the new economy, networks and clusters are regionally driven with local communities seeking to maintain their social, environmental and economic agendas in a global economic climate. The geographic scope of clusters can vary from a single city, state or region to a network of companies across state borders or even country borders. As industry clusters become more accepted, their definition, boundaries and composition become more complex, which has led some cluster researchers to focus on clustering activities rather than on clusters as such. This article focuses on clustering activities with an emphasis on network relationships.
Key Terms in this Chapter
Social Capital: Refers to the institutions, relationships, and norms that shape the quality and quantity of a society’s social interactions. Social capital is the glue that holds them together.
Cluster: A geographic co-location of firms and/or activities that are linked along the supply and/or value chain.
Network: A collection of interconnected elements, the nature of which is determined by the relationships connecting the elements.
Small- to medium-size enterprises (SMEs): Refers to enterprises with a specific number of staff. A small size enterprise generally refers to firms with less than 20 employees.
Supply Chain: A network of suppliers, storage facilities, distributors, transporters, and retailers that participate in the sale, delivery and production of a product either for a particular firm or as part of a particular industry.
Value Chain: A value chain is a string of diverse companies working together to create or satisfy market demand for a particular product or a bundle of products.
Connectivity: The ability to link to the Internet via a computer.