Cluster Theory & Competition

18 Pages 4507 Words

Cluster Theory & Competition

An examination of Porter’s cluster theory in the context of a firm’s, region’s and nation’s competitive advantage.

INTRODUCTION

The age old adage about the three keys to success for operating a business “location, location and location” still holds true despite the reduced effect time and space barriers have on our life following the advent of transport and communication technologies. Porter has referred to this phenomenon as a paradox.
The growing global movement of goods, information, capital, and technology in recent decades has led to a tendency to see geography as diminishing in importance to competition. (Porter, 1998b, p.11)

The notion of location has influenced business in a major way from the loca gas station to the multinational corporation’s offshore activities. In today’s economy, more than ever, we see a conflicting set of pressures toward globalisation and localization, which has been coupled with a shift in perspective from economic theory to business theory. It is this notion that underlies in Porter’s literature on the competitive advantage of nations.

The following paragraphs, 90 years apart, discuss the nature of a cluster, the subject which is the underlying focus of this paper.
British auctioneers are all within a few blocks in London. Basel is the home base for all three Swiss pharmaceutical giants. Danish windmill producers are cantered in Herning. In America, many leading advertising agencies are concentrated on Madison Avenue in New York City. Large-scale computer manufacturers Control Data, Cray Research, Burroughs (now part of Unisys) and Honeywell all are headquartered in or near Minneapolis, Minnesota. Pharmaceutical and related companies…are based in the New Jersey/Philadelphia area. (Porter 1990, p.155.)

Collars and cuffs, localized in Troy, New York; leather gloves, localized in the two neighboring New York towns of Gloversville and Jo...