Policy Implications for Developing Cluster Initiatives

CLUSTERS FOR COMPETITIVENESS A Practical Guide &

Policy Implications for Developing Cluster Initiatives

February 2009

THE WORLD BANK 1818 H Street, N.W. Washington, DC 20433

 

 

 

CLUSTERS FOR COMPETITIVENESS

A Practical Guide & Policy Implications for Developing Cluster Initiatives

February 2009

 

 

 

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TabLE OF CONTENT

Overview ………………………………………………………………………………. vii

1. Context…………………………………………………………………………… vii

2. Purpose, target audience, and the structure of the toolkit ……… viii

Chapter 1

A cluster-based approach to competitiveness: Key concepts …………. 1

1. What are Industrial Clusters? …………………………………………….. 1

2. What are Cluster Initiatives? ………………………………………………. 3

3. What is the role of the public sector? …………………………………. 6

4. How do cluster initiatives compare to other instruments? …….. 7

Chapter 2

Key tools for implementation of cluster initiatives ………………………. 11

Tool 1: Cluster mapping ……………………………………………………….. 14

Tool 2: Product and Market Segmentation ………………………………. 18

Tool 3: SWOT – Strengths, Weaknesses, Opportunities,

and Threats ……………………………………………………………………… 21

Tool 4: GAP analysis ……………………………………………………………… 24

Tool 5: Porter’s Five-Forces ……………………………………………………. 26

Tool 6: Value-Chain Analysis …………………………………………………… 31

Tool 7: Market Trend Analysis ………………………………………………… 35

Tool 8: Competitive Position Analysis ……………………………………… 40

Tool 9: Old and New Institutions for Collaboration ………………….. 44

Tool 10: Monitoring and Evaluation: The P.A.I.D. Framework ……… 47

Chapter 3

A broad process to develop a cluster initiative ……………………………. 51

Stage 1: Cluster Mapping and Initial Competitiveness

Engagement ……………………………………………………………………. 52

Stage 2: Diagnostics and Strategy Formulation ………………………… 56

Stage 3: Implementation of Strategic, Policy, and Institutional

Initiatives ……………………………………………………………………….. 60

Stage 4: Post-Initiative Sustainability ……………………………………….. 65

 

 

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Chapter 4

Policy implications for competitiveness ……………………………………… 67

1. A supplementary cluster tool: Porter’s Framework

on Competitiveness ………………………………………………………….. 69

2. Cluster initiatives as policy catalysts for competitiveness ………. 74

Annexes

Acronyms …………………………………………………………………………… 79

References ………………………………………………………………………….. 81

 

 

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aCkNOwLEdgEMENTS

This publication was prepared by Mallika Shakya of International Trade

Department of the World Bank. The draft report that formed the basis

for writing of this publication was developed by a team at J.E. Austin As-

sociates Inc. led by Kevin Murphy, and including Kwang Kim and Justin

Stokes.

Peer reviewers of this publication were Christian Ketels from Institute

for Strategy and Competitiveness of the Harvard Business School and

Mark Dutz from South Asia Finance and Private Sector Development

unit of the World Bank. The overall project was undertaken under the

guidance of Mona Haddad, Sector Manager, International Trade Depart-

ment. The toolkit contributes to the knowledge development program

of the Export Competitiveness Thematic Group led by the Internation-

al Trade Department.

Additional feedback was received from Michael Wong, Yutaka Yoshino,

Douglass Zeng, Maiko Miyake, Shaun Mann, Vincent Palmade, Alfred Wat-

kins, Eric Manes, Anil Sinha and John Speakman.

Kerry Frasers provided editorial and designing assistance in finalizing

the report for publication. Amelia Yuson and Zijing Niu provided sup-

port for production.

 

 

 

vii

O V

E R

V IE

w

OVERVIEw

1. Context

Development experience from around the world has shown that the

determinants of export competitiveness are many and complex. The

arguments for investment in physical capital and infrastructure have

been long present. Neoclassical economists, then, emphasized getting

the macro fundamentals right so resources flow into the right sectors,

and within those sectors, the right firms. Further, economists looked

at other issues: human and social capital, technological progress and

innovation, business enabling environments, firm sophistication and

demand conditions, product and market diversification, etc. Academics

and practitioners have now generally come to agree that many of these

issues are not mutually exclusive but jointly supportive.

The World Bank Group’s Export Competitiveness Initiative, which

aims to develop synergies among practitioners working on economic

growth, trade and private sector development, has underscored several

of the above issues. It draws on a myriad of policy tools and approach-

es already employed in the World Bank Group’s work on trade and

economic policy, customs and logistics, and direct enterprise support.

The policy agenda that typically emerges from a competitiveness analy-

sis relates to three core areas, and collectively they offer a platform on

which necessary policy dialogues can be developed:

Macro fundamentals• (e.g., economic biases due to tariff and non- tariff trade barriers, real exchange rate misalignment, tax distor-

tions, overall fiscal health of the economy)

Hard and soft infrastructure• (e.g., infrastructure, customs and trade logistics, the costs of doing business)

Supply-side measures• (e.g., technology creation and adaptation, product standards and certification, export promotion, human re-

source development)

Determinants of export

competitiveness are many and

complex…

…one should start with a basic

framework.

 

 

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The cluster-based approach presented in this report complements such

a platform by offering a new way of dividing and understanding an

economy and formulating policies and practices. A cluster is a system

of interconnection between private and public sector entities. It usually

comprises a group of companies, suppliers, service providers, and associ-

ated institutions in a particular field, linked by externalities and comple-

mentarities. An example would be a country’s auto industry, with its

manufacturers and all their supporting services, such as parts and equip-

ment suppliers, transportation companies, retail distributors, educational

institutions and R&D firms, public relations and advertising agencies, etc.

A cluster approach may be used in addition to the usual economy-wide

analyses. Cluster analysis encourages engagement with a diverse group

of stakeholders through which they may develop a shared understand-

ing of the underlying public policy issues and act on them jointly.

Developing such a joint platform with strong ownership by the public

and private sector stakeholders is often crucial in jump starting more

comprehensive economic reform processes in developing countries.

A cluster-based approach enables the policy debate and actions to be

more strategic and incremental. Understanding the state of clusters

within an economy makes it easier to diagnose economic inefficien-

cies and to specify and prioritize various shortages and impediments

to competitiveness and growth. It can focus attention on the unique

challenges that may be sector-specific and can address institutional and

coordination-related issues to leverage additional benefits of positive

spillovers.


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