A cluster, as described by the author of the concept, Harvard Business School professor Michael Porter, is a unique model for economic development because it’s based on “geographic concentrations” of interconnected institutions – businesses, government agencies, and universities – in a specific field. Clusters product exponential growth for their communities because people living and working within the cluster are in some way connected to each other.
Examples –
- California’s “Wine Cluster” which is populated by hundreds of wineries and thousands of independent grape growers. There are also suppliers of grape stock, manufacturers of irrigation and harvesting equipment, producers of barrels, and designers of bottle labels, not to mention an entire media industry, with winery advertising firms and wine trade publications. The University of California at Davis, also near this area, has a world-renowned viticulture and oenology program. The Wine Institute is just north, in San Francisco, and the California legislature, in nearby Sacramento, has special committees dealing with wine industry.
- Italy’s “Fashion Cluster”
- Boston’s “Biotech Cluster”
- Hollywood’s “Movie Cluster”
- New York City’s “Wall Street Cluster”
- London’s “Finance Cluster”
- Northern California’s “Technology Cluster”
- Israel’s “Start-up Cluster”
Intense concentration of people working in and talking about the same industry provides companies with better access to employees, suppliers, and specialized information. “The social glue” that binds a cluster together also facilitates access to critical information. A cluster must be built around “personal relationships, face-to-face contact, a sense of common interest, and ‘insider’ status”.
Attracting new members to a cluster by offering a less expensive way to do business might be sufficient to create a cluster, but not to sustain it. If price is a cluster’s only competitive edge, some other country will always come along to do it more cheaply. The qualitative elements – such as tight-knit communities whose members are committed to living, working and raising families in the cluster – are what contribute to sustainable growth. Crucially, the cluster’s sense of shared commitment and destiny, which transcends day-to-day business rivalries, is not easy to manufacture.
While physical infrastructure can be built to create innovative companies or services hubs, the long term sustainability comes from cultural infrastructure to cultivate innovation.
