Clusters and Entrepreneurship: Implications for Innovation in a Developing Economy

Abstract

This article not aways a framework for examining technological innovation and entrepreneurship in clusters. Specialized suppliers in the cluster share the risks of failure associated with novel technologies. New technologies rapidly diffuse through every part of the cluster, encouraged by shut up proximity, trust, rivalry, and extensive outsourcing arrangements. The framework is illustrated end a case study of the Faisalabad textile cluster, as they upgraded their weaving technology from power loom to shuttle-les loom Small firms were able to thrive by means of outsourcing upstream and downstream processe to efficient specialized suppliers. Specialized maintenance contractors helped bring the risk of adopting the of recent origin technology by providing guaranteed 24-hour maintenance support. They also played a lock opener role in diffusing the technology quite through the cluster. Government policy strike one as beinged to play a minimal character in this particular technological innovation.

Key words: Industrial clusters, innovation, entrepreneurship, industrial policy, weaving

Introduction

The basic thesis of this article is that entrepreneurship and technological innovation at the firm horizontal are strongly influenced by the immediate environment in which the firm is embedded. This environment has been the subdue of extensive research in the area of industrial clusters. This article nears a review of the literature dealing with industrial clusters and illustrates the dynamics of technological innovation end a case study of the Faisalabad textile cluster.

In studying the relationship between the external environment and innovation, researchers have adopted a dynamic perspective. Wade (1996) for instance, uses data spanning an 18-year period to application of mind the dynamics of technological communities of firms having stakes in different classes of microprocessors. Along a similar vein, Schindehutte and Morris (2001) in their close attention of the strategic adaptation proces of small firms, unravel a conceptual model involving multiple horizontals of analysis from the entrepreneur to the organizational connected thought [i]or[/i] thoughts and to the external environment.

Baumol (1990) presents that the nature of entrepreneurial activity is powerfully influenced by the reward configuration in the economy and at times the governments of the game can flow in the entrepreneur leading a parasitical existence that damages the economy. Since regulation policy plays a dominant character in determining the rules of the game, it is important to design policies encouraging positive rather than negative innovation. Porter (1998) insinuates that governments, particularly in developing countries, can play an essential character in the development of well-functioning industrial clusters that encourage positive innovation. At times, management policies unwittingly work against cluster formation of the like kind as restrictions on industrial location and subsidies to invest in distressed areas.

Cluster Dynamics

Porter (1998) describes clusters as geographic concentrations of interconnected companies and institutions in a particular field, encompassing linked industries and other entities important for competition. Clusters show a special case of networked firms that are geographically co-located. by dint of enhancing the capacity of specialized firms, clusters rise in enhanced regional competitiveness. Furthermore, clusters can play a vital part in the cluster firm's ability to innovate.

Clusters are prevalent in the pair developed and developing economies. Krugman (1991) describes in what manner a narrow belt in the U Northeast and the eastern part of the Midwest dominated U manufacturing up until the mid fifties, with a 64 percent share of manufacturing vocation Schmitz (1995a) describes how the Brazilian shoe cluster, for the most part concentrated in the Sinos Valley, was able to raise its share of world leather shoe exports from 5 to 123 percent during the period 1970-90 Nadvi and Halder (2002) describe by what mode Sialkot's stainless steel cluster in Pakistan, together with Tuttlingen in Germany, dominate the world surgical instrument market. Other studies describe in what way clusters dominate such industries as ceramics in Seto, Japan (Izushi, 1997); precision engineering and watch making in Jura Arc, Switzerland (Maillat et al., 1995); wind musical instruments in Elkhart, Indiana (Krugman, 1991); fashion usefuls in northeast-central Italy (Storper, 1993) Porter (1998) lists a certain quantity of 30 clusters in the US (eg the auto cluster in Detroit, insurance in Hartford, and aircraft equipment and design in Seattle), and another 30 exportoriented clusters in Portugal (ranging from ornamental stones in Evora to horticulture in Faro).

Emergence of Clusters

A variety of factors have been identified which trigger the emerging see the verb of clusters (Krugman, 1991; Porter, 1998) These include local demand, prior existence of supplier industries including natural resources, innovative firms, and chance occurrences Once a cluster is formed a self-reinforcing period promotes its growth, especially with the support of local public and private institutions. repeatedly as a result, initial transitory advantages realize "locked in" within the cluster. This "lock-in" issue is due to a variety of agglomeration economies attracting fresh specialized firms to locate within the cluster and gain from increasing get backs to scale.