Role of Government in Industrial Clusters

Topics: Government, Policy, Business cluster Pages: 23 (6550 words) Published: September 26, 2013
Refereed Paper

Regional Economic Development:
Exploring the ‘Role of Government’ in Porter’s Industrial Cluster Theory.
Dr Mark Wickham
School of Management
University of Tasmania

Mark Wickham
Locked Bag 16
School of Management
University of Tasmania
Hobart Campus
Sandybay 7005.
Ph: 03 6226 2159
Fax: 03 6226 2808
Mark.Wickham@utas.edu.au

Dr Mark Wickham works as a lecturer at the University of Tasmania, specialising in the disciplines of Business Strategy and Marketing. Mark’s PhD examined the 25-year relationship between the Tasmanian state government and the Tasmanian light shipbuilding cluster in order to advance a more strategic ‘role of government’ in industrial cluster development. Mark is also interested in researching strategic marketing concepts, particularly those concerning Ethics and Integrated Marketing Communications.

1
CRIC Cluster conference. Beyond Cluster- Current Practices & Future Strategies Ballarat, June 30-July 1, 2005

Refereed Paper

Regional economic development:
Exploring the ‘role of government’ in porter’s industrial cluster theory.

ABSTRACT
Porter’s Industrial Cluster Theory (ICT) is a theoretical framework that achieved prominence in Australian economic policy development. Despite its widespread adoption, however, Australia has remained significantly below the OECD average in terms of its industrial clusters’ contributions to real wealth creation. In order to understand the positive role that (Australian) governments can play in the development of industry clusters, this paper analyses the 25-year history of the Tasmanian Light Shipbuilding Industry cluster. This analysis provides an insight into the set of government policy roles that facilitated the development of this internationally competitive industry cluster. This paper also proposes a re-conceptualisation of ICT that will potentially increase its value as a predictive tool for regional economic development.

Key words: Industrial cluster theory, role of government, cluster policy, regional economic development.

2
CRIC Cluster conference. Beyond Cluster- Current Practices & Future Strategies Ballarat, June 30-July 1, 2005

Refereed Paper

3
CRIC Cluster conference. Beyond Cluster- Current Practices & Future Strategies Ballarat, June 30-July 1, 2005

Refereed Paper
Regional Economic Development:
Exploring the ‘Role of Government’ in Porter’s Industrial Cluster Theory.

Introduction.
Since the 1970s, the onrush of globalisation in Australia’s markets has presented significant economic policy challenges to the country’s federal and state governments (Everett, 2002; Goldfinch, 1999; Moustafine, 1999). A major concern for Australian legislators was (and remains) the question as to how to make a nation previously protected by a ‘fortress’ of tariffs and subsidies more productive and competitive in world markets (Brown, 2000; Edwards, 2002; Martin, 2000; Quiggin, 1999). One theoretical framework that achieved prominence in Australian economic policy development since its inception in 1990 is Porter’s Industrial Cluster Theory (ICT) (see Australian Manufacturing Council, 1994; Bureau of Industry Economics, 1991; Keating, 1994; Kelty, 1993; McKinsey & Company, 1994). As part of his book The Competitive Advantage of Nations, Porter developed the notion that innovative industrial clusters are integral to export earnings and the generation of national competitive advantage. Porter’s ICT argues that a nation’s industry will be internationally competitive if a synergistic interrelationship exists between four important variables collectively known as the Diamond Factor Model: ‘Factor Conditions’; ‘Local Demand Conditions’; ‘Related and Supporting Industries’; ‘Firm Strategy, Structure and Rivalry’; and the two influencing roles of ‘Chance Events’ and ‘Government’. (See Porter (1990) for a discussion of the Diamond Factor Model, and Figure 1 for a diagrammatic representation).

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