Clusters and the New Economics of Competition

Topics: Productivity, Economic geography, Economics, Strategic management, Michael Porter, Competitive intelligence / Pages: 30 (7451 words) / Published: Feb 10th, 2008
Clusters and the new economics of competition
Harvard Business Review; Boston; Nov/Dec 1998; Michael E. Porter; Volume: 76
Issue: 6
Start Page: 77-90
ISSN: 00178012

Today's economic map of the world is dominated by what are called clusters: critical masses - in one place - of unusual competitive success in particular fields. Clusters are not unique, however; they are highly typical - and therein lies a paradox: the enduring competitive advantages in a global economy lie increasingly in local things - knowledge, relationships, motivation - that distant rivals cannot match. Untangling the paradox of location in a global economy reveals a number of key insights about how companies continually create competitive advantage. What happens inside companies is important, but clusters reveal that the immediate business environment outside companies plays a vital role as well. This role of locations has been long overlooked, despite striking evidence that innovation and competitive success in so many fields are geographically concentrated. Full Text:
Copyright Harvard Business Review Nov/Dec 1998

Paradoxically, the enduring competitive advantages in a global economy lie increasingly in local things -knowledge, relationships, and motivation that distant rivals cannot match.

NOW THAT COMPANIES can source capital, goods, information, and technology from around the world, often with the click of a mouse, much of the conventional wisdom about how companies and nations compete needs to be overhauled. In theory, more open global markets and faster transportation and communication should diminish the role of location in competition. After all, anything that can be efficiently sourced from a distance through global markets and corporate networks is available to any company and therefore is essentially nullified as a source of competitive advantage.

But if location matters less, why, then, is it true that the odds of finding a

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