What is a business cluster?
Business cluster is a group of firms, from same industry connected together in close proximity that share common markets, technologies, etc. A business cluster will include suppliers, distributors, primary producers, specialized services in finance, marketing, packaging, education, etc., working in a similar industry and in mostly the same region.
Who introduced this concept?
The clustering concept was popularized by Harvard Business School professor Michael Porter in his book ‘The Competitive Advantage of Nations’. His techniques teach communities to analyze their existing business and industrial bases and build their economic development on those strengths.
Good examples of business clusters include, Detroit’s auto industry, computer chip production in California’s Silicon Valley, the Napa Valley’s wine production, London’s financial sector, Hollywood’s movie production industry, to name a few.
Advantages of business clusters
Many companies facing common challenges and opportunities; together they would be capable of more than they are individually. The common challenges and opportunities that cluster cooperation can influence are found both inside and outside of region.
When will business clusters work and what are their limitations
Failed case of business cluster:
The biotechnology cluster in an Italian region, Lombardy, is a failed case of business cluster. The reasons for the failure of the biotechnology cluster are:
Business clusters have been around for a very long time, not all companies benefit from being in a business cluster, but in many cases businesses did benefit and they are the key to sustained growth, jobs and economic impact.
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