Wed | Aug 21, 2019

Business clusters not one size fits all

Published:Saturday | January 12, 2019 | 12:12 AMEric Deans

 

THE EDITOR, Sir:

Achieving economic, social and environmentally sustainable business participation in industrial clusters in special economic zones requires an understanding of the complex industrial clustering process rather than on descriptive information gathering.

This involves recognising the local and inter-regional industrial linkages and/or the channels of technology and knowledge transfer that exist, instead relying on relatively simple measures (such as 'industry size') to detect potential industry clusters. This explains why despite substantial investment in the hotel and BPO sectors, significant economic growth over the last four decades in remains elusive.

The facts explaining the existence of industry clusters around the globe may not be readily superimposed to the Jamaican context. Simply replicating the policy choices of governments associated with successful clusters (such as Silicon Valley or Singapore) will not be successful. There are clear dangers in attempting to reproduce significant policy direction from a relatively small number of specific cases, especially those whose economic performance is inherently atypical.

One of the major dangers of incorporating a carbon-copy approach to policy development is that of misunderstanding the specific origins and competencies inherent to a region's economy. Without the specific insight into how the relationships and networks between firms and industry is created and maintained, government policy directed at merely 'locating firms together' appears to omit and/or ignore the most important and dynamic aspects of the industrial clustering process.

Another issue concerns the record of government and private-sector resource allocation as it pertains to the development of industry cluster formation. It is noted that the approach frequently adopted involves little more than the latching on to opportunistic targets for traditional development initiatives.

In such cases, a cluster strategy serves more often as a means of allocating scarce resources, without assessing the opportunity costs, than as a way to build the linkages and future inter-industry synergies.

For example, in Europe, the US and Australia, many 'planned' clusters have failed to realise their full potential despite heavy investments in 'the required infrastructure'. The implication is that although setting up the infrastructure may be paramount to the diffusion of industrial clusters, it is not sufficient in of itself to ensure a cluster's formation and development.

It also requires attention to supporting SME suppliers and service industries, communities and workforce development.

ERIC DEANS

CEO, Jamaica Special Economic Zone Authority

edeans@jseza.com| we