Clusters and Competition New Agendas for Companies , Governments , and Institutions

the company level has been dominated by what goes on inside companies. Thinking about the competitiveness of nations and states has focused on the economy as a whole, with national economic policy seen as the dominant influence. In both competition and competitiveness the role of location is all but absent. If anything, the tendency has been to see location as diminishing in importance. Globalization allows companies to source capital, goods, and technology from anywhere and to locate operations wherever it is most cost effective. Governments are widely seen as losing their influence over competition to global forces. This perspective, although widespread, does not accord with competitive reality. In The Competitive Advantage of Nations (1990), I put forward a theory of national, state, and local competitiveness within the context of a global economy. This theory gives clusters a prominent role. Clusters are geographic concentrations of interconnected companies, specialized suppliers, service providers, firms in related industries, and associated institutions (for example, universities, standards agencies, and trade associations) in particular fields that compete but also cooperate. Critical masses of unusual competitive success in particular business areas, clusters are a striking feature of virtually every national, regional, state, and even metropolitan economy, especially those of more economically advanced nations. While the phenomenon of clusters in one form or another has been recognized and explored in a range of literatures, clusters cannot be understood independently of a broader theory of competition and the influence of location in the global economy. (See the insert “Historical and Intellectual Antecedents of Cluster Theory.”) The prevalence of clusters in economies, rather than isolated firms and industries, reveals important insights into the nature of competition and the role of location in competitive advantage. Even though old reasons for clustering have diminished in importance with globalization, new roles of clusters in competition have taken on growing importance in an increasingly complex, knowledge-based, and dynamic economy. The cluster concept represents a new way of thinking about national, state, and city economies, and points to new roles for companies, governments, and other institutions striving to enhance competitiveness. The presence of clusters suggests that much of competitive advantage lies outside a given company or even outside its industry, residing instead in the locations of its business units. The odds of building a world-class mutual fund company are much higher in Boston Clusters and Competition