5 benefits of Clusters

September 24, 2015

 

It has long been claimed that cluster development has a positive impact on regional economic growth, but what are some of the direct and indirect benefits of developing a cluster?

 

Clusters are concentrated geographic areas with intense economic activity, around one major industry. These are the result of natural, evolutionary process of that specific area and certain policies and constructive forces.

Examples of clusters include Montebelluna footwear cluster, Silicon Valley, Copenhagen CLEAN Cluster, Catalonia food cluster or Silicon Wadi entrepreneurial cluster in Israel.

According to various research papers and clusters evaluation, five benefits of cluster include:

 

  1. Drive competitiveness. In a cluster, there is an abundance of resources and competitors, mostly in the same niche market so companies in a cluster are always looking to keep their standards high and come up with innovative products and services.

  2. Attract financial resources. It is easier for a cluster to attract national and regional financial resources for various reasons. First, there is a common agenda of development, with an impact on more stakeholders. Second, investors are looking for an environment rich in entrepreneurial ideas and clusters usually attract complementary areas of growth. Third, it is easier to market a product to investors and consumers, building on an established reputation (e.g. Italian fashion, Danish wind energy suppliers). In Israel, the entrepreneurial Silicon Waldi cluster has attracted more than 60 venture capital funds that have already invested 10 bln $.

  3. Growth of employment and entrepreneurship. Currently, 38% of European jobs are concentrated around clusters (European Cluster Observatory, 2011). At its evaluation, Copenhagen Cleantech Cluster created more than 1100 jobs and supported 126 start-ups. Silicon Wadi, in Israel, has the highest density of start-ups per capita in the world.

  4. Improve a company’s operational efficiency. By having in close proximity all sorts of suppliers and expertise a company can accelerate growth and innovation. In clusters, companies decide to join efforts for distribution or research and development centers, this way using fewer resources.

  5. Foster innovation and tacit knowledge sharing. In most of the clusters, the whole value chain process is developed locally; companies share resources and collaborate to come up with innovative processes, products or services. The physical proximity encourages the creation of formal and informal relationships among companies, higher education and research institutions. This creates an environment where information can easily flow and disseminate.

 

Quercus Group has implemented cluster development projects in countries such as Denmark, Serbia, United States, Japan, Australia and Kenya so do not hesitate to contact us for conversations on clusters!

 

 

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