Dr Thackwray Driver, chairman of the Economic Development Board (EDB), Ministry of Planning, in his letter to the editor (T&T Guardian, July 19), correctly states that for the most part diversification of our economy means developing new goods and services that we can sell to regional and international markets. In order to sell we have to be globally competitive.
Further, he introduces the idea of business clusters and reports that the Medium Term Policy Framework of that ministry sees the concept of clustering fitting nicely into the government growth poles (new economic spaces). Hence he sees one method of developing these spaces will be the facilitation of one or more strategic business clusters therein (these are yet to be chosen).
Driver defines a cluster as the concentration of businesses related to a specific industry within a geographic space and the interconnected relationship affords the businesses therein a greater possibility of growth and survival than otherwise via exchange of ideas, best practices and innovations.
The problem with clusters and policies that the EDB may be trying to put in place in these growth poles (now more or less barren) is that such policies cannot create clusters from scratch. What a cluster policy can do is induce or support local learning processes and provide the relevant framework conditions for an already flourishing cluster.
Prof Michael Porter in his seminal work, Competitive Advantage of Nations, defined his diamond of the four components necessary for the emergence and evolution of clusters. These are: factor conditions, demand conditions, firm strategy and rivalry and related support industries.
When I first read his thesis I recognised that his diamond focused more on the traditional and more static view of classical economics which did not apply to us emerging economies. Hence, in recognition of his work I introduced the idea of an innovation diamond for T&T which focused more on developing a knowledge-based economy that could engender new businesses and by specialist knowledge spill-overs create and maintain clusters such that the return on investment in knowledge is not one of diminishing returns.
Since T&T's economy did not possess companies with such specialist knowledge it was necessary to produce this; hence we needed to create centres of excellence to acquire, implement and create knowledge for the generation of innovative ideas. Again in our economy we had, or needed, no knowledge flow among our firms, nor were there any innovative knowledge spillovers since they were mainly import and distribution firms of the plantation.
Hence the innovation diamond had to provide also business start-up facilities to spin out the innovative ideas developed to entrepreneurs willing to take some risks. The spatial proximity of the researchers and entrepreneurs would allow observations, comparisons, bench marking and hence the creation of clusters. This close proximity of the researchers, new SMEs as they worked together would also facilitate learning pro-cesses, business systems, IP matters etc.
Since it is of vital importance to have access to new knowledge-external players-the centres of excellence can act as gatekeepers and distributors of knowledge. The improvement allowed by the innovation diamond over that of Porter is the provision of knowledge and its creation as the fundamental drivers of competitive advantage in the clusters.
Of importance also in the innovation diamond is the identification of new markets (via foresighting) and the knowledge relationships needed for these emerging businesses to thrive. Given the aversion to risk by the existing private sector and our financial houses, the innovation diamond also proposed a gov- ernment-driven financing system that finances the centres of excellence and gives initial venture capital support to the SMEs prior to initial public offerings (IPOs).
This financing system can also utilise the liquidity in the present market via long-term government development bonds. The plans outlined by Driver ignore the fundamental place that knowledge creation, and its application, ie, the centres of excellence, play in developing global competitiveness.
Mary King
Via e-mail