clustering is a basis for bringing into alignment all the parts of a country’s innovation ecosystem, for sustained competitiveness through seamless interlinkages amongst all actors of the ecosystem, from policy makers, R&D, training, financing, institutional support to supplier networks. In clustering, agglomeration of firms matters. It allows small companies to collectively enjoy economies of scale usually reserved for large ones. It allows companies to share the costs of common services while encouraging active inter-firm competition through constant innovation and growth. An isolated Greenfield site in a depressed region, with government incentives and grants sounds attractive to a young business. But, without the proximity of competitor and cooperator firms, a premature death is likely.
I have visited some celebrated clusters and seen how they work to support diversification and sustainable competitiveness agenda.
This in part is what makes me a believer in clustering. One such is the tanneries micro-cluster in Igualada, Catalonia, Spain. Catalonia is Spain’s wealthiest region.
It contributes 19 per cent of the county’s GDP, 25.6 per cent of its exports and 20.7 per cent of foreign investment. Catalonia has long been fighting for its independence because its wealth is used to support the poorer parts of Spain. Compare this to Tobago’s agitation for self-governance (just an aside).
Catalonia was one of the first regions in the world to adopt cluster methodology. According to Clusters and Competitiveness: the case of Catalonia (1993-2010), Catalonia,“aimed at boosting competitiveness in a geographical area by improving the strategy and working environment of its companies. The publication, The Competitive Advantages of Catalonia, analysed the Catalan economy through eight clusters which were, “important not only in terms of wealth creation, but also for their growth potential.”
This is instructive, as it implies market trend analysis as the basis for expansion not “picking winner” on past nostalgia or vested lobbying.
The study provided “a competitive analysis of all these clusters as well as establishing priorities to improve each one’s competitiveness.” Further, it resulted in “an industrial and business policy which rejects the concept of good or bad sectors in favour of one focused on the appropriateness of business strategies” and redefined public policy to removing obstacles to productivity and promoting cooperation among companies. Important lessons for us in T&T.
The early ’90s, was a time of economic and industrial crisis. Catalonia was challenged by the significant opening up of the economy resulting from the Single European Market. The then Minister of Industry and Energy Antoni Subira, inspired by Porter’s cluster strategy and the Catalonia Competitiveness study, embarked on an industrial and business policy aimed at strengthening the competitiveness of the country’s industrial clusters through the implementation of a process of change.
The view at the time was that “existing industrial policy dedicated a great deal of its resources to boosting quality, productivity, innovation, exports, computerisation or design, and managed to improve companies’ operative efficiency, but did not, however, aid companies, especially small and medium enterprises, to reconsider their strategic decisions in order to successfully face up to the challenges of the future.”
The methodology was based on a triple shift: from sector to strategic segment, from cluster to micro-cluster and from analysis to strategic market driven change. This involved three consecutive stages: identification of the main challenges of the micro-cluster from the members’ point of view; uniting members to formulate a joint proposal for their vision of the future and defining the guidelines for strengthening the microcluster’s competitiveness.
The ministry worked closely with the region’s entrepreneurs, micro-cluster by micro-cluster, until the entire Catalonia’s economy was covered. This approach, credited to Minister Subira, doubled the Catalan GDP per capita in 10 years, achieving “the internationalisation of Catalan firms and raising quality levels to participate in global value chains.
In the case of the Igualada tannery micro-cluster, the companies began by demanding from government a relaxation of environmental protection measures, threatening large-scale unemployment. The Minister offered a robust competitive analysis. Recommendations emerged, from new free range supply sources for hides to a collectively funded waste disposal plant and University Centre of R&D. In two decades, this microcluster was transformed into an environmental leader supplying the most sophisticated luxury brands such as Gucci, Prada.
When I visited, a breakthrough on stain-resistant leather had been made which would benefit all the companies towards meeting the challenges of the future and staying competitive.
It takes 10-20 years of directed intervention as described above to achieve sustainable competitiveness of a cluster. Unless we start as did Igualada, diversification will remain an unrealised dream of many.
The conversation continues.