California wine cluster (MOC, Monday, Week 4)
microeconomics-of-competitivenessyear-twoCluster: a geographically proximate group of interconnected companies and associated institutions in a particular field, linked by commonalities and complementarities
==>> Big deal: positive externalities associated with geography:
-- Drive increased productivity/operating efficiency (efficient access to specialized inputs, ease of coordination across firms, rapid diffusion of best practices, proximate rivals encourage differentiation)
-- Stimulate innovation (ease of experimentation, density eases recognition of unmet needs)
-- Facilitate new business formation (opportunities are apparent, concentrated demand encourages spinoffs, commercializing new products is easier)
"So I really want competitors nearby??" Porter argues yes.
-- More competition more opportunity.
-- Lose employees to spinoffs expanding supply of skilled people
-- Bid up costs larger local supplier base, increased flexibility/efficiency
Most cluster participants are NOT direct competitors, firms end up differentiated.
Not sure I buy it...
Why French wine cluster is stagnant:
Inflexible government policies; protectionism => tons of fragmented little wineries; no incentive to innovate; stuck in the past/present
Beware when industries are considered a "national treasure"