Could ‘business clusters’ save the European economy? Source: http://www.akel.org.cy/

The European economy is on the brink of collapse, and unemployment is skyrocketing in many EU states.  However, the solutions suggested thus far have met with limited success.  The key question is this: How we can reduce the unemployment rates, and prevent the closure of small businesses? The creation of business clusters would be a viable solution to these problems. 

What is a ‘business cluster’?

A Business cluster is a network of connected businesses, suppliers, and associates in a specific field that are all located in the same geographic area. Clusters are thought to provide increased efficiency and productivity so businesses can be competitive on a national and global scale. The term business cluster (also known as an industry cluster, competitive cluster, or Porterian cluster) was introduced and popularized by Michael Porter in his book, The Competitive Advantage of Nations (1990).

The creation of local cluster networks allows firms to benefit from such things as the neighbourhood’s pool of expertise and skilled workers, its easy access to component suppliers, and its information channels.  Being part of a cluster boosts companies’ efficiency in:

   Sourcing relevant resources such as technology and human resources from other companies in the cluster.

  Accessing information, technology, and relevant institutions.  

  Coordinating with related companies.

  Assessing and motivating improvement.

Clusters do more than make opportunities for innovation more noticeable. They also provide the capacity and the flexibility to act quickly. A business that is in a cluster can often source what it needs to implement innovations more quickly than a business that is not. Local suppliers and partners can, and do, get closely involved in the innovation process.  This collaboration allows the business to meet customer requirements more effectively.

 

Types of Business Cluster

Just a few types of business clusters, based on different fields of knowledge, that have been recognised are:

  Factor endowment clusters.

  Knowledge services clusters.

  High-tech clusters.

   Low-cost manufacturing clusters.

The Evidence

The European Cluster Excellence Scoreboard, analysed the performance of selected emerging industries and regions in the period 2010-2013.  The results showed that 33.3 % of firms in clusters showed employment growth superior to 10%, while firms outside clusters had an increase of only 18.2%. 

Clusters operate together in regional markets. 38% of European jobs are based in such regional strongholds.  SME participation in clusters leads to increased innovation and growth.  There are about 2000 statistical clusters in Europe, of which 150 are considered to be world-class in terms of employment, size, focus and specialisation.

The 2014 Communication, 'For a European Industrial Renaissance' highlighted the effectiveness of clusters in facilitate cross-sector and cross-border collaboration, and helping SMEs to grow and globalise. The European Commission is launching several initiatives under COSME and Horizon2020 to support SME innovation and growth through clusters.

Conclusions

From this evidence, we can conclude that creating many independent business clusters in EU countries facing particularly tough economic challenges, such as Greece or Spain, would dramatically reduce economic and labour losses, as well as boost production.