CLUSTERS IN MODERN PRIVATE BUSINESS'

1
CLUSTERS IN MODERN PRIVATE BUSINESS. WHY AND
HOW? MART REPNAU 2/12/2005
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WHAT IS A CLUSTER? 1/2
Geographic concentrations of industries that gain
performance advantages through co-location.
(Doeringer and Terkla 1995) A geographically
bounded concentration of similar, related or
complimentary businesses, with active channels
for business transactions, communications and
dialogue, that share specialised infrastructure,
labour markets and services, and that are faced
with common opportunities and threats. (Rosenfeld
1997) Geographic concentrations of interconnected
companies and institutions in a particular field
that encompass an array of linked industries and
other entities incl. e.g. suppliers of
specialised inputs such as components, machinery,
and services, and providers of specialised
infrastructure, manufacturers of complimentary
products, companies in industries related by
skills, technologies or common inputs, as well as
governmental and other institutions such as
universities, standard-setting agencies, think
tanks, vocational training providers, providers
of information, research and technical support.
(Porter 1998)
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WHAT IS A CLUSTER? 2/2
Clusters can be defined as networks of
interdependant firms, knowledge-producing
institutions (universities, research institutes,
knowledge-producing firms), bridging institutions
(e.g. providers of technical or consultancy
services) and customers, linked in a value-added
production chain. Cluster concept goes beyond
that of firm networks as it captures all forms of
knowledge sharing and exchange. (OECD
1999) Geographic concentration of interconnected
companies, specialised suppliers, service
providers, firms in related industries, and
associated institutions (e.g. universities,
standards agencies, trade associations) in a
particular field that compete, but also
cooperate. (Porter 2000). Association of
geographically close-set businesses and
institutions of the same production field
(universities, agencies, board of trade), which
cooperates and competes internally (Porter
2000). Hollywood, Silicon Valley, North Italy....
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HOW, WHERE and WHAT KIND OF CLUSTER IS FORMED?
Reasons for cluster formation are different.
Availability of raw materials, appropriate
climate, proximity of markets, chance, presence
of RD institutions and/or schools, suitable
working force, etc. Hollywood and Silicon Valley
developed spontaneously without any planning over
a period of time. A cluster can go through
different stages potential, nascent, germinal,
sustainable, mature, decaying. But not
necessarily all of them. Clusters are very
different in sizes, they differ by country,
region and branch of industry, and also
individually. Innovation and innovation processes
are different in construction, food production
and ICT. They reflect historical factors,
different types of knowledge base, macro
economical circumstances, co-operation,
etc. Vertical and horizontal clusters
buyer-seller relation or connection between
sectors vs common market or the usage of common
resources, technologies or abilities.
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WHAT ASSURES THE SUCESS OF A CLUSTER?

• Most important factors are risk capital,
  critical mass, technical infrastructure, higher
  education and research establishments,
  initiative, influence of the prosperous,
  networks, social capital, synergy, etc. The more
  successful principally stand out in the so called
  non-material aspects.
• In addition to non-material factors a high level
  of competitiveness plays a significant role.
• The presence of a central agent, anchor is also
  important, eg. major corporation, research centre
  or similar.
• Porters Diamond of Advantage four factors
  that develop competitive edge input, market
  demand, competition, bound and supporting
  branches.

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WHERE ARE OUR CLUSTERS?

• How to identify clusters???
• - Quantity method (eg. I-O analysis, measuring
  the inputs and outputs).
• Suitable if buyer-seller relations are clearly
  identifiable.
• - Quality method (expert opinions, interviews).
• - Network analysis (flowcharts of who interacts
  with who).
• Clusters in Tallinn??
• Silicon Valley of Mustamäe
• Dvigatel
• BLRT Group
• .............

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The Silicon Valley of Mustamäe

• Ca 70 companies. Horizontal cluster??
• Developed on the basis of the Institute of
  Cybernetics. Has ties with the Institute of
  Cybernetics and Tallinn University of Technology.
• Technology, computer software and applications
• AS Cybernetica (data protection, light emitting
  diodes etc)
• ETM Endoskoopiatehnika (probes for medical
  research)
• Skype Technologies OÜ
• OÜ Englo (military technology)
• AS Ektaco (computer systems)
• Very tight-lipped people.

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Tallinns Technology park TEHNOPOL

• Ministry of Economy, Tallinn University of
  Technology and the City of Tallinn
• Now
• 9.8 hectares
• 45,000 sq metres area
• 110 active businesses
• (ICT, services)
• TUTs 9,500 students
• 2 research facilities
• Planned
• Soft services
• 70,000 sq metres area
• ICT
• Biotechnology
• Matter technology

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Dvigatel industrial area
Owner AS Mainor Now Dvigatel industrial
area. Vertical metal-working cluster, where are
15-20 operational businesses from metal importers
to finishing chambers. Active bid orders and
service exchanges. Developed around Dvigatel Teno
(now E-Profiil). Little contact with RD.
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Innovation city ÜLEMISTE CITY
Territory 33 hect, max. Expansion possibility 52
hect. In immediate vicinity of the airport and
train tracks. Planned volumes 300,000 m2 new and
renovated office area, 20 hect. Reserved for
high-tech production.
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CRITICISM OF CLUSTER THEORY

• Danger of overspecialisation e. all the eggs in
  one basket
• Suitable only for small businesses who have
  greater trust, at the same time todays economy
  is dominated by large enterprises
• Suitable only for city areas
• The need of geographic proximity is decreased by
  the growth of telecommunications.

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HOW TO SUPPORT CLUSTERS?

• Identification of clusters, mapping out the
  connections
• Formalization of clusters, formalization of
  communication channels
• Brokers, scouts, support to take part in
  information exchange fairs
• Services schooling, financial, technical and
  marketing help from one place
• Compilation and distribution of clusters internal
  information
• Technology transition, information exchange with
  other countries
• Available trade- and college education in the
  context of the cluster, cooperation between
  educational establishments and centres of
  competence
• Starting capital and product innovation support
  (nascent, germinal phase), risk capital
  (sustainable), floating capital, marketing
  support (mature), RD and co financing of cluster
  companies joint projects
• Incubators in clusters
• Networks, databases
• Marketing and branding.