Local Enterprises in the Global Economy

Local Enterprises in the Global Economy

Issues of Governance and Upgrading

Edited by Hubert Schmitz

This book opens a fresh chapter in the debate on local enterprise clusters and their strategies for upgrading in the global economy. The authors employ a novel conceptual framework in their research on industrial clusters in Europe, Latin America and Asia and provide new perspectives and insights for researchers and policymakers alike.

Chapter 1: Globalized Localities: Introduction

Hubert Schmitz

Subjects: development studies, development economics, economics and finance, development economics, geography, economic geography, innovation and technology, innovation policy


1. Globalized localities: introduction Hubert Schmitz Participating in the global economy brings both opportunities and dangers. The main danger is getting locked into a race to the bottom; in other words, competing by paying low wages, disregarding labour and environmental standards, cutting corners in the production process and avoiding taxation. Many enterprises, particularly in poor countries, use this strategy with knock-on effects for producers in other parts of the world. Witness the relentless price competition in global markets, especially for labour-intensive products; witness the falling terms of trade for developing country manufactured exports (Kaplinsky, 2000; Wood, 1997). Many producers, especially those of small and medium size, find that participating in and gaining from the global economy do not always go together. In order to achieve both export growth and rising incomes, it seems essential for local enterprises to ‘upgrade’ – to make better products, make them more efficiently, or move into more skilled activities. Policy makers in many parts of the world are looking for ways of helping their enterprises to achieve this. Many approaches are being tried. Particularly influential is the idea that the local sources of competitiveness need to be strengthened. The buzzwords are synergy, economies of clustering, systemic competitiveness, collective efficiency or local innovation systems. Studies carried out in the 1980s and 1990s showed many unexpected success stories of local enterprise clusters breaking into global markets. These stories continue to fuel excitement amongst local policy makers and their external backers. Simultaneously, there is a...