Innovation and Small Enterprises in the Third World
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Innovation and Small Enterprises in the Third World

Edited by Meine Pieter van Dijk and Henry Sandee

Innovation is crucial for small enterprises to become and remain competitive in the global economy. In this book, the authors have combined theoretical insights with comprehensive case studies on innovation among small-scale enterprises in developing countries, paying particular attention to technological change in clusters of small firms.
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Chapter 3: Cluster Trajectories and the Likelihood of Endogenous Upgrading

Peter Knorringa


Chapter 3 15/3/02 8:58 am Page 1 3. Cluster trajectories and the likelihood of endogenous upgrading 1 Peter Knorringa This chapter identifies in which types of clusters one is more likely to find endogenous upgrading capabilities. While clusters in developing countries as a rule do not initiate radical innovations, they appear to differ significantly in the extent to which they depend on outside actors for implementing incremental (process) innovations. The capability of constellations of local actors in specific clusters to implement and build on incremental innovations - leaving aside where these innovations originate from - in this chapter denotes their potential for endogenous technological and organizational upgrading. For the more mature and export-oriented clusters operating in buyer-driven commodity chains, such endogenous upgrading capability is important because it makes them more attractive to the more demanding but also better paying global buyers in the more quality-driven market segments (Gereffi, 1999; Schmitz and Knorringa, 1999). For this, the industrial-district literature offers the most obvious point of departure (Brusco, 1982; Pyke et al., 1990). After all, this literature posits the most attractive end of the continuum: clusters of locally owned firms who, jointly with local institutions, compete successfully in international markets on the basis of their endogenous upgrading capabilities. At first sight the recent European industrial district success stories, especially from the Third Italy, seem very relevant as an example for clusters in developing countries. These European industrial districts by and large share the following characteristics (Asheim, 1994; Schmitz and Musyck, 1994;...

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