Handbook on the Knowledge Economy
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Handbook on the Knowledge Economy

Edited by David Rooney, Greg Hearn and Abraham Ninan

This fascinating Handbook defines how knowledge contributes to social and economic life, and vice versa. It considers the five areas critical to acquiring a comprehensive understanding of the knowledge economy: the nature of the knowledge economy; social, cooperative, cultural, creative, ethical and intellectual capital; knowledge and innovation systems; policy analysis for knowledge-based economies; and knowledge management.
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Chapter 10: Knowledge Issues and Policy in the Operation of Industrial Clusters

Abraham Ninan


Abraham Ninan In his definitive work on international competitiveness, Michael Porter (1998) argued that a nation’s leading export firms are not isolated success stories but successful groups of rivals within related industries. Implicit in Porter’s theory of industry strategy is a concept of how knowledge regions work in both traditional and ‘new’ industries. Although there are important caveats to the observations, clusters operate geographically, often regionally. This is despite globalization and technological mediation. I argue that this is because of a number of knowledge mechanisms that must operate in clusters, namely: • horizontal and vertical links in clusters; • five factors in Porter’s competitive model (1998) – local context; firm strategy, structure and rivalry; factor input conditions; demand conditions and related and supporting industries; • close geographic proximity; • face-to-face communication and exchange for creative work; • social network memberships within clusters; • cognitive proximity; • absorptive capacity; • spatial levels of analyses: regional, national and international. Reviewing Porter’s cluster model: definitional elasticity In policy terms, the cluster approach, while not without critics (e.g. Garlick 1996; Meyer-Stamer 2002) is still in the ascendancy. Using a knowledge management perspective, I suggest policy imperatives for the operation of clusters – the fundamental engines of industrial organization and innovation. Porter (1998) used the term ‘clusters’ to describe the cluster concept; this refers to sets of firms connected by horizontal and vertical links of various kinds (including, but not confined to, input–output trading associations). Further, according to Porter (1998), the significance of these industrial clusters resides in the interactions between five sets of...

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