Seeing trees and forests: a comparative evaluation of business clusters and national industry associations in the New Zealand forest sector.

SUMMARY

This paper examines the perceptions of a sample of enterprise managers in the New Zealand forest products industry about the respective contributions of cluster groups and national industry associations. Enterprise managers are found to view these forms of association as complementary rather than as one being clearly superior to the other. This suggests that business development can benefit from the existence of both forms of association with individual enterprises matching participation with their current development needs. Government support to collective associations should be based on prior investigation of the gaps in business support rather than on prior judgements about the superiority of one form of association. This evidence is considered significant in the context of the present prioritising of clusters to the neglect of national industry associations.

KEYWORDS

enterprise cluster; industry association; evaluation; policy; New Zealand; forestry

ENTERPRISE CLUSTERS AS ONE FORM OF COLLECTIVE ASSOCIATION

Location in a business cluster is claimed to enhance innovation and enterprise development (Porter, 2000; Benneworth, 2002; Raines, 2002; Pinch et al., 2003; Rosenfeld, 2005). Proximity to industry peers, it is argued, gives access to agglomeration advantages that are not available to enterprises located in isolation or among unconnected activity. Support for this proposition is reflected in the efforts of public agencies to increase awareness of the existence of business clusters (Department of Trade and Industry, 2001) and in many industry-based projects to promote membership-based cluster groups (Solvell et al., 2003). Equally, there is evidence that clusters have no necessary impact on business performance (Malmberg et al., 2000; Beaudry and Breschi, 2003; Braunerhjelm and Johansson, 2003; Cingano, 2003) or that they have significance for independent firms only (Beardsell and Henderson, 1999) or that they encourage enterprise start up but not survival (Sorenson and Audia, 2000; Stuart and Sorenson, 2003). Much of the advocacy of cluster advantage assumes that they provide unique opportunities for businesses to engage in collaboration with other businesses. Such a view can overlook that participation in a national industry association has been an option for many enterprises (Bennett, 1998; Traxler, 2000). Cluster promotion increases the opportunity for collective activity but small businesses have limited resources to devote to discretionary activities. Providing support for localised collaboration may result in reduced involvement in other collective associations. This implies a need to consider net outcomes rather than examining cluster participation in isolation. Such information may correct the implicit assumption that enterprises outside a cluster operate in a starkly different environment to those within a cluster.

Determining the spatial reach of cluster advantages is a further reason to investigate different sources of collaborative opportunity. The assessment of cluster significance tends to be polarised. One view is that clusters are a geographical phenomenon and that a standardised way of identifying potential clusters is needed before claims about their significance can be made (Martin and Sunley, 2003). Another view equates clusters with business interdependence that can be investigated at any spatial scale from individual localities to transnational regions (Porter, 2000; 2003; Feser and Luger, 2003). These outlooks produce conflicting assessments of the importance of business clusters. Viewing clusters as a specific geographical entity, identified through rules about the level of industry concentration and specialisation, can show that clusters are rare and not necessarily associated with economic growth (Crouch and Farrell, 2001). On the other hand, as all parts of an economy are ultimately inter-connected, the business interdependence perspective can always find scope for promoting cluster development (Feser and Bergman, 2000; Porter, 2003).

Seeking to reconcile these two perspectives may reduce undue scepticism or excessive optimism about clusters. Exploring enterprise managers' perception of the activities supported by national versus local collaboration is one way of seeking reconciliation. This study makes a contribution to this area of enquiry by presenting evidence drawn from a sample of enterprises associated with business clusters in New Zealand's forest and timber processing industries. This sector provides opportunity to examine how managers compare the value of local (cluster) versus national (industry association) forms of association. There is a history of high levels of participation in national forest industry groups that are differentiated by the activity and type of enterprise represented. More recently, a government assistance programme has encouraged the formation of regionally-based cluster groups (Perry, 2004). Regional groups in the timber industry were particularly active in securing this support drawing in many businesses that were already members of a national industry. Consequently, this example gives opportunity to evaluate how enterprise managers evaluate the usefulness of supporting local versus national forms of collective association.

The discussion commences with further comment on the nature of clusters and industry associations to justify the comparison of these forms of enterprise cooperation. The design of the investigation and study context is then outlined followed by the findings of the interviews with enterprise managers. The implications of the study are then considered particularly with respect to the appropriateness of the present tendency to view clusters as a distinct and more significant form of collective action than industry associations.

COMPARING CLUSTER AND NATIONAL INDUSTRY GROUPS

Industry associations and cluster groups do not conform to standardised organisational structures. In the case of both types of organisation, the nature of the constitute enterprises, the mix of enterprise types and the status granted collective associations by government agencies will affect their operation (Bennett, 1998; Perry, 2004). At the extreme, for example, a national industry may be concentrated entirely within a single regional cluster. Even with a geographically dispersed industry highly organised cluster groups may share features of an industry association. Consequently, this investigation recognises that differences between industry associations and cluster groups may be unique to the sample covered. Rather than seeking universal rules, this investigation was motivated by the perspective that there has been too much recent emphasis on the competitive advantage of cluster participation to the neglect of the contribution of other forms of collective association. Consequently, any evidence of enterprise managers giving preference to national associations is considered worthy of consideration. As well, there are some aspects of clusters and associations that are likely to be relatively widespread.

There has been an influential view that industry associations are primarily to be viewed as predatory lobbies that exert political pressure to maintain regulatory protection (Sabel, 1994). A tendency not to address matters of immediate significance to enterprise development has been a further reason for dismissing the role of industry associations (Granovetter, 1994). These assessments can be linked to the organisational basis of industry associations as networks coordinated by a third party that has limited capacity to control the behaviour of members or prevent the diffusion of benefits to non members (Bennett, 1997). As a result, associations normally find it difficult to raise resources and are constrained in the range of activities that they can pursue. Excluding those cases where membership is compulsory because of industry regulation, participation depends on attracting members through the provision of services to individual members (the logic of services) or through the provision of collective services (the logic of influence) or some combination (Bennett, 1998). Whatever the mix, associations tend to sustain a small membership from all who might join because much activity is of a public good nature that does require membership to gain benefit from. Consequently, it has been argued that industry representative in associations tends to fragment across competing groups whereas fewer, better resourced groups are needed to promote business development (Bennett, 1998).