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

Within a small sample based on a particular set of national associations and cluster projects, the significance of this evident is to demonstrate that most enterprise managers perceive differences between the two forms of association. Most managers do not see one form of association as most effectively addressing all collective issues and they see a trade off may be needed between the implications of individual participation (ability to influence activity and commitment required) against what they seek from collective action.

This investigation falls short of presenting the findings as rules about what form of association is most effective at which activity. As well as the need to test these issues with a range of clusters and associations, a second interpretation of the evidence further highlights the possibility of variable experience. Matching business priorities to group effectiveness in the way just outlined suggests that both types of association will retain their relevance. An alternative interpretation is that one form of association can be used as a way of seeking to modify the activity of another. This perspective was important for enterprises associated with the Southern Wood Council, the cluster group with the highest proportion of associated enterprises claiming to be active participants in a cluster.

The Southern Wood Council comprises enterprises located in the far south of New Zealand that were all affiliated to national industry associations. Unlike other cluster projects, this group was an initiative of the businesses themselves rather than being a public agency led project. It arose partly from dissatisfaction with their national representation. National associations were viewed as dominated by the interests of corporate groups rather than independent forest processing operations such as theirs. This influenced a perception that national associations promoted issues that did not coincide with their priorities. Formation of the cluster group was seen as a way of obtaining a larger voice within national associations as well as gaining recognition as region with a particularly cohesive cluster of enterprises. This activism was connected to the high proportion of medium sized companies in the cluster, making it a realistic proposition that their collective action could influence a national association (Table 7). Size similarity also produced a cluster where firms faced similar resource issues and business challenges providing a rationale for the cluster that was lacking among other groups (Perry 2007). Ultimately, evolution from an independent cluster into a regional branch of a national association might be supported. In this way, rather than one form of association having continuing relevance for one set of activities some form of dynamic interaction can be envisaged as well.

CONCLUSION

Discussions of business clusters can encourage a view that firms outside a cluster operate in a starkly different environment to those within a cluster. They risk being bereft of opportunities to engage in cooperation with other businesses, enmeshed in distrustful business relationships, constrained in their choice of competitive strategy and disadvantaged by their lack of access to collective resources such as training and technology learning opportunities. This type of presentation is challenged by this investigation's evidence that national industry associations offer another form of collective association. Many enterprises participated in collective action before the recent interest in business cluster promotion developed. The contribution of national industry associations as tended to be overlooked because their role is frequently interpreted as being dominated by protectionist lobbying. Clusters, in contrast, are presented as being a tool for business development and the maximisation of competitive advantage. In practice, this study has found that national associations can be rated as more effective in some areas of business development support than clusters. Six specific conclusions arise from the findings.

First, it is important to recognise that clusters and national industry groups may make different contributions. Some cluster advocacy encourages giving little attention to the scale of geographical coverage of a group arguing that clusters may exist nationally, regionally or locally. This is true in the sense that firms may be grouped at any spatial scale. It is misleading in that group activities will be influenced by the geography of its membership. In this study, managers recognise that the choice made will affect the possible benefits obtained but they can remain uncertain whether it is most useful to engage with other firms locally or nationally.

Second, policy makers need to relate initiatives to the context in which intervention is directed rather than being driven by claims of universal applicability. The scope for cluster groups to add to business development is influenced by the extent to which alternative forms of collection association exist. Where there are active, well supported national associations there are likely to be fewer gaps in business development support than where national associations are absent or weak.

Third, a fresh assessment of the contribution to business development made by national industry associations is needed. Compared with the interest shown in regional cluster groups, national industry associations have been neglected by researchers. This may partly be explained by the acceptance of past judgements that have tended to be dominated by the perception of industry associations as protectionist lobbies without capacity to contribute to industrial development strategy. Such an assessment has certainly existed in New Zealand based on a survey of associations conducted in the early 1990s (Enderwick and Wilson, 1992). The present study has shown that at least in the forestry sector national associations appear to be of some importance with some enterprises even regarding them as a more effective form of collective association. This evidence suggests the need for a larger assessment of national industry associations.

Four, before supporting one form of association it is appropriate to investigate whether any existing group can be assisted to diversify its activity. Most enterprises are likely to prefer involvement in a single association over the need to maintain membership of two or more groups. This preference exists because firms have limited resources to devote to participation in collective groups. At the same time, it needs to be recognised that clusters and national industry associations can be attractive to different scales of enterprises. Small enterprises may have difficulty influencing the activity of national associations; on the other hand, large enterprises may be unwilling to support cluster groups included small enterprises that face different challenges to their own scale of enterprise.

Five, the risks of encouraging additional forms of collective association need to be assessed as well as the potential gains. Diversifying participation opportunities may maximise the number of firms engaged in some form of group, spreading the gains from joint activity, but at the expense of creating groups that are comparatively under resourced and fragmented. The option of concentrating participation within fewer large groups may reduce overall membership but bring the advantage of encouraging firms to resolve the differences that otherwise encourage fragmented representation. It might also result in collective groups that are well resourced and directed to significant industry improvement projects. These issues may be particularly significant in a small industrial country such as New Zealand where even broadly based industry groups potentially encompass a small population of businesses. The more general observation is that encouraging firms to join local clusters needs to be based on understanding that this level of collective activity will be more effective for business development than supporting their participation in a national association.

Six, repetition of the study in different sectors and economies is merited given the evidence that enterprise managers recognise that national and local forms of collective association potentially achieve different outcomes. In this regard it would be particularly relevant to examine other land based and newer technology-based industries such as biotechnology. Such additional investigations would ideally create a body of evidence that can lead to an understanding of the context in which each form of association is likely to add most to business development.

Received 24 November 2006

Accepted 16 May 2007

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