Mobile Edition
Print
Get the Mag
Weekly UpdatesOzlem Oz
New York: Palgrave Macmillan, 2004. Pp. 219 ISBN-10:1403936137
Management theorists have over the years developed various strategies to aid in addressing managerial issues. In particular, strategic management literature contains a good measure of contributions to the subject of corporate competitiveness. Some of the strategic thinking in the literature are aimed at elevating an organization's competitive position in a manner that will facilitate the acquisition of a greater share of the market. Yet, other strategies add flavoring to the already decorated business environment due mainly to the various management and economic principles that have guided the conduct of business both locally and internationally. But because business and economic activities take place in time and space, it is almost impossible to divorce geography from business and economic life. This explains why attempts by mainstream economists to downplay the significance of location theory following the introduction of neo-classical economics during the middle part of the century did not quite succeed. The reinvention of economic geography, so to speak, has brought back a measurable degree of interest in location and related theories in general and of clusters in particular.
As indicated by Kotze (2003) "numerous authorities in the field of strategy formulation have noted the rapid escalation of competition, not just in fast-moving, high-tech industries, such as information technology, but in almost all sectors of the global economy" (p. 99). What this implies is that the competitive environment has become so intense and savage such that some researchers (D'Aveni, 1999; Abel, 1999) have christened it "hyper-competition." The question is, in this era of nerve-racking competition, disappearing national boundaries, and a near regulation-free business environment, how do clusters enhance competitive advantage?
Ozlem Oz's contribution to the study of clusters and its role in competitive advantage, based on the Turkish experience, captures the essence and many of the salient features of location theory, economic geography, and international trade. The book, which attempts to clarify the link between geographic clustering and international competitiveness, begins from what could be described as the most primary first principles, and ends with key implications on both theory and policy. In between, the author's effort focuses on the identification and analysis of four case studies that cut across industry lines.
This review explores the mind of the author in an attempt to identify the weight of its contribution to literature on clusters in particular and of sustainable competitive advantage in general. It is presented in three sections. The first discusses the book's contents, highlighting the core topics covered. In the segment, the difficulties of the book and the areas not covered in the book are examined. The final section contains the summary and conclusion.
AREAS COVERED
Founded on Porter's diamond framework (1990) that makes "an explicit connection between geographic concentration and international competitiveness of specific industries," Oz begins by analyzing Marshal's 1890 principles of economics. In that classic, Marshall paid detailed attention to the geographic concentration of specific industries in particular districts, including the socioeconomic nature of clustering. After breaking down Marshall's analysis, Weber's (1929) location theory, and other positivistic approaches to economic geography, Oz extracted the fundamental elements that helped in galvanizing his own concept of clustering and its impact on competition.
The book opens with a strong theoretical emphasis with a focus on classical economic theories. Chapter 1 introduces the concept of geographic clusters and cites examples of the major contributions that have aided the understanding of the many aspects of clusters. Porter (as cited in Oz, 2004) defined clusters as "geographic concentration of interconnected companies and institutions in a particular field" (p. 11). This is the position adopted by Oz after a brilliant analysis of the two basic questions that arose from the examination of other definitions of clusters. This analysis of other definitions aided his theorized link between clustering and competitiveness.
Principally, Oz accepts Porter's conjecture that "clusters affect competition in three broad ways: by increasing productivity, by driving the direction and pace of innovation, and by stimulating the formation of new businesses" (p. 26). This assertion fits perfectly with Porter's (1990) diamond framework, which is predicated upon the fact that "sources of advantage are local." A great deal of attention is paid to the examination of the empirical evidence provided by both the supporters and opponents of Porter's Diamond Framework. His presentation of the debate of the Porter-style clusters is very rich in empirical evidence and strong in theoretical interpretation.
In spite of the numerous criticisms of the Diamond Framework model, which he so eloquently presented in the debate, Oz tended to rely almost exclusively on that study in his own research endeavor. However, borrowing from the Irish experience in particular, (one of many examples of the failure of the Diamond Framework), the author concludes that Porter's critics "may be right that the approach to clusters is not relevant for a small open economy" (p. 28). Nonetheless, he went ahead to explain that the case of Ireland may simply be an exception.
Following a review of the historical development and economic structure of Turkey dating back to 1923, the author analyzed Turkish industries by location in a bid to identify those that are concentrated spatially, and where they are concentrated. By applying Enright's (1990) C4EMP and C8EMP, supported by location quotients (LQs) to measure geographic concentration, Oz identified the top 100 Turkish industries from 231 sectors of the economy. In order to chose and analyze the clusters in depth, the author adopted a very interesting methodology.
Although he acknowledges the limitations of using the statistical approach to identify geographic concentration (as corroborated by the likes of Brusco et al., 1996), his methodological process began with the analysis of Turkish trade and industrial statistics. He then sought to determine any apparent statistical linkages between geographic concentration and international competitiveness. This process defaulted nicely into the selection and conduct of the four (4) cluster case studies aimed at clarifying any linkages that may have been identified. There is no mistaking the significance of an appropriate methodology in the effectiveness of a research such as this. The vivid imagery captured by this five-level methodological procedure provides one of the strongest points in Oz's efforts. The blending of some quantitative expose with qualitative case analyses brings to the fore all the cardinal elements necessary for the identification of any linkages between clusters and competitive advantage, or the lack thereof.
The author concludes the book in two segments, namely theoretical implications, and policy implications of the key findings of the four case studies. From the theoretical standpoint, the author indicates that the findings corroborate existing theoretical literature on the emergence of clusters as well as the cost and benefits of clustering. In spite of this, however, some issues emerged particularly in the details. For example, the findings revealed additional factors that influence the emergence of clusters. They include history, entrepreneurial spirit, accumulated know-how, and social network.
With regards to the competitiveness of clusters, the analysis did reveal, though, that "not all geographic clusters are internationally competitive" (p. 164). The Turkish experiment has shown that spatial clustering alone does not guarantee competitiveness, an obvious indication that some of the explanations of competitiveness of clusters in the literature are not true.
The implication of the outcome of the study on policy is predicated upon the notion that competitiveness of location is a central concern for both the government and the business community. The perceptible relationship that exists between clustering and competitive advantages thus suggest that government polices should be geared towards improving local business environment. In other words, it is essential for governments to strengthen its microeconomic policies in order to sustain the competitiveness of clusters. While the book does not dismiss the relative significance of such macroeconomic variables as wages and devaluation, heavy emphasis is placed on the actual sources of competitive advantage.
DIFFICULTIES AND UNRESOLVED ISSUES
The author encountered several difficulties establishing a uniform position on clustering and any advantages associated with it. Given the venomous attack on the Porter's Diamond Framework (the corner stone of his thesis) in both the theoretical and empirical literature, the study lacked a strong theoretical conviction. Even though the book is structured along the line of a prototypical strategic management textbook, the managerial flavor is clearly lacking. The author's attempt at linking some cluster-related studies with the literature on organization theory portends incoherency thus making the connection between clusters and competitiveness appear a bit foggy.
In almost all the economies of the world, organizations are developing new approaches to strategy formulation in response to the rather rapid escalation of competition. According to Kotze (2003), this competitive situation is characterized by a virtual state of business war and the increasingly unforgiving environment. The traditional strategy formulation process links relevant internal factors with complementary external factors in the form of macroeconomic trends. But this process is laden with major shortcomings that make it difficult for organizations to create sustainable competitive advantage. As Campbell and Alexander (2000) rightly observed, "sustainable competitive advantage requires management to discover, understand, document and exploit insights into ways of creating more value than that of their competitors" (p. 42).
FEED