Michael Porter's Theory Of Cooperative Clusters

Michael Porter has devoted many of his studies to the creation and maintenance of the competitive advantage of a nation. In his studies, Porter distances from classic economic theories and blatantly states that the ability of a nation to possess a competitive advantage depends on its ability to innovate and to be inimitable.
1. Innovation allows companies to succeed in international markets, especially when competitors are slow to respond to those inventions that “anticipate both domestic and foreign needs”. (Porter M. E., 1990, p. 217) The ability to innovate is central to a firm’s success; for example, the success of many Japanese firms can be credited to their ability to continually create ideas that suit the needs of global customers.

Home-based suppliers who boast international competitiveness serve to work with others in their own and related industries to promote the creation of innovations within groups of interrelated organizations. The cooperation of related industries can also aid in providing competitive advantages, especially when it indirectly supports the creation of new skills in other industries. When both of these players work together to promote the competitiveness of a region, they must have “short lines of communication, quick and constant flow of information, and an ongoing exchange of ideas and innovations”. (Porter M. E., 1990, p. 228) However, this is only possible if all companies work together, which identifies the importance of cooperative clusters and the advantages of geographical proximity. In addition, internationally competitive firms lead all members of related and supporting industries to gather knowledge about worldwide needs and possibilities for

Perhaps most important is the effect of rivalry on innovation and competitiveness. It has an especially powerful stimulation effect on geographically proximate firms as competition between these organizations becomes more personal; instead of competing for market share, proximate firms also compete for the same customers, the same workforce and the same scarce resources. However, this stiff competition also forces rivals to move beyond these sources of competitive advantage and to focus on those that are more sustainable and create an inimitable and specialized set of advantages within a region. (Porter M. E., 1990, p. 232) One can see that these characteristics reflect those of clusters. As such, all firms within the cluster will aim to be market leaders through constant innovations and more productive uses of factor resources, as this is the only way to win the desired customers, workers and resources. Significantly, the existence of clusters encourages new business formation which furthers rivalry and competition. Low barriers to entry and the better ability of entrepreneurs to spot opportunities promote formation. Local rivalry also forces firms to look to international markets so that they may gain access to other customers when domestic ones have already been