Clusters have gained increasing prominence in debates on economic development in recent years. Governments worldwide regard clusters as potential drivers of enterprise development and innovation. Cluster initiatives are also considered to be efficient policy instruments in that they allow for a concentration of resources and funding in targeted areas with a high growth and development potential that can spread beyond the target locations (spillover and multiplier effects).
Examples of internationally renowned clusters, such as that of the Silicon Valley cluster in California, the information technology cluster of Bangalore in India, or the Australian and Chilean wine clusters demonstrate that clusters are environments where enterprises can develop a competitive and global edge, while at the same time generating wealth and local economic development in the process. This is because clustering provides enterprises with access to specialized suppliers and support services, experienced and skilled labour and the knowledge sharing that occurs when people meet and talk about business.
Clusters are also particularly promising environments for SME development. Due to their small size, SMEs individually are often unable to realize economies of scale and thus find it difficult to take advantage of market opportunities that require the delivery of large stocks of standardized products or compliance with international standards. They also tend to have limited bargaining power in inputs purchase, do not command the resources required to buy specialized support services, and have little influence in the definition of support policies and services.
Within clusters, SMEs can realize shared gains through the organization of joint actions between cluster enterprises (e.g., joint bulk inputs purchase or joint advertising, or shared use of equipment) and between enterprises and their support institutions (e.g., provision of technical assistance by business associations or investments in infrastructure by the public sector). The advantage accruing to the cluster from such collective efforts is referred to as collective efficiency.
The UNIDO Approach to Cluster Development focuses in particular on overcoming of these impediments to SME competitiveness and on unleashing their growth and sustainable development potential.