From Marshall’s Triad to Porter’s Diamond: added value?

The purpose of this paper is to offer clarity on a central concept introduced in Porter’s The Competitive Advantage of Nations, i.e. the cluster. The authors situate the concept introduced by Porter (1990) relative to two of its antecedents, the industrial district and industrial complex. Placing the cluster in a historical context permits consideration of the extent to which it, as a concept for analysis, may be differentiated from other geography-based approaches to economic phenomena. In this way, this paper examines the added value of the cluster concept derived from economic factors.

The paper provides a detailed literature review tracing the evolution of theories of location and agglomeration into which Porter’s cluster fits. The evolution of Porter’s own conceptualisation of the cluster and how this relates to theoretical clarity surrounding the concept is explored. Comparative analysis of theories of location, agglomeration and clustering is provided to identify similarities and differences across the approaches and identify the added value of the cluster concept in relation to other approaches.

Clustering represents a process associated with spatial organisational form which may offer advantages in efficiency, effectiveness and flexibility. Cluster benefits can be appreciated through the lens of Young’s (1928) identified sources of increasing returns. A key aspect in clustering is revealed in terms of its role in enabling four sources of increasing returns. The authors outline how these sources of increasing returns are related to “soft” processes of networking, interaction and individual and collective learning. Porter’s Diamond is a self-reinforcing system which can permit increasing returns and reinforce such tendencies of economic activity within agglomerations.

Added value from Porter’s cluster concept is identified in the context of both its locational anchoring and in terms of its potential for understanding the role of exploitation of increasing returns for development. This points to the importance of focusing on clustering as a process rather than on cluster within typologies of organisational form. This implies that the nature of relationships (and how they change) within and across markets, institutions and actors lies at the heart of clustering because of their roles in knowledge-generation, including innovation, knowledge sharing and upgrading.