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Wednesday, July 2, 2014

Enhancing Entrepreneurial Clusters with Global Supply Chain Networks



Global entrepreneurship is a concept that has made its way into recent economic literature. Small business has the opportunity to reach geographically dispersed customers that was not possible just a few decades ago. These entrepreneurs work within clusters and rely on effective supply chains to ensure that products are distributed to end users. Research by Wu, et. al. (2010) presents a framework for understanding global entrepreneurship where supply chain management serves as a platform for resource collection, market development, and risk mitigation. 

Before one can effective discuss the mechanisms of global entrepreneurship it is beneficial to understand what the term means. Fundamentally, entrepreneurs focus on value creation, development of new products/services, sparking ventures, and encourage market innovations (Brush, et. al., 2003). Entrepreneurs can exist within organizations or own small businesses. 

It is also possible to see entrepreneurs as the un-academic market researchers that seek to find opportunities. Entrepreneurs use their knowledge, skills, and abilities to find advantages in the market and seek methods of capitalizing on those advantages. They must first find an opportunity and then act upon that opportunity to realize capital growth. 

Drucker (1985) discusses entrepreneurial opportunities:

1. The creation of new and unique information

2. Exploitation of market inefficiencies as a result of information asymmetry

3. Acting upon the costs and benefits of alternative resource allocations

Entrepreneurs are highly effective within clusters of similar businesses that help raise knowledge and provide supply chain opportunities.  A cluster can be thought of as a proximal group of interconnected and field associated companies that may include end-product manufacturers, suppliers, and support businesses (Porter, 1998).  It is a grouping of like-minded and industry related businesses that enhance each other’s development.

Clusters develop opportunities to ship related products, draw interested investors, and enhance innovation. Entrepreneurs and investors can find value creation opportunities inside clusters because of the following:

-developed processes due to job specialization;

-high availability and lower prices for resources such as labor force and loan services;

-updated technology and a culture of development;

-lower cost of manufacturing and distribution of products/services due to risk pooling and economies of scale;

-stable demand for products and services;

-strong social networks around core competencies.

The authors conclude that clusters provide unique benefits for entrepreneurs due to the clustering of resources, knowledge, and distribution networks.  Clusters encourage greater innovation in industries as well as reduce the risks associated with conducting business. Both horizontal and vertical supply chain expansion becomes possible when entrepreneurs are used to innovation products and services to develop more opportunities. The mechanisms of distribution should be developed that can bundle smaller batch production to create efficiencies in intercontinental delivery from multiple businesses.
   
Brush, C. et. al. (2003), Doctoral education in the field of entrepreneurship, Journal of Management, 29 (3).

Drucker, P. (1985), Innovation and Entrepreneurship, Harper & Row, New York, NY.

Porter, M. (1998), Clusters and the new economics of competition, Harvard Business Review,
November-December, pp. 77-90.

Wu, et. al. (2010). Global entrepreneurship and supply chain management: a Chinese exemplar. Chinese Entrepreneurship, 2 (1).

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