Friday, June 22, 2018

Economic Clusters can Self-Form or be Induced by Government

Economic clusters are a beneficial way to spark industry in the area. While these clusters often form organically based on the region and the resources available it can also be sparked through government and industry action (Dmitry, et. al, 2018). Organic develop is self driven but government and business action are possible when the right external factors are present.

Organic development occurs because businesses seek to make profit and they find that the right skills, resources, and opportunities exist where other businesses have found success. They create a process of development where multiple companies may end up working off of each other so that the city-region develops the appropriate competencies.

When an area has not attracted investment but the external factors are ripe for a particular industry it is possible for governments to infuse a cluster. This will require either attracting an anchor company or having a new one start. Of course such a business would not last long unless it finds market competitiveness quickly.

Therefore, governments often spur investment into a region by putting together a good economic package. This package may include tax incentives, cheap land leases, solid government performance, development of local labor capital and the collaborative conduits that impact industry in the area.

This is important because where industry has not opted to develop on their own, countries can encourage these industries by seeding in the right way. They will need to be focused on what they want to accomplish and how they are going to attract these businesses. It may also require significant coordination among multiple entities and active government influence to ensure the conditions are right.

Dmitry, S., et. al. (2016). Economic Clusters as a Form of Self-Organization of the Economic System.
International Journal of Economics and Financial Issues, 6 (S1).

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