ArticlePDF Available

Emergence and development of low-tech clusters: an empirical study of five Palestinian clusters

Authors:

Abstract

Purpose This study aims to analyze the nature of challenges facing five low-tech Palestinian small and medium-sized enterprise (SME) clusters and to understand their dynamics. The study proposes a number of key policies necessary to foster start-ups and the growth of the current clusters. Design/methodology/approach Five low-tech Palestinian clusters were selected for investigation. Using multiple sources of evidence, the research questions are answered using a case study approach. Twelve semi-structured in-depth interviews were conducted with representatives from the government, private sector and universities. Content analysis was used to analyze the data obtained from the interviews. Findings These five low-tech clusters in Palestine are located in a complex environment that imposes a mix of challenges which adversely affect their performance. The challenges facing Palestinian clusters are different in terms of their degree of complexity. The common challenges facing the Palestinian low-tech SME clusters are the fundamental lack of innovative stimulation policies or of incentives in the Palestinian ecosystem, lack of trust, unfair competition, limited access to finance, lack of access to promising markets and the limited collaboration between different parties. More focused policies are suggested to the Palestinian authorities. Practical implications Clusters represent a new and complementary way of understanding an economy, organizing economic development, enhancing competitiveness and innovation through sectoral specialization and cooperation and implementing public policies. In the overwhelming majority of Palestinian entities categorized as SMEs, clustering adds value to the firms from the point of view of productivity and by battling unemployment, which is rampant among Palestinian youth. Originality/value Even though the issue of clusters in SMEs has been well researched in developed countries, empirical studies are still lacking in this developing region. The attention given to policies in this article allows using the insights gained for cluster development in Palestine.
Emergence and development of
low-tech clusters: an empirical
study of five Palestinian clusters
Suhail Sultan
Faculty of Business and Economics, Birzeit University,
Birzeit, Palestinian Authority
Meine Pieter van Dijk
Maastricht School of Management, Maastricht, The Netherlands, and
Omar Omran
Faculty of Business and Economics, Birzeit University,
Birzeit, Palestinian Authority
Abstract
Purpose This study aims to analyze the nature of challenges facing five low-tech Palestinian small and
medium-sized enterprise (SME) clusters and to understand their dynamics. The study proposes a number of
key policies necessary to foster start-ups and the growth of the current clusters.
Design/methodology/approach Five low-tech Palestinian clusters were selected for investigation. Using
multiple sources of evidence, the research questions are answered using a case study approach. Twelve semi-
structured in-depth interviews were conducted with representatives from the government, private sector and
universities. Content analysis was used to analyze the data obtained from the interviews.
Findings These five low-tech clusters in Palestine are located in a complex environment that imposes a mix
of challenges which adversely affect their performance. The challenges facing Palestinian clusters are different
in terms of their degree of complexity. The common challenges facing the Palestinian low-tech SME clusters are
the fundamental lack of innovative stimulation policies or of incentives in the Palestinian ecosystem, lack of
trust, unfair competition, limited access to finance, lack of access to promising markets and the limited
collaboration between different parties. More focused policies are suggested to the Palestinian authorities.
Practical implications Clusters represent a new and complementary way of understanding an economy,
organizing economic development, enhancing competitiveness and innovation through sectoral specialization
and cooperation and implementing public policies. In the overwhelming majority of Palestinian entities
categorized as SMEs, clustering adds value to the firms from the point of view of productivity and by battling
unemployment, which is rampant among Palestinian youth.
Originality/value Even though the issue of clusters in SMEs has been well researched in developed
countries, empirical studies are still lacking in this developing region. The attention given to policies in this
article allows using the insights gained for cluster development in Palestine.
Keywords Clusters, SMEs, Challenges, Policies, Palestine
Paper type Research paper
Introduction
The increasing globalization and the resulting mass of competition associated with greater
technological complexity make innovation a key aspect for enterprises, revealing
increasingly the importance of establishing cooperation networks and clusters (Garcia-
Villaverde et al., 2017;Hamidi and Zandiatashbar, 2019;Khan et al., 2019;Kuksa et al., 2019). A
cluster is not only geographic band of enterprises, but also a localized network of specialized
organizations including firms, knowledge-producing agents, bridging organizations and
government agencies (Van den Berg et al., 2001;Van Dijk, 2003).
Emergence and
development of
low-tech
cluster
The authors would like to thank Zamaleh Fellowship Program for their support.
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1450-2194.htm
Received 16 July 2019
Revised 29 November 2019
14 January 2020
20 February 2020
16 March 2020
Accepted 20 April 2020
EuroMed Journal of Business
© Emerald Publishing Limited
1450-2194
DOI 10.1108/EMJB-07-2019-0100
The review of the cluster literature reflects, although a host of studies have examined
clusters in developed countries (Kamran et al., 2017;Vanzettine et al., 2017), that a lack of
research that systematically addresses the dynamics and nature of cluster development in
developing economies is still problematic, especially small and medium-sized enterprises
(SMEs) (Van Dijk and Rabellotti, 1997;Schmitz and Nadvi, 1999;Park and Luo, 2001;Lin et al.,
2009;Pyke and Lund-Thomsen, 2016;Vanzettine et al., 2017). Researchers have identified this
research gap, subsequently calling for more research to investigate the transferability of
current theories of clusters to developing countries (Ghauri and Santangelo, 2012;Vanzettine
et al., 2017). This further stresses the role of localization and contextualization in pushing
forth cluster development. As such, contextual focus can help to establish a regions social,
political and economic conditions (Sultan, 2014) that can either reduce or increase the level of
complexity of cluster development progress in developing countries.
Cluster development in Palestine, which is divided into two geographically detached areas
(West Bank and Gaza Strip), is a relatively new concept. The concept was introduced by none
other than Micheal Porter himself during visit to Palestine and the region in 1998. The
Palestinian private sector is dominated by SMEs, and most of them are working in traditional
and low-tech sectors (Sultan, 2014). Thusly, the question to be posed is as follows: Does the
concept of cluster development successfully work in the Palestinian context? This paper aims
to study the emergence and development of five Palestinian low-tech clusters that are
working in an unusual and harsh operating, oftentimes dysfunctional, environment. In
addition, it also studies the mechanism for specific insights on how to analyze the regional
clusters dynamics. Also to be studied are the challenges with respect to the importance of
localization and the consideration of contextual factors facing these clusters, including the
government policies needed to foster them, implications for scholars and practitioners, as well
as future research streams.
Theoretical background
This section discusses the cluster definitions, challenges and policy needed to foster clusters
(see Appendix).
Cluster definition and value creation approach
The literature has recognized the importance of clustering for economic development (Van
Dijk and Rabellotti, 1997;Schmitz and Nadvi, 1999). Several contributions in this field showed
how clustering in the developing world is often related to (technological or sectoral)
upgrading through insertion into broader production structures, also theorized as global
commodity or value chains (Bair and Gereffi, 2001;Humphrey and Schmitz, 2002;Sturgeon
et al., 2008;Pyke and Lund-Thomsen, 2016).
A common definition of clusters is geographic concentrations of industries related by
knowledge, skills, inputs, demand and/or other linkages (Porter, 2011;Peer and Keil, 2013).
Clusters could include organizations of different sizes and types (Delgado et al., 2015). Studies
focusing on geographical agglomeration indicate that spatial organizational agglomeration
can be the factor that shapes the evolution of organizations and influences the nature of
competition among them (Porter, 2011;Tsang and Siu, 2016).
The organizational ecology literature supports the notion that geographically clustered
firms may differ from firms outside the cluster regarding cost structures, competitive
behaviour and performance over time (Tan, 2006;Baum and Mezias, 1992;Lomi, 1995).
Clusters reveal a blending of both geographic proximity and industry-level or sectoral-level
specialization (Fujita and Thisse, 1996;Porter, 2011;Delgado et al., 2015). Inter-firm
technological spillover or specialized labour and intermediate inputs are mechanisms to
EMJB
explain the dynamics of the cluster. Specialized labour markets, inputs, suppliers and
knowledge spillovers lead to enhanced rates of innovation and productivity, all of which have
been associated with geographical proximity and achieving external economies (Delgado
et al., 2015;Paula and Da Silva, 2019). Building on that explanation, cooperation and its
importance as a means of enhancing competitiveness for clusters through collective
efficiency, entrepreneurial skills and the dissemination of information are emphasized
(Bijaui, 2019).
Another manner by which a cluster is generally understood is to have a group of innovative
actors in a specific industry, massed in key locations (Porter, 1998;Fang, 2015;Hamidi and
Zandiatashbar, 2019). Co-location is associated with better access to specialized, high-
productivity employees with lower search and training costs. At the supply input level,
intermediate industries provide downstream firms with local access to specialized materials,
finance, marketing and business services, as they themselves exploit greater internal economies
of scale and benefit from reduced transport costs (Cooke and Morgan, 1994;Porter, 1998).
A common cultural background is important for clusters to develop (Knorringa and
Nadvi, 2016). Ideally, clusters achieve economies of scale and scope similar to larger corporate
entities. However, more than just access to resources, relying on institutions is a means for
organizations to reduce uncertainty and increase the predictability and intelligibility of their
actors to the audience. Other advantages associated with clusters are more favourable market
conditions, such as the presence of customers requiring more attention and time based on
their unique needs, greater rivalry and complementarities in products and technologies.
Governance structures could develop at different geographical levels (Krugman, 1998),
ranging from local to national, initiated by either the public or private sector. For developing
economies without the benefit of large corporations, enterprises reap the advantages of
clustering (Pyke and Sengenberger, 1992), as clusters, in this context, are similar to economies
of scale which are prevalent in large companies (Martin and Sunley, 2003).
Cluster challenges
Geography, particularly location, can be linked to success in industries such as real estate.
For clusters, however, geography alone does not guarantee a firms success (Porter, 2000;
Tallman and Phene, 2007). Rather, the fundamental role of regional clusters is to facilitate the
formation of local inter-organizational networks, which act as channels of knowledge and
innovation diffusion (Balland et al., 2012;Garcia-Villaverde et al., 2017). Studies suggest that
firms belonging to regional clusters are more likely to achieve superior innovation and
economic performance (Capello and Faggian, 2005;Garcia-Villaverde et al., 2017).
Quality locations and/or a legal framework also play a role (Tracey et al., 2014;Turkina
et al., 2019). Paramount amongst the advantages is the sharing of information. This may stem
from the homogeneous nature or nearness of firms, as this familiarity amongst the
enterprises and entrepreneurs may be the initial step to establishing trade organizations.
Local tradersinterest in this type of cluster is directly attributable to the ability to buy
cheaply and sell outside the cluster (Van Dijk and Sverrisson, 2003).
Clusters face various challenges that are critical to their competitiveness (Gereffi and Lee,
2016), such as lack of trust (Chen et al., 2017;Vanzettine et al., 2017), lack of specialized human
resources (Pyke and Lund-Thomsen, 2016), lack of information that is critical to business,
restrictive government rules and regulations, market access constraints, limited logistical
facilities, poor R&D infrastructures (Richardson, 2013), inability to conform with new global
standards (Lei and Huang, 2014) and weak links with supporting/related industries
(Knorringa and Nadvi, 2016). Challenges that are considered to be at the cluster-level tend to
require long-term solutions and concerted efforts to overcome them (Ponte and Sturgeon,
2014;Abdin and Rahman, 2015).
Emergence and
development of
low-tech
cluster
Hospers and Beugelsdijk (2002) criticized the fact that results of cluster studies are hardly
transferable from one place to another, given different resources availability, economic
structures, cultures and so forth. Burfitt and Macneill (2008) doubt the transferability of
cluster initiatives from the implementation perspective, identifying managerial and political
challenges in a multilevel and multi-organizational setting. Rather than reviewing cluster
culture and initiatives, the primary focus should be allocated as to why certain cluster entities
exist and how they function within that specific context.
Cluster promotion policies
Many studies of clusters in developing countries have focused on the supportive role of
government and public agencies on clustersperformance (Richardson, 2013;Kamran et al.,
2017), indicating for example that when the social bonding in a given cluster is weak,
government interventions are of greater significance. The role of classical factors of
production (including land, labour and capital) is analysed by Kamran et al. (2017) and
subsequently found that better infrastructure, availability of utility services and the
accessibility to inexpensive bank loans and commercial finance helped businesses in
developing countries flourish in geographic proximities. Richardson (2013) mentions that it
would be great if the policymakers foresee the problems prior to developing the cluster and
can take the necessary steps to address them.
However, it is well known that the institutional environments and business situations of
developing countries are fundamentally different from those of the developed countries (Park
and Luo, 2001;Lin et al., 2009). Chen et al. (2016) explain that, in emerging economies, rules are
often unclear and uncertain, because the formal institutions are still evolving.
The framework with respect to the promotion policies of clusters is evident from Table 1
(Van Dijk, 2003) and consists of five distinct categories: (1) policy-related incentives, (2)
controlling prices and providing subsidies, (3) innovation promotion, (4) physical support and
(5) stimulating cooperation amongst enterprises within the cluster itself. These polices have
been recommended by Van Dijk for China and India (Van Dijk, 2003).
Research setting, problem and questions
Almost 99% of the industrial firms in Palestine are categorized as SMEs that solely compete
on price, with very few of these enterprises have direct access to foreign markets (Sultan,
2014). A project of five low-tech clusters was launched in 2012 to enhance the competitiveness
of SMEs working in five different regions. These clusters are presented in Table 2.
The five clusters consist of a small yet growing number of SMEs, mainly family-owned
and family-operated. For the purpose of enhancing the competitiveness of these SMEs, the
impetus is to form dynamic clusters which promote productivity, innovation and
Category Example
Policy-related
incentives
Fiscal policies, targeted education and training, marketing support, linking with
private or public capital or suppliers and cluster marketing through advertising
Prices and subsidies Influencing land prices, the price of electricity and water or other services
Innovation
promotion
Involving research centres, stimulating incubator centres and promoting linkages
with training and R&D institutions
Physical support Providing space and infrastructure
Stimulating
cooperation
Forming groups or associations, consulting these groups and promoting inter-firm
relations
Source(s):Van Dijk (2003)
Table 1.
Cluster promotion
policies, different
categories of
instruments
EMJB
competition in a number of ways, such as cost reduction due to sharing of resources, and
creating critical mass by having a pool of specialized skills, expertise and value-added
products (Sultan, 2014;Kuksa et al.,2019). Sultan and Van Dijk (2017) sought answers as to
which level of development the Palestinian clusters have attained. This resulted in the
identification of five stages whereby clusters are distinguished, ranging from location
clusters to fully fledged industrial districts. Table 3 applies this to five such Palestinian
clusters.
The need and opportunity to create more dynamic clusters in Palestine has led to the
following research questions being proposed:
RQ1. What are the main challenges facing Palestinian low-tech clusters?
RQ2. How can the dynamics of Palestinian low-tech clusters be promoted?
According to Porter, poor countries lack well-developed clusters(Porter, 1998), primarily
attributed to structural deficiencies in their business environment. On the one hand, this can
be phrased as institutional voids, or missing intermediaries and poor institutional
infrastructure. On the other hand, in developing economies, industrial activity tends to
concentrate in selected locations, especially select metropolitan cities and capitals, as a result
of the lack of widespread infrastructure in peripheral areas (Giacomin, 2017;Prtelski et al.,
2020). Also contributing to this are significant differences in the dynamics according to the
level of development within the cluster, the organizational setup, geographical distribution
and their role within the global value chain. The scale at which cluster policies are designed
also varies from country to country, depending on its political structure, size and available
resources.
Cluster Type
Investment
(USD million)
Number of
firms
Number of
employees
Contribution to
GDP (%) Location
Leather and
shoe
Industry 180 85 1,275 0.5 Hebron
Stone and
marble
Industry 400 50 1,000 2 Bethlehem
Furniture Industry 100 55 1,650 1 Salfit
Tourism Service 380 80 1,200 2 East
Jerusalem
Palm and date Agriculture 50 12 400 0.1 Gaza
Stage Main characteristic In Palestine
Locational cluster Nearness, leading to sharing
information, etc.
The majority of the firms in the date and
palm cluster
Market cluster More market outlets, benefitting from
traders exportingthe product
The majority of the furniture and the
leather and shoe cluster
Labour division
cluster
Development of inter-firm relations leading
to specialization
Minority of the five clusters
Innovative cluster Innovation starts playing a role resulting in
a dynamic development
Majority of the stone and marble and the
tourism and creative arts cluster
Full-fledged
industrial district
Supportive local governments supporting
the own dynamics of the cluster
No examples yet in Palestine
Source(s):Van Dijk and Sverrisson (2003) and Column 3 from Sultan and Van Dijk (2017)
Table 2.
Five Palestinian low-
tech clusters
Table 3.
From clusters to
industrial districts, an
evolutionary
perspective
Emergence and
development of
low-tech
cluster
Research methodology
With respect to a situation, if not much is known or when more information is needed for
developing a viable theoretical framework, the research will fall under the exploratory
research umbrella (Sekaran and Bougie, 2016). In Palestine, the number of studies that
examined clustering start-ups and growth are quite few and not comprehensive. Testing the
proposition of a theory can be done in one of two ways: inductively or deductively. By
choosing the relevant theory at the beginning of the research study, deduction was chosen as
the research approach (Saunders et al., 2017).
In order to answer the two research questions regarding why and how the low-tech
Palestinian clusters emerge and develop, and how certain policies might foster these clusters,
a case study method was applied. Yin (2017) stated that case study suits the types of how
and whyresearch questions. Yin further stated that case study is used to investigate a
contemporary phenomenon within a real-life context, especially when the boundaries
between phenomenon and context are not clearly defined.
A research strategy of in-depth interviewing was selected to gather data (Saunders et al.,
2017). The population and unit of study consist of establishments with experience gained
from operating within at least one of the Palestinian low-tech clusters. Public sector officials
with authority to develop the clusters were interviewed in accordance with the selected
research strategy, as well as managers within the five clusters and managers of supporting
establishments within the said clusters. Criteria for participant selection for the study were
based on their knowledge and experience in managing firms within the cluster, their
information on services available within the cluster and their experience with cluster
inducement policiy (Porter, 1998).
Table 4 presents the l ist of workplaces of the interviewees during the period from January
to October 2019. Twelve semi-structured interviews were conducted with participants from
universities and from the government and the private sectors. Each interview was reviewed
in detail and linked to specific coding. Codes were then grouped according to two themes:
challenges and policies. A process of mapping and linking codes was undertaken to
ascertain how each related to the other. Results are presented and discussed in the next
section.
To support the data collection, this study used sources of evidence related to
documentation, interviews and direct observation (Creswell and Poth, 2017). Secondary
sources of evidence are literature on the existence of clusters, project reports investigating the
implementation of cluster policy and local news providing information on clusters. Data from
each of the aforementioned sources were subsequently analysed in this study. The following
section addresses the challenges facing the five Palestinian low-tech clusters and the needed
policies to promote these clusters.
Government Private sector Universities/Research
Ministry of National
Economy
Palestinian Federation of Industries Palestine Polytechnic University
Ministry of Agriculture Cluster managers An-Najah University
Ministry of Tourism and
Antique
Federation of Chambers of Commerce,
Industry and Agriculture
Al Quds University
Al Azhar University
PALTRADE Palestine Economic Policy
Research Institute (MAS)
Number: 3 Number: 4 Number: 5
Table 4.
Population overview
EMJB
Findings
Main challenges facing the five Palestinian low-tech clusters
The establishment of any cluster is based on the so-called hard factors like the location of
natural resources, as well as human factors such as the interaction between the actors and the
institutions. In our case, the hard factors are naturally available, while the soft factors such as
trust and structural linkages are significantly more difficult to develop.
Even though the talk is about the same source of funds, the same clustersmanagement and the small
area of land, there are significant differences in the development of the five clusters.
Principally speaking, the five clusters studied are facing a complex set of challenges and
hurdles. Ultimately, the main challenges facing the five low-tech clusters could be categorized
as market failure, government policy failure and system failure.
Market failure. Essentially, this stems from a lack of knowledge creation, lack of
information, unfair competitive practices, imbalances between demand and supply factors,
among other external obstacles. The five clusters are suffering from the high levels of
competition from local products from large companies or imports.
Clustermembers are suffering from the unfair competition, limited access to finance, limited access
to information and limited access to markets.
The traditional production that is not in accordance with the demands of existing markets has made
an inappropriate quality which is not compatible with market
Standards have become important.
Government policy failure. This is due to the dysfunctional nature of public policies and
government services such as providing quality education, consumer protection and clearly
defined technical standards. Although the Palestinian government has set up associations
and unions, the role of national and local governments in supporting the clusters is quite
limited.
There is a lack of incentive policies and incentive packages to clusters.
The Government is talking about the support of many clusters without providing the needed
resources.
System failure. This results from a lack of coordinated efforts amongst entities spanning
government, education and the private sector. Regrettably, civil society organizations,
political parties, labour unions and trade associations are considered to be factors of
imbalance for the governments hegemony. Lack of trust has therefore become the norm and
presents a grave dilemma, often hindering the establishment of larger companies. The
consequences in terms of social capital and generated business are failed cooperation,
mistrust and disintegration. Hence, as a key measure to potentially reduce transaction costs
and business risks, building social capital becomes vital.
Attitudes, personal values, assumptions and beliefs of all key people who are involved in these
clusters lead to the feeling of distrust between entities and cluster authorities, along with poor
communication and common understanding before the cluster actors.
Collaboration between research centres, universities, private sector entities and public institutions is
also prevalent in Palestine.
Most notable is the lack of assets needed for cluster emergence and development, most
notably modern technology and research-based industries. On the one hand, managers of
companies attributed the lack of research and development units to the high costs and the
effect of franchise businesses prevailing in some engineering enterprises. On the other hand,
Emergence and
development of
low-tech
cluster
technological knowledge, for instance, is transferred easily from the parent firms in South
Korea or Germany to Palestine. In this regard, dependency on imported technology is
criticized due to the fact that it will continue to hinder the building of local capacities and the
constructive use of national resources.
Palestinian SMEs lack the logistical capacities and capabilities.
We lack the creative design, research and development and innovation.
Considering these complex challenges, it seems that, in spite of excessive interest by
developing countries to develop clusters, the effectiveness of clustering policies remains
questionable (Tan, 2006). The findings confirmed that clusters do not exist in isolation but are
rooted in communities (Sultan, 2014). As such, the analysis exposed three categories of
challenges, which are imposed by the context and have adversely affected the development of
the five clusters: market failure, government policy failure and system failure. It is therefore
implied that careful consideration of these specific challenges can help businesses affiliated
with a cluster to leverage the potential advantages of their geographic proximity.
Current policies to promote the five Palestinian low-tech clusters
Although, the support for the clustering process was evident in the National Development
Plan (20172022), regrettably these plans lack the implementation of policies needed to
promote clusters. The Palestinian prime minister stated that:
The government will support particular areas of specialization in each of the regions in Palestine so
that they can grow strategically into development clusters. In this way, we support economic
development, preserve and protect the land for the people, and show our resilience and steadfastness.
So, what are the policies needed to foster the Palestinian clusters? This section discusses the
policies as stated in table (1) by Van Dijk (2003), while considering the life cycles of clusters
(Pronest
ı, 2019). According to Altenburg and Meyer-Stamer (1999) and Polozhentseva and
Klevtsova (2015), policies related to cluster development must address inefficiency that poses
obstacles to clusters and their eventual growth. At both firm and cluster levels, one key
measure of success is enhanced performance, which yields higher and more pronounced
levels of turnover and subsequent profits by accessing new markets through more
sophisticated levels of business development services and coordination systems, allowing
governmental interventions to be more effective.
Policy-related incentives. In order to provide an enabling business environment for clusters,
changes are required for certain laws and regulations. This can be achieved by including a
well-defined cluster policy under the auspices of existing national policies and strategies as
well as incentives schemes for cluster members. Despitethe presence of incentives laws such
as the Intellectual Property Law, the Investment Promotion Law and the Public Procurement
Law exist, they still require further modification, amendments and specific clauses to
encourage businesses, especially SMEs, to work together in clusters.
The laws that applied come from many jurisdictions through history: Customary Law ...Ottoman
Law ...British Law ... Jordanian Law ...Egyptian Law ... Israeli law and finally, the Palestinian
National Authoritys law.
Prices and subsides. Marketing clusters receive no tangible support. Although the Palestine
Trade Center (PALTRADE) encourages companies to export goods and services, it primarily
targets large businesses rather than SMEs or cluster initiatives. This challenge exists also in
the pursuit of access to finance, as banks are far more comfortable lending to larger
enterprises as opposed to SMEs, due to a lack of loan guarantees and a stated higher risk to
the banks. Collateralization is often the primary obstacle for Palestinian entities accessing
EMJB
banks and related financial services, as the members are typically SMEs (Foghani et al., 2017).
Thus, a more effective financial system is needed, such as changing collateral laws, investing
in financial literacy and financial inclusion and increasing the number of suppliers of finance
and improving the credit assessment systems used for SMEs.
Innovation promotion. The results of interviews show that all SMEs are producing almost
the same products, using the same production lines, and the same designs.
The national innovation system is relatively weak in Palestine.
Ideally, innovation and clustering should be natural partners, as mutual needs for research
and enhancement of product offerings are present. Clusters allow SMEs to achieve critical
mass through innovation and research, which result in better and more pronounced
communication amongst cluster members, enabling them to support the said cluster and
ultimately each other (Muhammad Auwal et al., 2018;Khan et al., 2019). Through these
efforts, product and service innovation reach the market, thus allowing clusters to create
enhanced competitiveness in marketplaces.
Physical support. There is currently no large-scale influence from the Palestinian public
sector in terms of land prices, industrial zones, utilities such as electricity or water, or tax
exemption, among others. The Palestinian government does not provide any preferential
treatment in a direct manner to any cluster. Thus, as clusters are part of the national
discussion, as evidenced by their presence on national agendas and development plans, this is
believed to encourage donor and funding agencies to provide assistance and support for
existing and new clusters.
Stimulating cooperation. There currently exists an environment where research
institutions, incubators or accelerators and training centres are not collaborating
effectively, resulting in clear deficiencies as well as redundancies amongst them. Research
activity and cluster activities are limited, which is quite telling. Field research showed that
firms in clusters recognize a lack of a functioning knowledge infrastructure which is
counterproductive to cluster development. Therefore, interviews stated a need for better and
more effective communication between education and private sector entities.
Sharing information, ideas and collaboration requires trust and without this element, the cluster
becomes dysfunctional.
Higher education institutions have the capacity to provide knowledge in fields of interest that
can be disseminated and integrated into the clusters and their firms. This leads to the
experience of joint efforts towards educational courses from higher education institutions
that offer degrees or certification in fields relevant to the clusters themselves, such as at
Palestine Polytechnic University and An-Najah National University.
Discussion
In terms of challenges and policies, we find that some of the challenges are very specific to
Palestine, while most cluster development policies are either non-existent or not properly
implemented. This research paper confirms what was stated in the theoretical section about
the importance of clusters for economic development (Peer and Keil, 2013;Njos and Jakobsen,
2016). However, in the Palestinian context, there are a number of specific constraints making
cluster development more complicated (Sultan, 2014). Specifically, within Palestine, the West
Bank is landlocked and is dependent on Israel for access to the Mediterranean Sea. The
current political environment and low level of development of the studied clusters make
reliance of the clusters on export markets more difficult. Also technology diffusion is slow,
and the local innovation capacity is limited due to the weak innovation ecosystem and the
mistrust between all stakeholders.
Emergence and
development of
low-tech
cluster
In this specific situation, few of the expected dynamic effects of clustering can be
found. As such, what proposals should a given cluster initiative focus on is a question
that should evolve from the cluster dialogues and analyses, thereby forcing cluster
members to assume ownership of such of those initiatives. To improve the development
of the five clusters, there is a need for improving the upstream and downstream value
chain of each cluster by SMEs, building trust and reinforcing social capital among the
cluster stakeholder groups and coordinationamongactors.Aswell,thereisneedfor
promoting joint activities in the field of training, marketing and production and in
establishing relations between Palestinian universities and research centres and these
clusters.
Conclusion
Data collection comprised in-depth semi-structured interviews, and hence, the current
research provides an overall picture and understanding of the cluster phenomenon in the
Palestinian context as cases of analysis. This paper aims to assess the challenges facing five
Palestinian clusters and identify potential policies to promote these clusters. After
approximately 810 years of their emergence, parts of these clusters remain immature and
encounter many difficulties. The main challenges facing the five low-tech clusters are
categorized as market failure, government policy failure and system failure. Hard factors
such as location and natural resources are there, while soft factors such as trust and
structural linkages are significantly more difficult to develop.
Policies related to cluster development were proposed to tackle inefficiency that poses
obstacles to clusters and their eventual growth. The paper recommends the following
policies: incentives, prices and subsides, innovation promotion, physical support and
stimulating cooperation. Strategic alliances, competition and collaboration must be based on
resource sharing and integration. The cluster members should establish collaborative
principles, which facilitate mutual efforts in innovation and R&D and, in turn, enhance their
competitiveness.
Theoretical and managerial implications
Theoretical implications
From a theoretical point of view, the importance of cultural factors of more favourable market
conditions in the current cluster and the cluster as an opportunity to promote the shared
interests is confirmed (Hospers and Beugelsdijk, 2002;Burfitt and Macneill, 2008). However,
the lack of competitiveness given the bigger neighbours and the availability of cheap Chinese
products makes it difficult for Palestine to fully benefit from the existing clusters for its
economic development and for employment creation.
Managerial implications
This study has the following key managerial implications.
Firmsmanagers.
(1) Clustering can positively enhance corporate innovation performance. This finding
suggests that the enhancement of corporate sustainable development and
competitiveness should rely on clustering resources and relationships to increase
competitive advantage.
(2) Firms should cooperate with supply chain agents and foster industryacademia
cooperation, in an attempt to upgrade knowledge and technical management
capabilities.
EMJB
Policymakers.
(1) The one-size-fits-all strategy is not fit-for-purpose to drive sustainable cluster
development. More focus should be placed on eliminating hindering and other
constraints.
(2) The government and private companies should establish strategic cooperation
platforms. Strategic alliances, competition and cooperation should work on the basis
of the sharing and integration of resources. This facilitates joint efforts in innovation
and R&D and improves competitiveness of companies.
Limitations and next steps
Research limitations
The limitations of the research are the following.
(1) Research methodology: As with any qualitative study, there are limitations due to the
small number of interviews (Saunders et al., 2017).
(2) Research scope: This research study was applied to specific sectors in a specific
country, which limits the generalizability of the study in other contexts (Saunders
et al., 2017).
(3) Context: Palestine, as a developing country, experiences a fragile and conflict
environment. Therefore, there are limitations due to the bureaucracy, culture and
unavailability of resources for and statistics on cluster development (Sultan, 2014).
(4) Research topic: There are limitations referring to the topic of cluster itself such as the
lack of empirical data on the role of trust and collaboration between key players, and
there are difficulties in identifying the clustersboundaries.
Next steps
All of the clusters mentioned in this research paper initially developed with the support of the
Palestinian government and donors money. Thus, the support from the government and
donors has been an important factor in their emergence. This raises questions about the role
of government and donors in promoting clusters in developing countries and at what stage
they should act. This research paper has highlighted some examples of external inducement
of clusters, but more research is needed.
There is a particular shortage of research looking at the impacts of cluster policies over the
longer term. Further research might therefore turn its attention to assess the impact of the
abovementioned policies on the development and success of the five clusters as well as the
start-up of new ones.
It was noted that cluster members inter-connect and build value networks, either formally
or informally. In this research paper, there has been a concentration on the formal links
between cluster members. However, further research may want to investigate the role of
informal links and whether such links, if important, can be promoted through public policies.
References
Abdin, M. and Rahman, M. (2015), Cluster development models: challenges and opportunities,
International Journal of Economics, Finance and Management Sciences, Vol. 3 No. 4, pp. 358-366.
Altenburg, T. and Meyer-Stamer, J. (1999), How to promote clusters: policy experiences from Latin
America,World Development, Vol. 27 No. 9, pp. 1693-1713.
Emergence and
development of
low-tech
cluster
Bair, J. and Gereffi, G. (2001), Local clusters in global chains: the causes and consequences of export
dynamism in Torreons blue jeans industry,World Development, Vol. 29 No. 11, pp. 1885-1903.
Balland, P.A., De Vaan, M. and Boschma, R. (2012), The dynamics of interfirm networks along the
industry life cycle: the case of the global video game industry, 19872007,Journal of Economic
Geography, Vol. 13 No. 5, pp. 741-765.
Baum, J.A. and Mezias, S.J. (1992), Localized competition and organizational failure in the Manhattan
hotel industry, 1898-1990,Administrative Science Quarterly, Vol. 37, pp. 580-604.
Bijaoui, I. (2019), The education and training open incubators (ETOIs) anchored cluster the case of
ISPALE, DRC,American International Journal of Business Management (AIJBM), Vol. 2 No. 4,
pp. 105-119.
Burfitt, A. and Macneill, S. (2008), The challenges of pursuing cluster policy in the congested state,
International Journal of Urban and Regional Research, Vol. 32 No. 2, pp. 492-505.
Capello, R. and Faggian, A. (2005), Collective learning and relational capital in local innovation
processes,Regional Studies, Vol. 39 No. 1, pp. 75-87.
Chen, L., Zhou, Y., Zhou, D. and Xue, L. (2017), Clustering enterprises into eco-industrial parks: can
interfirm alliances help small and medium-sized enterprises?,Journal of Cleaner Production,
Vol. 168, pp. 1070-1079.
Cooke, P. and Morgan, K. (1994), The regional innovation system in BadenWurttemberg,
International Journal of Technology Management, Vol. 9 Nos 3-4, pp. 394-429.
Creswell, J.W. and Poth, C.N. (2017), Qualitative Inquiry and Research Design: Choosing Among Five
Approaches, Sage, Thousand Oaks, CA.
Delgado, M., Porter, M.E. and Stern, S. (2015), Defining clusters of related industries,Journal of
Economic Geography, Vol. 16 No. 1, pp. 1-38.
Fang, L. (2015), Do clusters encourage innovation? A meta-analysis,Journal of Planning Literature,
Vol. 30 No. 3, pp. 239-260.
Foghani, S., Mahadi, B. and Omar, R. (2017), Promoting clusters and networks for small and medium
enterprises to economic development in the globalization era,Sage Open, Vol. 7 No. 1, doi: 10.
1177/2158244017697152.
Fujita, M. and Thisse, J.F. (1996), Economics of agglomeration,Journal of the Japanese and
International Economies, Vol. 10 No. 4, pp. 339-378.
Garcia-Villaverde, P., Elche, D. and Perez, A. (2017), Determinants of radical innovation in clustered
firms of the hospitality and tourism industry,International Journal of Hospitality Management,
Vol. 61, pp. 45-58.
Gereffi, G. and Lee, J. (2016), Economic and social upgrading in global value chains and industrial
clusters: why governance matters,Journal of Business Ethics, Vol. 133 No. 1, pp. 25-38.
Ghauri, P.N. and Santangelo, G.D. (2012), Multinationals and the changing rules of competition,
Management International Review, Vol. 52 No. 2, pp. 145-154.
Giacomin, V. (2017), A Historical Approach to Clustering in Emerging Economies, Harvard Business
School, Boston, MA.
Hamidi, S. and Zandiatashbar, A. (2019), Does urban form matter for innovation productivity? A
national multi-level study of the association between neighbourhood innovation capacity and
urban sprawl,Urban Studies, Vol. 56 No. 8, pp. 1576-1594.
Hospers, G.J. and Beugelsdijk, S. (2002), Regional cluster policies: learning by comparing?,Kyklos,
Vol. 55 No. 3, pp. 381-402.
Humphrey, J. and Schmitz, H. (2002), How does insertion in global value chains affect upgrading in
industrial clusters?,Regional Studies, Vol. 36 No. 9, pp. 1017-1027.
Kamran, S.M., Fan, H., Matiullah, B., Ali, G. and Hali, S.M. (2017), Ethnic communities: a factor of
industrial clustering,International Journal of Social Economics, Vol. 44 No. 10, pp. 1290-1306.
EMJB
Khan, K.U., Xuehe, Z., Atlas, F. and Khan, F. (2019), The impact of dominant logic and competitive
intensity on SMEs performance: a case from China,Journal of Innovation & Knowledge, Vol. 4
No. 1, pp. 1-11.
Knorringa, P. and Nadvi, K. (2016), Rising power clusters and the challenges of local and global
standards,Journal of Business Ethics, Vol. 133 No. 1, pp. 55-72.
Krugman, P. (1998), Whats new about the new economic geography?,Oxford Review of Economic
Policy, Vol. 14 No. 2, pp. 7-17.
Kuksa, I., Shtuler, I., Orlova-Kurilova, O., Hnatenko, I. and Rubezhanska, V. (2019), Innovation cluster
as a mechanism for ensuring the enterprises interaction in the innovation sphere,Management
Theory and Studies for Rural Business and Infrastructure Development, Vol. 41 No. 4,
pp. 487-500.
Lei, H.S. and Huang, C.H. (2014), Geographic clustering, network relationships and competitive
advantage: two industrial clusters in Taiwan,Management Decision, Vol. 52 No. 5, pp. 852-871.
Lin, Z., Peng, M.W., Yang, H. and Sun, S.L. (2009), How do networks and learning drive M&As? An
institutional comparison between China and the United States,Strategic Management Journal,
Vol. 30 No. 10, pp. 1113-1132.
Lomi, A. (1995), The population ecology of organizational founding: location dependence and
unobserved heterogeneity,Administrative Science Quarterly, Vol. 40 No. 1, pp. 111-144.
Martin, R. and Sunley, P. (2003), Deconstructing clusters: chaotic concept or policy panacea?,Journal
of Economic Geography, Vol. 3 No. 1, pp. 5-35.
Muhammad Auwal, A., Mohamed, Z., Nasir Shamsudin, M., Sharifuddin, J. and Ali, F. (2018),
External pressure influence on entrepreneurship performance of SMEs: a case study of
Malaysian herbal industry,Journal of Small Business & Entrepreneurship, pp. 1-22.
Njøs, R. and Jakobsen, S. (2016), Cluster policy and regional development: scale, scope and renewal,
Regional Studies, Regional Science, Vol. 3 No. 1, pp. 146-169.
Park, S.H. and Luo, Y. (2001), Guanxi and organizational dynamics: organizational networking in
Chinese firms,Strategic Management Journal, Vol. 22 No. 5, pp. 455-477.
Paula, F.D.O. and Da Silva, J.F. (2019), The role of the appropriability mechanisms for the innovative
success of Portuguese small and medium enterprises,International Journal of Innovation
Management, Vol. 23 No. 04, doi: 10.1142/S1363919619500324.
Petelski, N., Milesi, D. and Verre, V. (2020), Strategies of innovation and appropriation. Sectoral
analysis of Argentine manufacturing firms,Journal of Evolutionary Studies in Business, Vol. 5
No. 1, pp. 116-157.
Peer, A. and Keil, T.(2013), Are all startups affected similarly by clusters? Agglomeration,
competition, firm heterogeneity and survival,Journal of Business Venturing, Vol. 28 No. 3,
pp. 354-372.
Polozhentseva, Y. and Klevtsova, M. (2015), Instruments of development of cluster policy: stages,
models, international practice,Procedia Economics and Finance, Vol. 27, pp. 529-537.
Ponte, S. and Sturgeon, T. (2014), Explaining governance in global value chains: a modular theory-
building effort,Review of International Political Economy, Vol. 21 No. 1, pp. 195-223.
Porter, M.E. (1998), Clusters and the new economics of competition,Harvard Business Review,
Vol. 76, No. 6, pp. 77-90.
Porter, M.E. (2000), Location, competition, and economic development: local clusters in a global
economy,Economic Development Quarterly, Vol. 14 No. 1, pp. 15-34.
Porter, M.E. (2011), Competitive Advantage of Nations: Creating and Sustaining Superior Performance,
Simon and Schuster, New York, NY.
Pronest
ı, G. (2019), Life Cycle of Clusters in Designing Smart Specialization Policies, Springer Nature,
Switzerland.
Emergence and
development of
low-tech
cluster
Pyke, F. and Lund-Thomsen, P. (2016), Social upgrading in developing country industrial clusters: a
reflection on the literature,Competition and Change, Vol. 20 No. 1, pp. 53-68.
Pyke, F. and Sengenberger, W. (Eds) (1992), Industrial Districts and Local Economic Regeneration,
International Labour Organisation, Geneva.
Richardson, C. (2013), Knowledge-sharing through social interaction in a policy-driven industrial
cluster,Journal of Entrepreneurship and Public Policy, Vol. 2 No. 2, pp. 160-177.
Saunders, M.N., Lewis, P. and Thornhill, A. (2017), Doing Research in Business and Management: An
Essential Guide to Planning Your Project, 2nd ed., Pearson, Harlow.
Schmitz, H. and Nadvi, K. (1999), Industrial clusters in developing countries-clustering and
industrialization: introduction,World Development, Vol. 27 No. 9, pp. 1503-1514.
Sekaran, U. and Bougie, R. (2016), Research Methods for Business: A Skill-Building Approach, Wiley,
New York, NY.
Sturgeon, T., Van Biesebroeck, J. and Gereffi, G. (2008), Value chains, networks and clusters:
reframing the global automotive industry,Journal of Economic Geography, Vol. 8 No. 3,
pp. 297-321.
Sultan, S. (2014), Enhancing the competitiveness of Palestinian SMEs through clustering,EuroMed
Journal of Business, Vol. 9 No. 2, pp. 164-174.
Sultan, S.S. and Van Dijk, M.P. (2017), Palestinian clusters: from agglomeration to innovation,
European Scientific Journal, Vol. 13 No. 13, p. 323.
Tallman, S. and Phene, A. (2007), Leveraging knowledge across geographic boundaries,
Organization Science, Vol. 18 No. 2, pp. 252-260.
Tan, J. (2006), Growth of industry clusters and innovation: lessons from Beijing Zhongguancun
Science Park,Journal of Business Venturing, Vol. 21 No. 6, pp. 827-850.
Tracey, P., Heide, J. and Bell, S.J. (2014), Bringing placeback in: regional clusters, project
governance, and new product outcomes,Journal of Marketing, Vol. 78 No. 6, pp. 1-16.
Tsang, K.K.M. and Siu, K.W.M. (2016), The 3Cs model of sustainable cultural and creative cluster: the
case of Hong Kong,City, Culture and Society, Vol. 7 No. 4, pp. 209-219.
Turkina, E., Oreshkin, B. and Kali, R. (2019), Regional innovation clusters and firm innovation
performance: an interactionist approach,Regional Studies, Vol. 53 No. 8, pp. 1193-1206.
Van den Berg, L., Braun, E. and Van Winden, W. (2001), Growth clusters in European cities: an
integral approach,Urban Studies, Vol. 38 No. 1, pp. 185-205.
Van Dijk, M.P. (2003), Is Nanjings concentration of IT companies an innovative cluster?,
Cooperation, Networks, and Institutions in Regional Innovation Systems, pp. 175-193.
Van Dijk, M.P. and Rabellotti, R. (1997), Clusters and networks as sources of cooperation and
technology diffusion for small enterprises in developing countries,Enterprise Clusters and
Networks in Developing Countries, pp. 1-10.
Van Dijk, M.P. and Sverrisson,
A. (2003), Enterprise clusters in developing countries: mechanisms of
transition and stagnation,Entrepreneurship and Regional Development, Vol. 15 No. 3,
pp. 183-206.
Vanzettine, N., Corsano, G. and Montagna, J.M. (2017), A comparison between individual factories
and industrial clusters location in the forest supply chain,Forest Policy and Economics, Vol. 83,
pp. 88-98.
Yin, R.K. (2017), Case Study Research and Applications: Design and Methods, Sage, Thousand
Oaks, CA.
Further Reading
Piore, M.J. and Sabel, C.F. (1984), The Second Industrial Divide: Possibilities for Prosperity, Vol. 4, Basic
Books, New York, NY.
EMJB
Appendix
Cluster definition and value creation approach
Year Author(s) Questions Methods Key results
1992 Baum and
Mezias
Examine the impact of
localized competition in
rates of failure
Case study Ecological approach can
provide a more detailed
understanding of the
competitive dynamics
1994 Cooke and
Morgan
Analyse three elements of
Germanys strongest
regional economies
Case study Network of innovative
economic activity between
business and government is
of key importance to the
development process
1995 Lomi Investigate the effects of
location dependence on
founding rates of rural
cooperative banks in Italy
Pooled cross-
sectional time
series data
Ecological approach can
provide a detailed
understanding of the
evolutionary dynamics of
organizations
1996 Fujita and
Thisse
Why do economic activities
agglomerate in a small
number of places?
Desk research Identify a few general
principles governing the
organization of economic
space
1997 Dijk and
Rabellotti
How to increase economic
growth through small
enterprise development?
Qualitative Identifying factors leads to
the success of small
enterprise clusters and
networks and discussing
industrialization strategies
and flexible specialization
1998 Porter What is cluster and why it
is important for
competition?
Case study Clusters offer a constructive
way to change the nature of
the dialogue between the
public and private sectors. A
cluster allows each member
to benefit as if it had greater
scale or as if it had joined
with others without
sacrificing its flexibility
1999 Schmitz and
Nadvi
Growth and export
prospects of small
manufacturers in
developing countries
Desk research Clustering helps small
enterprises to overcome
growth constraints and
compete in distant markets,
but there is also recognition
that this is not an automatic
outcome
2001 Bair and Gereffi Discuss the role of US
buyers in promoting full-
package apparel
production
Case study Emphasizing the
relationship between
producers and foreign
buyers, this approach
provides a useful way to
bridge the globallocal
divide in the literature on
industrial clusters in
developing countries
(continued )
Table A1.
Summary of previous
studies
Emergence and
development of
low-tech
cluster
Cluster definition and value creation approach
Year Author(s) Questions Methods Key results
2002 Humphrey and
Schmitz
How does insertion in
global value chains affect
upgrading in industrial
clusters?
Desk research This paper argues that
clusters are inserted into
global value chains in
different ways, and that this
has consequences for
enabling or disabling local-
level upgrading efforts. It
pays particular attention to
the position of developing
country firms selling to large,
global buyers
2003 Martin and
Sunley
Deconstruct the cluster
concept in order to reveal
and highlight these issues
Desk research The cluster concept should
carry a public policy health
warning
2006 Tan Examine the origin and
growth of industry cluster
in a traditionally heavily
regulated economy and
region
Case study The success of technology
parks in promoting
technology transfer and
attracting clusters of highly
innovative firms has
motivated countries from
around the world in an
attempt to promote regional
development
2008 Sturgeon et al. How does the global value
chain (GVC) trend?
Case study Underlines the need for an
open, scalable approach to
the study of global industries
2011 Porter Explain the sources of
sustained prosperity in the
modern economy
Qualitative The roots of productivity lie
in the national and regional
environment for competition
2012 Ghauri and
Santangelo
Look at the changing
environments of
international business and
the new challenges faced by
multinational enterprises
from developed markets
Desk research Addresses some of these
challenges faced by
international business
research and analyses how
firms both from developed
and emerging markets are
dealing with these new
phenomena and challenges
2013 Peer and Keil Are all start-ups similarly
affected by the survival
benefits and drawbacks of
locating in geographic
clusters?
Desk research The local levels of skilled
labour, suppliers and
purchasers have a beneficial
influence, and local
competition has a
detrimental influence on
start-up survival; these
relationships are moderated
by heterogeneity in firms
resources and capabilities
Table A1. (continued )
EMJB
Cluster definition and value creation approach
Year Author(s) Questions Methods Key results
2014 Sultan How clusters can enhance
the competitiveness of
SMEs?
Quantitative and
qualitative
methods
Positive relationship
between cluster and SMEs
performance in the
Palestinian food-processing
sector
2015 Delgado et al. Comparisons of clusters
across regions and support
of policymakers in defining
regional strategies
2009 data for US
industries
Proposed set outperforms
other methods in capturing a
wide range of inter-industry
linkages, including the
grouping of industries within
the same three-digit NAICS.
2015 Fang Address cluster
innovation relationship
Meta-analysis The clusterinnovation
relationships are state-
contingent and provide
guidance on evaluating
whether a cluster strategy
can encourage innovation in
a specific region
2016 Pyke and Lund-
Thomsen
What is the role of social
upgrading in developing
country industrial clusters?
Desk research The states policies and
regulations might enable or
constrain cluster actors to
behave in ways that affect
social upgrading or
downgrading
2016 Tsang and Siu Identify the factors in
developing a sustainable
cluster in a densely
populated city
Case study The one-size-fit-all strategy
could not guarantee the
sustainable development of
the cluster
2016 Njos and
Jakobsen
Constellations of
specialized clusters may
hamper the long-term
innovation ability of
regions
Desk research Present three theory-based
strategies for cluster
evolution and link these to
regional development and
innovation by assessing their
impact on regional path
renewal
2016 Knorringa and
Nadvi
Explore the intersection
between three processes
associated with
globalization
Case study A greater focus on the formal
and informal institutional
contexts, termed the social
contract, in explaining
divergent experiences and
practices observed across
these countries
(continued )Table A1.
Emergence and
development of
low-tech
cluster
Cluster definition and value creation approach
Year Author(s) Questions Methods Key results
2017 Kamran et al. Factors behind the
clustering of the motorcycle
industry, a low-tech and
low-investment industry
Survey for 250
firms and
interviews of
experts
Conjectured a new viable
factor for industrial
clustering, ethnic
community,as it acts as a
catalyst to diffuse
knowledge, experience and
skills within the industrial
cluster
2017 Vanzettine et al. Analyse facilities
integration, discounts on
investment and production
costs
Mathematical
model
Costs reduction when
resources and services are
shared by plants within a
cluster
2019 Hamidi and
Zandiatashbar
How urban sprawl affects
innovation productivity?
Multilevel
modelling
Innovative firms tend to
locate more in census tracts
that are less compact but
offer spatial proximity to
firms in related business
sectors. The regional
compactness positively and
significantly affects the
number of innovative firms
2019 Khan et al., Are there significant
relationships between the
competitive environment
and dynamic capabilities
and firm performance?
Econometric
model
There are significant
relationship between
competitive environment and
dynamic capabilities on
firms performance
2019 Paula and Da
Silva
To what extent does
product innovation concert
into financial performance
Empirical method For extractive sectors
(mining and quarrying),
formal mechanisms (e.g.
patents) are better to protect
product innovation and
informal mechanisms are
more effective to protect
process innovation
Cluster Challenges
2000 Porter Economic geography
during an era of global
competition involves a
paradox
Qualitative Clusters represent a new way
of thinking about national,
state and local economies,
and they necessitate new
roles for companies,
government and other
institutions in enhancing
competitiveness
2002 Hospers and
Beugelsdijk
What lessons can be drawn
from comparing success
stories of regional
clustering?
Desk research Best practices should be seen
as inspiration sources rather
than as recipes for successful
regional economic
development
Table A1. (continued )
EMJB
Cluster definition and value creation approach
Year Author(s) Questions Methods Key results
2003 Van Dijk and
Sverrisson
The dynamics of clustered
enterprise development in
developing countries
Desk research The implications for
development policy are
outlined, and it is emphasized
that support must be tailored
to the actual state of existing
clusters
2005 Capello and
Faggian
Verify the existence and
importance of relational
capital on the innovation
activity of firms
Quantitative
approach, using
econometric
techniques
Relational capital will play a
different role in different
regional, sectoral and firms
contexts
2007 Tallman and
Phene
Examine knowledge flows
within and across
geographic boundaries of
clusters and nations in the
biotechnology industry
Mathematical
model
Geographic proximity does
not matter in some instances,
while in others it has a
decidedly nonlinear effect
2008 Burfitt and
Macneill
Examine the extent of
weaknesses in the
theoretical and
methodological
underpinnings of the
cluster
Qualitative Irrespective of whether
cluster policy is the
appropriate choice as an
economic development tool
in any particular regional or
economic circumstance, its
selection always necessitates
prior consideration of the
institutional capacity needed
to meet the governance
challenges that it creates
2012 Balland et al. The formation of network
ties between firms along the
life cycle of a creative
industry
Case study Video game firms tend to
prefer to partner over short
distances and with more
cognitively similar firms as
the industry evolves
2014 Tracey et al. Examine new product
outcomes in the context of
regional clusters
Desk research New product outcomes result
from complex interactions
between a clusters macro-
level configuration and its
micro-level governance
processes
2014 Ponte and
Sturgeon
The evolution and current
status of global value chain
(GVC) governance theory
Desk research The proposed modular
framework is built on three
scalar dimensions: micro
level, a meso level and a
macro level
2014 Lei and Huang Contradicted perspectives
on relationship between
geographic cluster and
competitive advantage
Case study Firms within the same
cluster that have established
idiosyncratic network
resources have stronger
competitive advantages than
firms that have not
(continued )Table A1.
Emergence and
development of
low-tech
cluster
Cluster definition and value creation approach
Year Author(s) Questions Methods Key results
2015 Abdin and
Rahman
Analyse most of the
available cluster
development models and
offer
Desk research Proposed a new model titled
J. M Model for Cluster
Development. This model
would be pro-poor, flexible
and equally effective in any
least developed country and
developed economies as well
2016 Gereffi and Lee How industrial clusters are
shaped by their ties to the
international economy?
Desk research The new form of synergistic
governanceis illustrated
with evidence from recent
studies of GVCs and
industrial clusters
2016 Pyke and Lund-
Thomsen
Examine the role of social
upgrading in developing
country industrial clusters
Desk research States policies and
regulations might enable or
constrain cluster actors to
behave in ways that affect
social upgrading or
downgrading
2017 Garcia-
Villaverde et al.
Examine if social capital
may be influenced by
managersperception of
market dynamism
A survey of 215
firms
The negative effect of
structural social capital on
radical innovation worsens
when market dynamism
perception is higher
2017 Chen et al. The challenge to relocate
SMEs into industrial parks
Case study Inter-firm alliances are an
essential policy
implementation tool that has
the potential to help local
government in promoting the
relocation of enterprises into
eco-industrial parks and to
improve industrial
environmental performance
2018 Muhammad
Auwal et al.
To what extent does the
external pressure influence
the entrepreneurial
activities within business
dynamics?
Survey SMEs that seek competitive
advantage should resolve
their challenges by
responding positively to
environmental pressure
through sustainability
2019 Turkina et al. How is firm innovation
affected by location in an
innovation cluster?
Empirical analysis Location of clusters offers
benefits and at the same time
poses certain constraints
Cluster Promotion Policies
1998 Krugman Debate on industrial
clusters in developing
countries
Desk research Clusters lead to growth and
competitiveness of small
manufacturers in developing
countries
Table A1. (continued )
EMJB
Corresponding author
Suhail Sultan can be contacted at: ssultan@birzeit.edu
For instructions on how to order reprints of this article, please visit our website:
www.emeraldgrouppublishing.com/licensing/reprints.htm
Or contact us for further details: permissions@emeraldinsight.com
Cluster definition and value creation approach
Year Author(s) Questions Methods Key results
2001 Park and Luo The utilization of guanxi,
which is an important
cultural and social element
in China, and the impact of
guanxi on firm
performance
A Survey of 128
firms
Guanxi leads to higher firm
performance, but is limited to
increased sales growth, and
has little impact on profit
growth. Guanxi benefits
market expansion and
competitive positioning of
firms, but does not enhance
internal operations
2003 Van Dijk Whether the IT companies
in Nanjing (China) can be
considered an innovative
cluster
Case study Offers recommendations for
stimulating development of
clusters; more efforts by local
government will be needed to
develop an innovative milieu
in Nanjing
2009 Lin et al. What drives mergers and
acquisitions in different
institutional environments?
Case study Learning and network
factors vary sharply across
countries with different
market-based institutions
2013 Richardson Whether knowledge-flows
through social interaction
occur within the context of
a policy-driven cluster?
Case study Social interaction leading to
knowledge diffusion within
the cluster may be lacking
2019 Kuksa et al. How to assess the
effectiveness of the
enterprises interaction in
the innovation cluster?
Econometric
method
In adjusting the existing
strategy to the acting
clusters of enterprises and in
developing measures aimed
at increasing the
effectiveness of their
interaction
2020 Prtelski et al. How is the appropriation
strategy of firms formed,
and what factors explain
the use of the mechanisms
that firms use to protect
their innovations?
Econometric
method
The cluster of high
innovative activity shows a
greater incidence of the use of
secrecy and patents, while
the cluster of low innovative
activity presents a greater
use of complementary assets
and first mover Table A1.
Emergence and
development of
low-tech
cluster
... In recent decades, the internationalisation of small and medium-sized enterprises (SMEs) has garnered substantial attention within the academic community (Dabić et al., 2020;Child et al., 2022). While research has predominantly examined the internationalisation of SMEs originating from developed economies, there has been a growing recognition of the importance of studying SMEs originating from emerging economies (Chandra et al., 2020;Paul et al., 2017;Sultan et al., 2020). This shift in focus reflects the evolving global economic landscape and the rising prominence of emerging markets in the international business arena. ...
... Due to this the internationalisation barriers encountered by the technologically intensive firms are typically different experienced by the low-tech SMEs (Faroque et al., 2017;Chandra et al., 2020;Roy et al., 2016). For instance, the majority of low-tech SMEs rely heavily on intermediaries for their internationalisation, (e.g., indirect exporting) because they typically do not have the financial or human resources available in-house to take care of all of the practical aspects of internationalisation (Dana et al., 2022;Sultan et al., 2020). In addition, it is essential to emphasise that contextual factors have close ties to the internationalisation of companies (Arbaugh et al., 2008). ...
... In addition, it is essential to emphasise that contextual factors have close ties to the internationalisation of companies (Arbaugh et al., 2008). As a consequence of this, the findings of studies on the internationalisation of SMEs typically vary and are related with features that are unique to particular nations (e.g., Lecerf and Omrani, 2020;Sultan et al., 2020). ...
Article
This research is one of the first to examine internationalisation challenges for emerging economy low-tech SMEs. Based on primary data collected from 175 low-tech Indian firms, our SPSS and AMOS based analysis revealed that internationalisation barriers can be classified into five distinct categories, i.e., managerial, marketing, government, financial and procedural barriers. Findings revealed a strong correlation among different categories of internationalisation barriers. It was further found that procedural and regulatory barriers were most significant for low-tech firm internationalisation. Findings also revealed specific factors such as firms' age, sources of new buyers and sources of finance influencing internationalisation barriers. This study uses the resource-based view (RBV) paradigm to show how low-tech firms use internal resources to overcome complicated internationalisation barriers. Our study adds to the internationalisation literature by highlighting low-tech firms' unique challenges and provides insights for practitioners, policymakers, and scholars to help emerging economy low-tech firms compete in international markets.
... In recent decades, the internationalisation of small and medium-sized enterprises (SMEs) has garnered substantial attention within the academic community (Dabić et al., 2020;Child et al., 2022). While research has predominantly examined the internationalisation of SMEs originating from developed economies, there has been a growing recognition of the importance of studying SMEs originating from emerging economies (Chandra et al., 2020;Paul et al., 2017;Sultan et al., 2020). This shift in focus reflects the evolving global economic landscape and the rising prominence of emerging markets in the international business arena. ...
... Due to this the internationalisation barriers encountered by the technologically intensive firms are typically different experienced by the low-tech SMEs (Faroque et al., 2017;Chandra et al., 2020;Roy et al., 2016). For instance, the majority of low-tech SMEs rely heavily on intermediaries for their internationalisation, (e.g., indirect exporting) because they typically do not have the financial or human resources available in-house to take care of all of the practical aspects of internationalisation (Dana et al., 2022;Sultan et al., 2020). In addition, it is essential to emphasise that contextual factors have close ties to the internationalisation of companies (Arbaugh et al., 2008). ...
... In addition, it is essential to emphasise that contextual factors have close ties to the internationalisation of companies (Arbaugh et al., 2008). As a consequence of this, the findings of studies on the internationalisation of SMEs typically vary and are related with features that are unique to particular nations (e.g., Lecerf and Omrani, 2020;Sultan et al., 2020). ...
Article
This research is one of the first to examine internationalisation challenges for emerging economy low-tech SMEs. Based on primary data collected from 175 low-tech Indian firms, our SPSS and AMOS based analysis revealed that internationalisation barriers can be classified into five distinct categories, i.e., managerial, marketing, government, financial and procedural barriers. Findings revealed a strong correlation among different categories of internationalisation barriers. It was further found that procedural and regulatory barriers were most significant for low-tech firm internationalisation. Findings also revealed specific factors such as firms' age, sources of new buyers and sources of finance influencing internationalisation barriers. This study uses the resource-based view (RBV) paradigm to show how low-tech firms use internal resources to overcome complicated internationalisation barriers. Our study adds to the internationalisation literature by highlighting low-tech firms' unique challenges and provides insights for practitioners, policymakers, and scholars to help emerging economy low-tech firms compete in international markets.
... Therefore, efforts Initially, the idea of clusters was closely related to geographical proximity-based businesses (Ganau & Rodríguez-Pose, 2018; Cottineau & Arcaute, 2020). The cluster concept expanded with an emphasis on value creation, economic efficiency (Porter, 2000), and corporate collaboration (Villa & Taurino, 2018;Sultan et al., 2020). Furthermore, Porter (2000) emphasized clusters in the value chain concept to produce one type of product, while the close distance between business groups is considered added value due to agglomeration. ...
... Factors, such as limited access to information and distrust of legal contracts, were also identified as obstacles to cluster improvement (Yigit Ozkan et al., 2020). On the other hand, industrial activity in developing countries tends to be concentrated in certain locations, especially certain metropolises and capital cities, due to the need for more infrastructure in suburban areas (Sultan et al., 2020). ...
... At its inception, the definition of clusters was mostly related to business development based on geographical proximity (Ganau & Rodríguez-Pose, 2018; Cottineau & Arcaute, 2020; Shiposha, 2020). However, as the concept developed, it expanded to include the important social infrastructures, information exchanges, and collaborations between companies(Villa & Taurino, 2018;Sultan et al., 2020).Porter (2000) indicates that there is no definite limit regarding geographical proximity between business units in a cluster. The geographical criteria referred to lies more in whether economic efficiency overCopyright  2023 GMP Press and Printing ISSN: 2304-1013 (Online); 2304-1269 (CDROM); 2414-6722 (Print) ...
Article
Full-text available
Clusters are groups of activities consisting of core industries, related industries, supporting industries, and supporting and related economic activities, which are interrelated and mutually supportive. This study aims to cluster micro, small and medium enterprises (MSMEs) in Garut Regency based on their similarity of attributes attached to the factors. These aspects include a taxpayer identification ownership, business license ownership, total net worth, total capital, number of employees, total business volume, product certification, product license, and brand. Clusterization has an important urgency for the development of MSMEs. Clustering can help group MSMEs into groups that are easier to analyze and make the right decisions to increase the efficiency and competitiveness of MSMEs. In addition, the application of clustering for MSMEs can have positive implications such as identifying the characteristics of MSMEs, developing appropriate marketing strategies, improving product or service quality, collaboration and information exchange, and access to resources. This can help MSMEs to increase their efficiency and competitiveness in the market. After data screening, the sample of MSMEs was analyzed using K-means clustering analysis and the help of RapidMiner 5.3 software. There were six iterations conducted before the data position value was stable, with the results revealing three MSME clusters. Cluster 2 had the highest percentage of MSMEs, with 84%. Cluster 1 had a higher percentage of MSMEs with ownership of business license numbers than Clusters 2 and 3. Cluster 3 had a larger and more significant number of MSMEs and a larger total net worth and ownership of product and brand licenses than the other clusters, while Cluster 2 showed an intermediate profile in almost all factors. The study results provide an overview of the local government in adopting cluster formation policies in Garut Regency.
... This resulted in the identification of five stages whereby clusters are distinguished, ranging from location clusters to fully-fledged industrial districts (see Table 7.3). The study of Sultan, Van Dijk, and Omran (2020) analyzed the nature of challenges facing these five Palestinian clusters. ...
Chapter
Full-text available
This study aims to analyze the challenges facing five Palestinian clusters and to understand their dynamics and level of development. Using multiple sources of evidence, the research questions are answered using semi-structured interviews and focus group discussions. Content analysis was used to analyze the data obtained. The five clusters in Palestine are located in a complex environment that imposes a mix of challenges that adversely affect their performance. The challenges facing Palestinian clusters are different in terms of their degree of complexity. The common challenges facing the Palestinian clusters are the fundamental lack of innovative stimulation policies or incentives in the Palestinian ecosystem, lack of trust, unfair competition, limited access to finance, lack of access to promising markets, and the limited collaboration between different parties. More focused policies are suggested to the Palestinian authorities.
... The study argued that strategic planning effect on SMEs is not clear and significant. Sultan, et al., (2020) proposed that firm may withstand in the economic competitiveness and managing unplanned issues via effective strategic planning practices. The research demonstrated the importance of proper planning process in SMEs. ...
Article
This research explored the effect of strategic planning practices on performance of women in small and medium enterprises in Kigali City, Rwanda. Specifically, the study determined effect of vision strategy on women entrepreneurs’ performance in small and medium enterprises from Kigali City, to analyze effect of growth strategy on women entrepreneurs’ performance in small and medium enterprises from Kigali City, and to ascertain effect of competitive strategy on women entrepreneurs’ performance in small and medium enterprise from the Kigali City. The researcher used resource-based view theory, institutional theory, and upper echelon theory. A descriptive and analytical design where the mixed approach was adopted. The target population was 478 persons. The sample size was 218 respondents and five key informants. Results to the first objective revealed a positive association between guiding customers and sales (r=0.320**, p-value=0.001), investment (r=0.317, p-value=0.001). Significant correlation between for clear reason vibrant goal and specific objectives (r=0.408*, p-value=0.048), and with profit (r=0.716, p=0.000). Results on the correlation between vibrant goal and specific objectives and dependent variables, indicate a significant correlations between vibrant goal and specific objectives and sales (r=.407**, p=0.000), investment (r=538, p=0.000). Results to second objectives felt positive association between volunteering strategies with sales (r=0.424**, p=0.000), investment (0.740**, p=0.000), profit (0.484**, p-value=0.000). Findings from the third objective felt significant association between the mark cost concertation and sales (r=0.244**, p=0.013), investment (r=0.322*, p=0.001) with profit (r=0.270*, p=0.006). A positive high significance was established between acquiring same sector with sales (r=0.181*, p=0.063).The study recommends to understand strategic execution in place to attain organization objectives, to endure the unserved efforts to improve skills and willingness. Keywords: Competitive Strategy, Growth Strategy, Performance, Strategic Planning, Vision Strategy
... The first challenge is external because of the political conflict that restricts economic growth in some developing countries [11]. Likewise, the second challenge is internal and is classified as a structural obstacle attributed to the weak role of the policy of some companies and sustainable development institutions in controlling, organizing and strengthening the environment conducive to the prosperity of the private sector and the manufacturing industry [12][13][14]. The third major challenge, which will be the main focus of this study, is the internal issues at the level of the organization, which are attributed to the application of best management practices at the level of the company, such as the implementation of sound strategic planning and the application of sustainable development standards. ...
Article
Full-text available
The study aims to identify the role of strategic planning in achieving sustainable development in the Hadramout Corporation for Consultation and Sustainable Development, which is considered, according to Yemeni law, to be a medium-sized company. The sample of the study was represented in Hadramout institutions for consulting and sustainable development, and the number of respondents was (30) employees in the institution out of a total of (50) employees, meaning that the questionnaire was distributed to (60%) of the total number of employees in the institution. The researcher used the descriptive and analytical approach to achieve the goals The study and testing its hypotheses represented the independent variable in the strategic planning represented in (the external environment, the internal environment, the mission and goals) while the variable dependent on the study was the competitive advantage, the researcher used the questionnaire in the study as an appropriate tool for the study, where the formulation of the questionnaire was represented by the total items of the questionnaire for the independent variable Strategic planning and its chosen dimensions in the study (external environment, internal environment, mission and goals) (23) questions, while the total paragraphs of the questionnaire for the dependent variable, which is the competitive advantage (16) questions, and the researcher used the five-point Likert scale consisting of five points and the following statistical package (SPSS) and methods Statistics for data processing, which are (frequency, percentages, weighted average, standard deviation, regression analysis, coefficient of variation A) To analyze the paragraphs of the questionnaire, the researcher also used to test hypotheses (T of favoritism, T of tabulation, T of significance, correlation coefficient, coefficient of determination) to test the hypotheses. The external environment, the internal environment, the mission and objectives) has a role in achieving the competitive advantage, and the current study suggested paying attention to employees and achieving coordination and communication between them to achieve a kind of distinction, efficiency in the services provided by the institution and educating and training employees on the importance of applying the objectives and mission of the institution because of its great impact On the organization and its performance, the institution must prepare high competencies that control the techniques of public institutions for sustainable development.
... Clustering of small and medium enterprises (SMEs) has become a widespread phenomenon in many developing countries (Franco et al., 2020;Sultan et al., 2020). United Nations Industrial Development Organization (UNIDO, 2001) defines a cluster as a geographical concentration of enterprises that produce and sell a range of complementary products. ...
... Obviously, for states in the midst of political debate and controversy and whose reputation is characterised by uncertainty and conflict, such as Palestine, it is even harder and challenging to develop a national identity and, hence, a nation brand that can be used to promote the country to internal and external audiences. Although Palestine, including Bethlehem and Jerusalem, has been an important pilgrimage destination for centuries and probably possesses one of the oldest brands in the world (Sultan et al., 2020), it still suffers from having an unknown state brand. Moreover, Palestine having successfully achieved State Status in 2012 at the United Nations General Assembly should now, most certainly, consider its image dilemma. ...
Article
Full-text available
Literature on nation branding is heterogeneous and varies significantly, not only in terminological terms but also in theoretical approaches and practical application. This paper aims to conduct an extensive exploratory study that empirically develops a comprehensive nation brand framework for Palestine, with international applications as well. Design/methodology/approach Initially, a conceptual framework for developing a nation brand is theoretically designed. Subsequently, through a methodologically deductive–inductive approach and qualitative means, it tests, adapts and refines the framework based on empirical data collected from key stakeholders, such as government officials, politicians, business people and academics. Findings The theoretical part of the research uncovers the extant key models and core concepts, and it identifies several gaps, with the more prominent one being the lack of an integrated and widely adopted framework for developing a nation brand. The research, thus, conclusively builds a holistic strategic framework towards a distinct nation brand for Palestine, with generic/international application and value, also presenting the practical implications of the findings and identifying avenues for further research. Originality/value There are varying extant perspectives on the topic, with these different views often reflecting scholars’ and stakeholders’ methodological approaches, perspectives and even deeper ontological beliefs and convictions. This paper is original consequent to its multi-perspective approach, the strength of its theoretical foundation, the extent and methodological approach of its empirical research, the uniqueness of its focus and the comprehensiveness of the framework developed that can also be used as the conceptual cornerstone for testing in other nations branding studies as well.
Article
Full-text available
The contribution of Small and Medium-Sized Enterprises (SMEs) to economic prosperity and expansion is widely acknowledged worldwide. However, the empirical evidence in the literature on enhancing sustainable performance in manufacturing industries, specifically SMEs in developing countries living under constant unstable economic and political environments such as Palestine, is still insufficient.
Article
Full-text available
The contribution of Small and Medium-Sized Enterprises (SMEs) to economic prosperity and expansion is widely acknowledged worldwide. However, the empirical evidence in the literature on enhancing sustainable performance in manufacturing industries, specifically SMEs in developing countries living under constant unstable economic and political environments such as Palestine, is still insufficient. Referring to the theory of Triple Bottom Line (TBL), Contingency Theory (CT), Natural Resource Based View (NRBV) and the relevant literature on sustainable performance in business firms, this study aims to explore the effect of competent human capital (CHC), strategic flexibility (SF) and turbulent environment (TE) on the sustainable performance (SP) of SMEs industries in the context of Palestine. Based on 380 random samples in manufacturing SME industries in the country, 245 useful questionnaires were analyzed using Partial Least Squares Structural Equation Modeling for analysis by the Smart PLS 4.0 software. The findings indicate that several enablers could improve the performance of SMEs in Palestinian industries in terms of sustainability. One of these aspects is adopting a supportive governmental policy to strengthen the sustainability concept in the industrial sector and encouraging industries to move toward circularity and greening their operations. Nevertheless, SMEs need to implement proper managerial tools at the firm’s level that enhance sustainable performance, including investment in competent human capital, developing flexible strategies and proper analysis of the surrounding turbulent environment, since all of these will positively impact and improve the sustainable performance of those SMEs. The contribution of this study to the literature develops current knowledge of sustainable performance in SMEs in manufacturing industries, specifically in countries that suffer from political and economic turbulence, by providing a conceptual framework focusing on managerial and business aspects that contributes to achieving desired sustainable performance. Consequently, the study’s findings also show how CHC, SF and TE are essential managerial tools for organizations and SMEs operating in an extremely competitive and turbulent market.
Article
Full-text available
Following the evolutionary and neoshumpeterian theoretical framework, this research studies how the appropriation strategy of firms is formed in different industrial sector and what factors explain the use of the mechanisms that firms use to protect their innovations. The analysis is based on evidence from Argentine manufacturing firms surveyed by the National Survey of Employment Dynamics and Innovation (ENDEI) for 2010-2012. The results of the statistical analysis allow to identify three clusters at the sectoral level with differentiated characteristics in terms of their innovation activities and business conformation. The cluster of high innovative activity shows a greater incidence of the use of secrecy and patents, while the cluster of low innovative activity presents a greater use of complementary assets and first mover. The econometric analysis (Probit models) shows different effects of the factors considered (type of effort and innovative results, capabilities, linkages, structural factors) on the mechanism used, showing that the appropriation strategy is an emerging of innovation process and differs according to the sectoral cluster considered. The type of innovative effort affects only the appropriation strategy of the high and low innovative activity clusters; while the structural factors of firms explain only the appropriation strategy of sectors of high and medium innovative activity.
Article
Full-text available
Intangible resources are widely considered the main source of gaining competitive advantage and sustain superior performance in transition and emerging economies such as China, particularly in SMEs sector. In this paper, we argue theoretically (under resource-based view RBV) and demonstrate empirically that intangible resources (e.g. dynamic managerial capabilities (DMC) and dominant logic (DL)) are indispensable for long-term superior firm performance. We calculate CFA to test the measurement model. With an empirical study of 328 SMEs in China, the results indicate that highly competitive environment facilitates the impact of dominant logic on firm performance. Furthermore, our results also support that there is a significant mediating role of dominant logic between dynamic managerial capabilities and firm performance. In the end, we discussed managerial implications and theoretical contributions. Keywords: SMEs, Dominant logic, Dynamic managerial capabilities, Performance and competitive intensity
Article
Full-text available
This study investigates the role of formal and informal appropriability mechanisms to appropriate revenues from innovation in several sectors. This relationship depends on factors such as sector, type of product or service, firm’s characteristics, etc. The set of appropriability mechanisms used by a firm depends on their availability and on the firm’s appropriability strategy. An empirical test using a sample of 2,122 Portuguese SMEs from four different sectors of the 2012 Community Innovation Survey indicated that for manufacturing; water supply, sewerage, waste management and remediation activities; and wholesale and retail trade, repair of motor vehicles and motorcycles; informal appropriability mechanisms, such as lead-time and complexity, are more effective for converting product innovation into financial performance in the short term. On its turn, for extractive sectors (Mining and Quarrying), formal mechanisms (e.g., patents) are better to protect product innovation and informal mechanisms are more effective to protect process innovation.
Article
Full-text available
Geography of innovation, creative clustering, urban buzz and innovation districts are place-based concepts that have emerged as a result of the US economy’s transformation to knowledge-intensive economies. The notable built environment characteristics of these concepts are spatial clustering, walkability and proximity to urban amenities, diversity, regional connectivity and agglomeration. While several of these characteristics have been associated with urban sprawl in previous studies, there is a lack of direct evidence on how urban sprawl affects innovation productivity. This national study seeks to examine the relationship between urban sprawl, place-based characteristics and innovation productivity. We used Multilevel Modelling to account for built environment characteristics at both neighbourhood and regional levels. We found that innovative firms tend to locate more in census tracts that are less compact but offer spatial proximity to firms in related business sectors. This is likely due to the higher land and property value in compact areas, which could make it unaffordable for small businesses. We also found that the regional compactness positively and significantly affects the number of innovative firms. This is likely due to the role of compact regions in supporting public transit investments, enhancing social capital and reducing poverty and racial segregation.
Article
Full-text available
This study identifies the advantages, the constraints, as well as the right promotion policies necessary to foster the development of clusters. After a literature review, data were collected through field visits on five important clusters. Fifty cluster firms were surveyed to assess their performance. Semi-structured interviews were held with ten key policy decision makers. Focus group discussions were held, discussing with a group of 10 participants an assessment of the five clusters. The research shows important differences between the five clusters studied. It points to constraining factors, such as a lack of closer collaboration between firms themselves and between firms and universities, which could lead to innovation. As the size of most of the Palestinian economic entities are micro to small and medium, clustering can help these entities to increase their productivity and thus help in reducing the high unemployment rate among Palestinian youth.
Article
Full-text available
This research attempts to explore the importance of cluster-based systems in preparation for small and medium enterprises (SMEs) to go global, and it is an ongoing research. The findings of this research are aimed at providing insights to policy makers, academicians, and practitioners with the objective of creating initiatives, strategies, and policies, which reflect the primary aim of supporting SMEs in managing global challenges. SMEs that are cluster-based have the potential to facilitate the successful inclusion of SMEs in the growth of productivity and networks of global distribution. Most Asian developing countries are in the dark when it comes to this matter. The main purpose of this study is to investigate the relations between the capabilities of the networks and clusters in developing SMEs’ preparedness in facing business players in the global arena. This study’s scope includes specific Asian developing countries. Even though the issue of clusters in SMEs has been well researched in developed countries, such empirical studies are still lacking in the Asian region despite its prevalent collectivism practice. In the concluding analysis, the study intends to develop a model emphasizing the cluster-based industrial SMEs toward globalization.
Article
How is firm innovation affected by location in an innovation cluster? How does the interplay of firm and cluster characteristics matter? We examine these questions by conducting an empirical analysis of firm innovation performance in regional innovation clusters. Our theoretical framework is based on a synthesis of the literature on industrial clustering, regional agglomeration economies and social networks. We test the framework empirically through the analysis of data on patent citations from 578 firms located in 26 European regional clusters in the information technology industry over 10 years. We find that location in these clusters offers benefits and at the same time poses certain constraints. One of the central findings is that connectedness to highly performing firms (in horizontal relationships), research institutions and universities located in a cluster moderates the onset of diminishing returns between firm innovation performance and research and development effort, and helps firms cope with the negative effects of locating in clusters.
Article
Eco-Industrial Parks are a proven approach that balances environmental protection practices and regional industrial development. However, it is a challenge to relocate small and medium-sized enterprises into industrial parks. Recently in China, there is a new phenomenon where interfirm alliances have started to facilitate local government in promoting the relocation of small enterprises to industrial parks. In this paper, we attempt to identify the role that these interfirm alliances can play. This study uses a survey method to investigate this question in Jieyang City, and 598 valid questionnaires were collected. The validity and reliability of the relevant factors were tested using factor analysis, and ordered logit-regression was adopted to quantitatively assess the effect of the extracted factors on the dependent variable. The results highlight five key influencing factors in alliances: policy, market, managerial, financial, and technical. All factors significantly affect the relocation decisions of small enterprises according to various firm characteristics. Among these factors, the financial factor has the strongest influence on alliances among manufacturing firms. Policy and managerial aspects of alliances are critical to encouraging small enterprises to move into industrial parks while larger enterprises consider financial and technical effects to be more important. The market factor of alliances affects family-owned SMEs much more than it does for other enterprises. In summary, interfirm alliances are an essential policy implementation tool that has the potential to help local government in promoting the relocation of enterprises into eco-industrial parks and to improve industrial environmental performance.
Article
This paper not only draws conclusions from the available literature but also offers some new factors as well, which are not included in the existing literature. To be more precise the paper aims to ascertain factors behind the clustering of the motorcycle industry, a low-tech and low investment industry. The paper weighs the government’s policies, the role of factors of production, infrastructure, geography and other drivers for the subject industry and associated industries in the geographic location of Hyderabad. Design/methodology/approach For collection of data a questionnaire was designed to survey the cluster (N=250) after reviewing the literature and conducting interviews of experts of the motorcycle manufacturing industry, i.e. owners, managers, auditors, suppliers; a component matrix was developed to reduce the dimension of factors and measure the correlation, which helped to weigh the influence of factors. Confirmatory Factor Analysis proposed 4 factors as the best fit Findings The study conjectured a new viable factor for industrial clustering; “ethnic community” as it acts as a catalyst to diffuse knowledge, experience, and skills within the industrial cluster. Research limitations/implications This research do not find the weightage of the factors for industrial clustering, i.e it does not calculate the influence of factors behind the industrial clustering. Practical implications The above findings aim to stimulate policymakers and researchers alike to further pursue the line of inquiry developed in this paper. Originality/value First-time confirmatory factor analysis is used to find the reasons of industrial clustering. RMSEA is used to test the model fit and most importantly, it is the research about emerging industrial cluster.