Clusters of craftsmen have
existed as long as people have
lived in substantial settlements—
certainly since they have lived in cities.
Modern examples include diamond cutters
in Antwerp, knife makers in Sheffield,
sock makers in Yiwu, and the cinematic
entertainers in Mumbai. This phenomenon
is widely present in Asia’s information
technology (it) industry.
Clusters form because firms benefit
from having others in the same, or complementary,
industries close by. There is a supply
of skilled labor, specialized suppliers
and buyers, and flows of knowledge among
firms. This is the classic story told by the
19th century economist Alfred Marshall.
However, the story is a static one, and hightech
industries are quintessentially dynamic.
New firms can form new clusters.
As these examples suggest, market forces
create them (with Silicon Valley being
the prime example), but governments often like to accelerate the process. They do this
to enjoy the benefits of having a vibrant
cluster sooner than the market might produce
and from a belief, which might on occasion
be warranted, of establishing a
vibrant cluster before some other nation
does, that is, to gain a first-mover advantage.
However, such initiatives imply that
government officials know how to do this.
The record on this is checkered.