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Clusters refer to the “geographic concentration of interconnected companies, specialized suppliers, service providers and associated institutions in a particular field in a country or a region”. Clusters are formed in order to improve the productivity and competitiveness of companies in a region. New Zealand is among the countries that pursed the cluster development strategy in early 2000 in order to improve the productivity of its firms.
The overall expectation was to achieve higher economic growth. However, the country has since abandoned its cluster program due to its inability to achieve the intended development objectives. This paper analyzes the reasons as to why New Zealand abandoned its cluster program.
Failure of New Zealand’s Industry Cluster Program
The cluster program helped the country to promote collaboration among the firms that were involved in it especially in accessing information on the dynamics of the market (MED, 2006). This was particularly realized in the Matamata racing and thoroughbred breading cluster. However, the cluster failed to achieve the overall goal of increasing productivity due to the following reasons.
First, the scope of the program was highly limited and the core objectives were not clearly spelled out thus leading to failure (MED, 2006).
Second, since the program was funded by NZTE, most products or objectives of the program were duplicated in other programs financed by NZTE. This led to conflict of interest and wastage of resources (MED, 2006).
Third, NZTE was not able to fully support the program since it was already supporting other forms of collaborations among firms in various industries.
Finally, the government realized that better outcomes could be achieved if regions were allowed to make decisions that fit them as compared to national decisions made by NZTE (MED, 2006).
Contribution of the Broader Economic Development
The government has responded to the failures of the cluster program through the broader economic development initiatives and this can be explained as follows. First, the government has helped the local firms to improve their productivity by providing incentives for innovation (MED, 2011).
Second, the government helps the firms to connect with their counterparts at the international level through export oriented polices. Besides, it helps them to access capital (MED, 2011). Finally, the government has focused on supporting only the major industries associated with high returns.
Such industries have great competitive advantages and potentials for high exports (MED, 2011). Examples of industries supported by the government include petroleum and seafood. This strategy has helped the government to optimize the use of its resources thus improving economic growth.
Nations Pursuing Cluster Program
Connecticut State in the US has managed to successfully implement its cluster program. The program involves training and developing employees in order to improve their productivity (CERC, 2008). It focuses on the adoption of lean techniques which enhance cost reduction.
The program also facilitates collaboration between public and private sector in policy formulation (CERC, 2008). Finally, it focuses on “urban revitalization through business development in order to increase income and job opportunities for citizens” (CERC, 2008). Currently, Connecticut has been able to implement eight industry clusters.
Regional industry cluster aims at bringing together firms and associated institutions with the purpose of enabling them to utilize their synergies thereby increasing their productivity and competitiveness. New Zealand implemented a cluster program but failed to realize its benefits due to the reasons discussed above. The government has since embarked on a broader economic development initiative such as helping firms to access capital as a response to the failures of the cluster program.
CERC. 2008. Connecticut’s Industry cluster initiative. Web.
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