Micro-Clusters and Networks

Ewen Michael

• Publisher: Routledge
• Year: 2006
• eBook ISBN: 9781136377983
• Edition: 1
• Topic: Business
• Subtopic: Hospitality, Travel & Tourism Industry
• Index: Business

This book introduces a new approach to the analysis and management of growth in small tourism markets for regional and rural locations. It recognizes from the outset that the vast bulk of the tourism industry's product is delivered by small business enterprises and that many of these are located outside of metropolitan areas. Its central premise is that a myriad of small-scale clusters can provide an effective means to establish a local competitive advantage in tourism activities based on the resources of existing communities. The book brings together contemporary views of the potential of clustering theory to promote development in micro-markets, within the paradigm of competition, to create a new framework for regional development that might serve to enhance the growth of small-scale tourism destinations.Microclusters and Networks provides a theoretical explanation of how and why micro-clusters come about, with chapters by specialist authors to illustrate examples of their practice in the real world; but it goes further to demonstrate not only why they work but also how community members interact to form successful clusters. The incorporation of networking theory provides the means to explain the role of local community interaction in delivering successful social outcomes. The analysis that is provided clearly has applications for many industries beyond the development of rural and regional tourism destinations.

Chapter 1

Introduction

Ewen J. Michael

There has been a renaissance of interest among those concerned with regional development in the use of Cluster Theory over the past decade. This may be, in part, because the concept of clustering appears to have a particular application for the development of new industries in regional and peripheral areas. Intuitively, it suggests a mechanism to deliver new economic opportunities for communities that otherwise struggle to keep pace in a world that favours the concentration of large corporations and capital for the creation of a competitive edge. The practice of clustering, and particularly its practice at a micro-scale, has yet to prove itself as a dynamic strategy for regional development policy, and its costs and benefits are still subject to conjecture. Nevertheless, in the right circumstances, the potential benefits of micro-clustering may offer a new economic path to restore the prospects of some rural communities, with new avenues to stimulate wealth creation, employment, population growth, service provision and the restoration of civil infrastructure.

Tourism can be seen as an industrial function that produces a vast array of highly differentiated outputs. In fact, tourism is not one industry but many, for tourism outputs come from a range of different production processes. Part of the quantum of the tourism product is undeniably rural, where consumers seek the attributes that only visits to a regional location can provide. The regional tourism product itself is also highly differentiated — indeed some would argue that it is unique in every location – but, as an industrial activity, it can only be delivered in specific circumstances. Where a tourism function is possible, however, it may offer substantial economic and social benefits for the host community in circumstances where there are sometimes few alternatives. In this context, micro-clustering may offer an approach that helps create new tourism destinations, or expand existing ones, in a framework that could channel the benefits to meet the needs and values of the existing (or should that be remaining) population.

Some might suggest that there is an interconnection between the concepts of tourism and clusters that has been linked by historical commentators for centuries — in the sense that somehow this relationship is supposed to be obvious to the casual observer, and so can be treated as if it were assumed knowledge in some way. Hudson (1993) makes the point by accident in an intriguing description of the ‘Grand Tour’ in seventeenth and eighteenth century Europe. For over 200 years, until the French revolution undid the European aristocracy, it was not uncommon for the wealthy sons of the nobility to be sent, along with their accompanying entourage of tutors, servants and guards, on tours of intellectual discovery. For months, if not years at a time, the young aristocrats would journey from their northern European citadels to discover the wonders of the new enlightenment in Paris and the classical origins of Roman culture and the renaissance by visiting Florence, Rome, Naples and Venice, where they could view concentrations of antiquities and collections of art and heritage in clearly identified precincts. Indeed, the contemporary use of the word “tourist” stems from this time, as a means to describe those who undertook the journey and the places they would visit. Tourism has always been about the journey and the place , but the more attractive destinations have always been those that provide bundles of values for the visitor to consume.

In the contemporary world, of course, tourism is an international activity with broad appeal — there are now many more ways to undertake the journey and there are an infinite variety of places available for the tourist to visit. Some destinations offer singular attractions and some offer collections of different activities in the same location. The scale of activity in some destinations can be very large, and might even encompass whole cities, like London or Paris, while others can be so small that only a handful of visitors will travel there in any given period of time. The differences between destinations are profound, and call for quite different forms of analysis, interpretation, policy and business operation. The interest here, however, is confined to those smaller destinations in rural and peripheral regions.

The consideration of tourism in micro-clusters, of course, has a very contemporary origin. It stems from a series of tangential findings in a number of studies towards the end of the twentieth century into niche markets in tourism — including, for example, antique retailing in Southwestern Pennsylvania (Grado, Strauss, & Lord, 1997); antiques as a tourism market in Australia (Michael, 2002), and Seaton's (1996, 1999) analyses of Book Towns in the United Kingdom and Europe. Collectively, these studies and many others point to the possibility that some of these markets, particularly those that generate a demand for travel, are amenable to clustering in regional areas. The Australian study (Michael, 2002) went so far as to suggest that the co-location of like firms exhibited the capacity to draw visitors to regional areas, effectively acting as a generator of domestic tourism (detailed in Chapter 6). The results were not conclusive but they suggested, or at least implied, the possibility that successful firms in non-metropolitan areas were more likely to be found operating in small co-located clusters, and sometimes these clusters created a visitor destination in their own right. During this time, of course, Porter (1991) had rekindled interest in the concept of industrial clustering with a revised approach that he and subsequent analysts could demonstrate was relevant for large-scale or macro regions, raising a debate about the potential for clustering theory to contribute to new approaches to development policy. For tourism analysts, however, the problems and issues do not concern large-scale regions but rather their focus is on smaller localities and their communities; and, hence, the new theoretical views seem an imperfect match with the emerging coincidence of empirical data for clustering in niche markets.

In this context, the term “micro-cluster” was coined to refer to the geographic concentration of a small number of firms in a cohesive local environment (Michael, 2003), where the complementary interaction between those firms contributed to an enhanced level of local specialisation. A micro-cluster, then, is defined by its local context, and the unique identification of its product, rather than by artificial perceptions of regionality or production processes. As a concept, this is not new, but it serves to shift the focus of analysis in economic development from the broader and more general issues that dominate larger regions or States, to the specific problems of individual localities, towns and villages and the people who live in these environments.

From this earlier work there now emerges a hypothesis to suggest the possibility that some niche markets, and particularly those that generate a demand for travel, are both amenable to clustering in regional areas and more successful when they do. The implication from this proposition is that micro-markets of this type, when operating in a cluster formation, are capable of creating a tourism function (or destination) in their own right. The inherent value in this argument rests in its intriguing consequence, for if a locality can establish a micro-cluster, then it may well be able to generate a range of accelerated economic and social benefits for that community. The development process, however, is driven by and embedded in its micro scale, where small communities remain in control of the structure and the nature of growth — it will be their choices which determine the form of development that takes place and it will be their decisions that will control the management of the externalities that arise as a result. More importantly, if the dynamics that deliver micro-clustering can be harnessed through a policy process, it suggests the prospect for a new pathway for regional tourism development that remains entirely consistent with community demands. In this sense, the micro-clusters approach may well incorporate a political dimension to the resolution of local development possibilities that many other policy frameworks lack.

If micro-cluster theory can contribute to the practice of regional development policy, and to regional tourism in particular, it will be because it allows local communities to engage in the process of growth on terms that are acceptable to them. Given the problems of rural decline, the diminution of economic opportunity and regional inequity in parts of Australia, New Zealand, South Africa and many of the peripheral regions of Europe and North America, any potential to expand regional growth warrants further exploration. The need is more compelling where that potential offers both employment growth and economic opportunity in ways that are consistent with the maintenance of community values and lifestyles.

While the notions of location and clustering are well understood in strategic planning, the same cannot be said about the forces that initiate and enhance the process of clustering in micro-environments. Arguably, even less is known about the nature and scale of the costs and benefits that successful clustering might impose on regional communities, and no work at all appears to have been done on the effects of de-clustering! The concepts of location concentration and clustering can be seen as core knowledge within the literature of strategic planning, geography and microeconomics; but they do not necessarily explain the dynamics that initiate and enhance clustering in truly micro-environments. Likewise, there are several contemporary studies of commercial alliances between firms (e.g., Dyer, Kale, & Singh, 2001), and of the effects these alliances have on operations and costs, but the benefits from these relationships are intended to be internalised for the advantage of the member firms, and so have little to do with the range of social and economic impacts that successful clustering might bring to a small community. In short, without a comprehensive understanding of the forces that apply in these circumstances, the potential for any form of policy application remains constrained.

For public sector and social planners with an interest in regional tourism development, the problem is still how to identify those dynamics that lead to successful clustering, and how to assess the social impacts that such a process might generate. This is not to suggest that micro-clusters are the panacea for regional development policy, but rather where particular market conditions favour the practice of cluster formation, as appears the case in many small rural destinations, this approach may create another opportunity for local growth. This rather generous statement, however, presupposes that micro-cluster formation is amenable to public sector intervention; and, as a corollary, that there exists both a role for government and a theoretical pretext for taking such actions.

These then are the issues that this book addresses. The approach that has been taken looks first at the issues exposed by the concept of rural decline, in part to explain the urgency in the need to identify new approaches to regional development. Rural decline is not so much an economic phenomenon as it is a social one: where the loss of opportunity and the perceived diminution of infrastructure in rural areas is failing to deliver new prospects for growth and, hence, is seen by the residents in those communities as the critical issue confronting the framework of the future policies that will affect them. Rural decline takes many forms, with many consequences for the people who are affected — although it is doubtful that anyone has expressed this so eloquently as Michael Sanders (2004) in his commentary on the changes to life in rural France:

“Les Arques in 1900,” she told me, “had nearly eight hundred people, today less than two hundred. Then, one hundred and twenty were of school age, today not twenty. Then, the village had four working mills, two cabarets [small bars], and a brickworks. Cazals had four hotels, eight cabarets, and six cafés! And have you seen St Caprais? … The village is in ruins!” she exclaimed. “On dirait qu'il y a eu une guerre!” You would think there had been a war there.
If, perhaps, Madame Delon had exaggerated the degree of St Caprais’ dilapidation, her words struck home all the same. Caught in a downward spiral of eroding population and declining agriculture, it showed what time and the elements will do, in the space of just two generations, to stone and tile without the attentions of the hand of man. Without trade. Without, in short, a life.

Michael Sanders (2004): From Here You Can't See Paris, Bantam,
London, (p. 18).

Over the past decade, throughout the developed world, there has been a steady increase in the demands for new approaches to rekindle regional growth and create new opportunities for the sustainability of regional communities (see Prosser, 2001). Combining the perceptions of rural decline and regional inequity with the reactions of an increasingly volatile electorate creates a compelling argument for seeking out new mechanisms for development policies that are capable of bringing real benefits to regional residents. The task is made more difficult, of course, for any new direction must also conform to national growth strategies, the global demands of competition policy and the often conflicting expectations of local residents to deliver employment growth while maintaining community values and lifestyles.

As Chapter 2 notes, there are many approaches to regional development that might appropriately contribute to the reconstruction of opportunity for regional communities, but as yet no single approach or basket of choices has found a consensus of support in the policy domain. The potential for micro-cluster theory to make even a small contribution to the enhancement of these options remains only as one possibility, but one that seems particularly relevant where a community identifies a tourism function as part of its set of economic and social choices. The notion of growth through a tourism cluster is not an innovation in itself, for it simply recycles the principle that economic benefits normally stem from multiplier and accelerator effects, while social benefits are the consequences of its positive externalities. In small communities, however, clustering can be directed by local choices to optimise the consequences from growth, rather than being its victim.

Nevertheless, the issue of concern remains with the ways and means that the sources for reviving regional opportunities can be identified. To establish the background for this discussion, Chapters 3 and 4 consider the principles behind a model of successful micro-market clustering based on tourism. They serve to revise and re-evaluate the traditional approaches to cluster theory by incorporating contemporary analyses of the new economic approaches to complementarities — an interpretation that introduces the notion of diagonal clustering as the agent provocateur for accelerating growth. While this explains the economic dynamics inherent in the formation and maintenance of micro-clusters, more is needed to explain how individuals, businesses and communities can benefit from the process. The answer, perhaps, lies in Chapter 5, which applies the concepts of network theory to expose the human mechanisms that make the clustering model a viable strategy for growth.

All of this might seem quite abstract and theoretical, if it were not based on some empirical reality. To this end, Chapters 6, 7 and 8 seek to provide some illustration of real micro-clusters in operation, and of the networking processes that occur within them. The approach adopted here helps point to the key success factors for clustering that are relevant to an existing market's niche industries and community structures. It assumes the pr...

Table of contents

• Front Cover
• Half Title
• ADVANCES IN TOURISM RESEARCH
• Title Page
• Copyright
• Contents
• List of Figures
• List of Tables
• Contributors
• Acknowledgements
• Preface
• 1 Introduction
• 2 Issues in Regional Development
• 3 Development and Cluster Theory
• 4 Micro-Clusters in Tourism
• 5 The Role of Networks
• 6 Micro-Clusters: Antiques, Retailing and Business Practice
• 7 Wine Tourism Networks and Clusters: Operation and Barriers in New Zealand
• 8 Networks: Comparing Community Experiences
• 9 A Path for Policy
• 10 The Contribution of the Micro-Cluster Approach
• Glossary
• Author Index
• Subject Index