In order to reduce widespread poverty in low-income countries, it is essential to create jobs by promoting the development of labor-­intensive manufacturing industries (Sonobe and Otsuka, 2006, 2011). Yet, there is no clear-cut, generally accepted, and effective strategy to develop such industries. This study attempts to provide an effective strategy to foster the development of labor-intensive industries in developing countries based on the results of management training experiments conducted in selected metalwork, garment, and shoe clusters in Ghana, Kenya, Ethiopia, Tanzania, and Vietnam as well as on a large number of our case studies of cluster-based industrial development in Asia and ­sub-Saharan Africa (SSA) compiled by Sonobe and Otsuka (2006, 2011). We pay ­special attention to micro and small enterprises (MSEs) in industrial clusters because clusters consisting of MSEs are ubiquitous, and at least some of them seem to have high potential to grow and generate employment. The very fact that they have survived competition in the increasingly globalized world indicates that they have a comparative advantage. At the same time, the fact that only a few of them have ­successfully developed warrants the detailed study of a development strategy that helps them overcome market failures without causing ­serious government failures.

Industrial clusters can be defined in several ways, but we define them as the geographical concentration of enterprises producing similar and closely related products in a relatively small area, for example, assemblers and part-suppliers (Sonobe and Otsuka, 2006). Most, if not all, successful industrial development is cluster-based not only historically but also at present throughout the world. The Industrial Revolution in the UK was clearly cluster-based; the textile industry in Manchester and the ship-building industry in Glasgow are just a few well-known examples. Philadelphia is also known to be a center of cluster-based industries in the USA. Even now, IT industries continue to be highly clustered, beginning with Silicon Valley followed by Bangalore, Hyderabad, Delhi, and Mumbai. In Taiwan, it is difficult to find manufacturing industries which are not clustered (Sonobe and Otsuka, 2006). In China, there are many large industrial clusters in industrialized areas, such as Zhejiang, Guangzhou, and Jiangsu provinces (Long and Zhang, 2011). Two leading industries in Bangladesh, namely, the garment and pharmaceutical industries, are also cluster-based, as will be explained in Chapter 3.

It has been increasingly recognized that entrepreneurship holds the key to industrial development in developing countries (World Bank, 2012). Indeed, a significant number of studies find that productivity and ­profitability vary greatly across enterprises, even in the same industry in the same country, and that a large part of the variation can be accounted for by the difference in management practices.2 In the past, foreign aid and government policies have not paid enough attention to the critical role played by entrepreneurship (e.g., Sievers and Vandenberg, 2007). Identifying and nurturing high-potential entrepreneurs, however, are the key to successful industrial development.