Porter and the "Competitive Advantages of Nations' [Cluster Theory Development]

Nations should continuously seek to gain competitive advantages and that occurs through the development of their industries to meet and exceed market expectations. When a nation can further its industrial development through the use of economic clusters it can often realize higher GDP growth rates. The study of clusters is an analysis of the economic environmental and organizational factors that lead to momentum for firms to adapt to those market needs. Market Need, Environment, Organizational Capacity, and Human Capital come together.

Michael E. Porter is from Bishop William Lawrence University Professor at Harvard Business School and one of the leading theorists on clusters and economic development. While the type of cluster being proposed in this work is of a similar strain there are some differences between his and mine based on the way the theory has developed. However, you will find there are similarities and contributing factors so some of the work is based in part on aspects of his theoretical underpinnings.

Porter believed that the capacity for nations to push development is based on four broad attributes that constitute the "diamond" of national advantage,

1. Factor conditions

2. Demand conditions

3. Related and supporting industries

4. Firm strategy, structure, and rivalry (Porter, 1990, Para 1)

Companies must continuously update to increase operational and innovative sophistication if they expect to lead the global market with their products and services. The process of adaptation leads to consistent improvement. According to Porter putting competitive businesses in close geographic locations increases competition and in turn speeds innovation. As companies engage in domestic competition they also improve their competitiveness in comparison to foreign rivals. If lucky a cluster can block out other foreign market entries based on a cluster's unique advantages that would be difficult to copy.

Porter also believes that economic clusters are seen as a way to avoid inward focus and stagnation in growth. The ability to speed economic development with new products and services through improved competition leads to greater benefits to society. In the model I'm presenting it is believed that economic clusters not only innovate around market needs but also create long-tail adaption of products and services in the manufacturing and supply chains that optimize to feed such clusters. In turn, maximizing and improving infrastructure.

In my theory, these supply chains are seen as economic vines and that is a wider conception beyond business-specific purposes and into the human elements that also feed the fuller functioning of the system. The physical and digital aspects of business are often calculated in traditional economics but the soft side of human capital such as libraries, quality of life, contentment, politics, safety, discrimination, etc. have an impact on human choice and influence the health of a cluster.

In general, it is believed that government should support cluster development without necessarily being directly involved unless they have research and development objectives. For example, they may encourage international trade, product safety standards, deregulation, etc. One can see these as environmental factors that help encourage clusters to develop by using influencing factors like regulation, taxes, foreign/domestic policy, etc. Specifically, in this transactional cluster model, I'm proposing government and industry collaborate to spark a cluster, create rules for the cluster, and actively manage the environment for developmental success around key objectives.

The Transactional Rapid Innovation Cluster (TRIC) Model helps to encourage unique competencies that can contribute to solving defined problems through focused cluster creation or organic general development through environment enhancement. When focused cluster development occurs companies increase the pace of product creation through collaboration in the R &D development process. The advantage they gain is not only from the specific products they create but also the adaptations in their wider industrial base from patents and new products drawn from partnering with other industries.

Key Points:

-Michael E. Porter was a leading theorist on economic clusters and economic development.

-Porter believed four broad attributes lead to the "diamond" of national advantage. 

-The Transactional Rapid Innovation Cluster (TRIC) model is an offshoot branch of theory focused on pinpointed investment to solve defined market problems through R&D collaboration. 

-The Transactional Rapid Innovation Cluster (TRIC) model can be used to improve the economic and quality of life/social health of a community.

Porter, (March April 1990) The Competitive Advantage of Nations. Harvard Business Review. Retrieved. https://hbr.org/1990/03/the-competitive-advantage-of-nations.