Free Essay: Cluster Theory

Cluster theory involves an approach to strategy. The theory asserts that concentrating businesses in specific areas generates numerous benefits. For example, it reduces competition hence boosting revenue companies earn (Towse, 2020). The stable existence of a fixed customer base assures sustainability, continuity, and firm profit generation. The permanent presence of suppliers results in low expenditures for the industries as well. Geographic concentration, further, builds more likable associations that develop productive commerce in all compartments. The significance of cluster theory to a creative economy entails its ability to create competitive advantage, generate employment opportunities, and enhance productivity.

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Benefits of Cluster Theory

Creative industries can enhance inventions and improve productivity in other sectors of the economy (Towse, 2020). Industries in locations near regions where creative industries exist can benefit from economic spill overs, such as accessing innovative concepts. However, such assistances do not get transacted in the market. Besides, the creative industries can get incorporated as part of the larger manufacturing chains of other sectors. For example, design organizations may get engaged in providing added value to the commodities of producers (Towse, 2020). Such economic spill overs enable non-creative companies located near creative industries to become more productive and prolific.

Furthermore, cluster theory considerable can make regions where creative companies exist to become more appealing to other ventures and highly professional personalities. The attraction of skilled groups of the creative class and other businesses significantly helps in developing the region economically (Batabyal & Yoo, 2018). Besides, other attributes of creative industries like the availability of social amenities, art, and music, among others, have fundamental value. Policymakers use creative industries strategies in the development of urban policy.

The cluster theory, therefore, enables sharing the financing of infrastructure (airports, roads, and social amenities), market places, and production services, thereby minimizing the expense incurred in accessing markets by all producers (Towse, 2020). Besides, agglomeration of industries offers companies a diverse customer base, suppliers, and skilled workforce, enhancing their ability to operate effectively. Furthermore, clustering provides an opportunity for developing trust, thereby leading to knowledge sharing, hi-tech spill overs, and the growth of innovations and idea.

Sharing, learning, and matching remain specifically crucial to high net-worth companies in information-intensive firms since they tend to depend on expertise talents and invention for comparative advantage (Towse, 2020). However, it is essential to note that other concerns like access to global transport links and cost of supply can overshadow the benefits of agglomeration near same industries. Cluster theory accurately represents the creative economy since the concept of digital communication involves businesses forming formidable global commerce. Besides, several high-tech industries gain when companies operate in geographical proximity.

Furthermore, the informal discussion that occurs in public can contribute to a quick and effective exchange of abilities and philosophies (Gong & Hassink, 2017). Over the last decade, governments across the globe have made a significant change in their economic viewpoint. The attention has shifted to entrepreneurship, start-ups, and the creative industries as the mainstream of future economic development. Economists argue that these sectors remain the economy's most viable causes of vitality, invention, job opportunities, and value establishment.

Cluster theory, therefore, offers many excellent opportunities in the perspective of innovation, hence accurately represent the sector. Cluster theory creates essential social capital by developing communities, partnerships, and acquaintances (Gong & Hassink, 2017). Agglomeration generates sectoral hotspots which draw the most skilled entrepreneurs in a specific field. Besides, hubs offer a steady basis in the ever-changing fabric of a concentration. A centre provides services required by emerging creative businesses on flexible and cheap terms.

Limitations of Cluster Theory

The first fundamental limitation to the cluster theory entails its static and expressive environment that restricts its ability to grow a useful cluster in practice. The philosophy, presently, stresses on explaining how a hub works in the contemporary setting instead of how a centre developed (Gong & Hassink, 2017). Integrating historical methods can enforce practical implementation. Besides, the interrelation of a cluster remains a challenge to evaluate empirically. Furthermore, the theory does not describe how precisely the community can enforce the aspect of correlation.

Sustaining competitive cluster advantage requires the clusters must regulate network openness to industries outside the constellation while improving strong inter-company associations within the concentrations of sectors (Gong & Hassink, 2017). Other factors that limit the practical aspects of the cluster theory involves anticipated income, the strength of demand, politics, taxes, and competition. Competition in the contemporary world has become more dynamic. Firms can lessen several input expense limitations through universal sourcing, making the customary view of comparative advantage depend on creating more productive usage of inputs that needs continuous invention.

Another limitation of the theory to useful competitive advantage involves the control of proprietary information. Information sharing between companies not engaged in direct competition within the cluster remains significantly beneficial to those firms. However, knowledge spill over in industrial concentrations that contains some direct competitors remains detrimental to those industries (Gong & Hassink, 2017). Besides, economists cautions that there exists a possibility unenforceability of non-compete sections in which confidential data may leak from the company when workers shift from one organization to the other.

Conclusion

Creative industries involve several economic undertakings that entail the creation or usage of data and knowledge. Creative industries have continued to remain considerably crucial to economic development. Scholars argue that human imagination remains an essential financial asset and that these industries in the 21st century will rely heavily on the development of information through modernism and ingenuity.

References

Batabyal, A. A., & Yoo, S. J. (2018). Schumpeterian creative class competition, innovation policy, and regional economic growth. International Review of Economics & Finance, 55, 86-97. www.sciencedirect.com/science/article/pii/S1059056017309528

Gong, H., & Hassink, R. (2017). Exploring the clustering of creative industries. European Planning Studies, 25(4), 583-600. www.tandfonline.com/doi/abs/10.1080/09654313.2017.1289154

Towse, R. (2020). Creative industries. In Handbook of Cultural Economics, Third Edition. Edward Elgar Publishing. www.elgaronline.com/view/edcoll/9781788975797/9781788975797.00020.xml