ABSTRACT
The tendency for businesses to cluster in low-income economies is much higher than in high-income economies. There is no precise measurement to indicate the scale of the difference but it is known that clusters are common in a wide range of developing countries and sectors (Humphrey and Schmitz 1995). Moreover, developing-country clusters typically exhibit a more extreme form of concentration than in developed economies. They are often centred around a single community that has a clear economic specialization on a single activity, such as basket ware, dying, weaving or metal work. Unlike the ambiguity surrounding the identification of clusters in developed economies, there is no question about the existence of clusters in developing countries. In many cases the specialization has a long unbroken history. Equally, new clusters can be found. In India, for example, an incipient biotechnology cluster in Hyderabad has been reported that complements an existing concentration of software services (Dyer and Merchant 2003). In the same country, Panipat is cited as a cluster of 700 carding machines that were transferred from Prato, Italy (UNIDO 2000). The machines make shoddy yarn from recycled wool, an activity no longer viable in Italy. A long history of public-agency assistance to clusters also makes the developing-country experience of interest, as this chapter will review in the case of Indonesia.
