5. CLUSTERING, INNOVATIONS AND TRUST: THE ESSENTIALS OF A CLUSTERING STRATEGY

5.1 Introduction

Many areas around the developed world are adopting the clusters approach to regional economic regeneration, with the United Kingdom-wide government Department of Trade and Industry (DTI) suggesting that this could be a key element in re-establishing the competitiveness of national businesses in the future.¹ As we demonstrate throughout this section, many of the regional initiatives in the United Kingdom and indeed in Europe, have originated in Scotland. There has been explicit reference to the Scottish approach to clusters in a recent DTI report. In this section we examine how Scottish Enterprise (SE), the development agency for Scotland, has recently launched a "clusters approach" for its key industrial sectors, arguing that if regions and nations are to be competitive in the next century they must be at the forefront of knowledge production. In order to compete, SE readily acknowledges that the information and ideas created and developed through clustering are reliant on strong partnerships and that if synergy is to be maximized then the whole process of the knowledge-based economy is dependent upon "working to build trust and a shared vision" (SE 1988a, 1). The envisaged strong partnerships will ideally consist of customers, suppliers, competitors, universities, colleges, research bodies and utilities; in other words, they will be a private/public sector mix. This is hardly surprising given the nature of the output produced, namely information, and the notoriety of the private sector for underinvesting in research and development. This underinvestment occurs because of the large element of fixed cost associated with the development of a new product or process, the inability of the innovator necessarily to reap the benefit of the innovation, and the uncertainty attached to whether a new product or innovation is to be successful. Given that knowledge production creates spillovers, and that much of the knowledge produced is tacit, and further, that new products and processes will benefit from critical commentary from all the players involved in a partnership, there is a spatial element attached to the idea of achieving a competitive advantage through the establishment of a "learning economy" within the globalized economy. The spatial dimension can be at a regional or a national level or indeed can transcend state/regional boundaries. Much of this is readily accepted within the existing literature and is acknowledged within part 5.2.

Of equal importance to the creation of new products and processes is the ability for members of a cluster to communicate efficiently. Because learning economies consist of partnerships, the ability for efficient communication between the members of a cluster is essential. Efficient communication will be assisted if the partners within a cluster can trust one another so that fears of one member appropriating the new idea or innovation can be reduced. The adoption of an appropriate institutional framework would greatly facilitate communication. This is recognized within the current literature on learning economies, but the nature of trust and cooperation is rarely discussed within this context. The ideas of trust and cooperation, however, are acknowledged to be the key to the success of some of the most well known regional economies of recent times, the industrial districts of the Third Italy being an example. We believe that if a regional development institution is to be successful with a clustering strategy, the nature of trust and cooperation within a partnership framework needs to be fully understood. We focus on the need for trust and cooperation, therefore, along with some brief commentary regarding the role of trust and cooperation within the industrial districts of the Third Italy in section six.

Within the European economies, there already exist examples of partnership frameworks that could be adopted to assist the success of individual regional clustering strategies. The most successful of these partnership institutions is the Strathclyde European Partnership (SEP). The SEP has received widespread acclaim (Danson et al. 1997) as a model for bringing together the key players - both public and private - for the delivery of regional economic development. In this section we examine the evolving partnership governance structures within Scotland at a regional and county level, highlighting both good and bad practice. We then conclude with policy implications and warning signs for the development of a clustering strategy based on the learning economy within Scotland.

5.2 Innovation and Learning

In its desire to establish a clustering strategy, SE is acknowledging the long-held view that European firms and industries are losing their competitive advantage in the main to the United States and Japan (CEC 1993). This loss is attributed in part to the lack of innovation within the European Union: "Among the factors having a major impact on the competitiveness of the Community economy, Member States point particularly to the following[:] ...inadequate assimilation of new technologies combined with failure to exploit properly the results of research and technological development, leading to difficulties in concentrating the production of goods and services in leading-edge and high value-added industries" (CEC 1993, 72). Yet conversely within the European Union, certain regional economies have been successful in terms of the usual economic indicators such as job creation and GDP growth. The reasons for success within these regions is partially attributed to the ability to be innovative. The role of knowledge and the innovation process has been identified by economic growth theorists as being a significant factor in endogenous growth theory and in accounting for the Solow residual (Boltho and Holtham 1992; van der Ploeg and Tang 1992; Scott 1992). The key component of the innovative process is the creation of knowledge, a point recognized by theorists and practitioners alike (see, for example, Gregersen and Johnson 1997; CEC 1993). The recognition of this point has focused attention on how firms, regions and indeed nations innovate. In researching this phenomenon, regional scientists have utilized the methodology of the evolutionary economists Gregersen and Johnson (1997), Morgan (1997), Grabher and Stark (1997), Storper and Scott (1995), Storper (1992 and 1995) and Lundvall and Johnson (1994). A major contribution to the discovery and utilization of knowledge is attributable to the institutional framework that evolves to facilitate the process. Institutions in this sense include both formal and informal organizations. Formal organizations include RDAs. An informal organization can be defined as "a social organisation which, through the operation of tradition, custom or legal constraint, tends to create durable and routinised patterns of behaviour" (Hodgson 1988, 10). The emphasis from the regional science perspective is that due to the nature of knowledge - much of it being tacit, it is not easily transferable - the system or region that creates it will develop the advantages associated with innovation.

Storper (1995) highlights the importance of what he describes as "untraded interdependencies" to firms' use of knowledge. For Storper the interdependency arises because of the way technology is developed. Utilizing the evolutionary approach, he focuses on the path dependency nature of technological development. "Technologies, for one thing, are subject to a variety of user-producer and user-user interactions" (Storper 1995, 204). Where clustering occurs because of some commonality of technological development, "untraded interdependencies" arise, such as common coded language, norms, customs and practices. These common institutions lead to easier communication and facilitate trust and cooperation. Similarly, Freeman comments "Firms learn both from their own experience of design, development, production and marketing and from a wide variety of external sources at home and abroad - their customers, their suppliers, their contractors...and from many other organisations - universities, government laboratories and agencies, consultants, licensors, licensees and others" (Freeman 1994, 470). This list is not unlike those institutions identified by SE as making up a typical cluster: companies, customers, suppliers, utilities, research institutes, education (see Figure 5.1).

Although original ideas may be learned from sources beyond their specific localities, their implementation and innovation can be achieved most efficiently within an area with sympathetic institutions, that is, an area where "untraded interdependencies" have developed. Gregersen and Johnson (1997) make a distinction between "the production of knowledge and the utilization of knowledge". What is significant for Gregersen and Johnson is that "learning has become increasingly endogenous. Learning processes have been institutionalized and feed-back loops for knowledge accumulation have been built in, so that the economy as a whole is learning by interacting in relation to both production and consumption. When economies learn how to learn the process tends to accelerate" (Gregersen and Johnson 1997, 481). This would be the ultimate aim of a clustering strategy based on the learning process: the acquisition of new knowledge and the processing of the new knowledge into innovative methods of production resulting in new learning for all the participants in the cluster.

Surprisingly, as we mentioned in part 2.2, many of the regional scientists already cited fail to identify the locational aspects of learning regions with the earlier studies of Marshallian industrial districts, Storper (1992) being a notable exception. Implicit in this discussion is the idea that there is an ongoing interaction between the key players in a spatially specific area, including what Marshall would call an industrial district. Marshall provides a useful summary of the learning process that is analyzed by Gregersen and Johnson (1997, 481) and Lundvall and Johnson (1994, 26). In addition to the usual list of agglomeration economies and external economies of scale that are gained through organizing production within spatially defined areas, we have seen that learning economies also develop norms and practices that enable the key players to interact in an efficient manner: "The idea that lies at the centre of the concept of innovation systems is that the overall innovative performance of an economy depends not only on how specific organizations like firms and research institutes perform, but also on how they interact with each other and with the government sector in knowledge production and distribution" (Gregersen and Johnson 1997, 482). In a similar vein Lundvall and Johnson comment "knowing how to do things in isolation is not the decisive type of knowledge any more. Knowing how to communicate and cooperate becomes much more important than before" (Lundvall and Johnson 1994, 25). Storper (1995) notes that all production systems involve uncertainty and that "The main way that such uncertainty is resolved is through conventions, which are taken-for-granted rules and routines between the partners..." (Storper 1995, 208). The most important of these conventions, we would argue, are trust and cooperation. Although theorists of the learning economies identify the need for communication, and although the method to produce efficient communication (establishing conventions of trust and cooperation) is acknowledged, the nature of trust and cooperation is not widely discussed. The issues surrounding the establishment of trust and cooperation are examined in section 6. For the remainder of section 5 we will examine the development of clustering within the Scottish economy.

5.3 The Development of Clustering Within Scotland

It has been claimed that Scotland has given the European Union the model approach to regional economic development, with its strategic partnerships of central and local government, RDAs, QUANGOs, and other players in the public, private and voluntary sectors (Danson et al. 1997). These partnerships have been established over the last twenty years, especially in West Central Scotland, through the progressive development of multi-agency, multi-annual, multifunctional initiatives, task forces and area agreements (Randall 1987; Moore and Booth 1986). While there have been criticisms of individual partnerships (Boyle 1989; Collins and Lister 1996), their durability and transnational acceptance have been testament to the perceived effectiveness and success of these forms of comprehensive intervention in the regeneration and redevelopment of communities.

Labour Party-dominated local authorities, such as Strathclyde Regional Council and Glasgow District Council, have been able to work closely on a common agenda with the market oriented Scottish Development Agency (Danson et al. 1980), and the private corporation-based Enterprise Trust movement (albeit their sponsorship was predominantly derived from the public purse). Their work, which has involved a series of partnerships at the local and subregional levels, suggests the building of trust through cooperation and experience. This has been critical in producing a model of intervention which is now adopted across the European Union.

The advantages of such partnership working can be discerned in the move toward a cluster approach to regional economic development within Scotland. It is becoming accepted at the national and regional levels that partnerships are not only a legitimate and effective way of coordinating and focusing the resources of a number of agencies onto a problem, but also the favored approach. Local further education colleges, housing agencies, health boards and others have joined mainstream economic development bodies in stressing the need to work in formal partnerships with each other to meet economic and social challenges, as well as in their commitment to participate in these formal arrangements. The clusters strategy stresses the need to position Scotland at the high value end of the market, with enterprises active in the cluster operating within "a local economic environment geared to innovation, investment and upgrading" (SE 1998, 4). The strategy will be advanced by flexible partnerships of public and private sectors, which will include industry, education and government. These partnerships will devise action plans around which all economic players will cluster to promote an integrated development policy. Integration will be extended to the critical issues identified elsewhere by SE: "the need to capitalise better on Scottish scientific and technological expertise; to help companies build up their research, design and development capacities; to stimulate entrepreneurship; to encourage companies’ international ambitions and to build a high-performance transport infrastructure" (SE, 1998, 4) [for how to define clusters see Bergman and Feser, Chapter 3, "Cluster Morphology of Regions: Analytic Options."]

See Figure 5.2 and Figure 5.3

The strategy is to be underpinned by these other objectives and agencies, therefore. It will be holistic, acting upon synergies and linkages. The clusters will include both indigenous and inward investment. The strategy stresses technology, innovation and sustainable economic growth and development, suggesting the transmogrification of SE back into the RDA envisioned in the 1970s, rather than the business agency it has become over the last few years (Danson et al. 1980). This approach is being applied in many geographical and functional contexts, with reliance on a single agency forsaken in all areas of (re)development. Although clustering is usually applied to industrial organization, the concepts on which it is built can be found in other forms of governance structures, namely partnerships. In the remainder of this section we examine an attempt to promote the clustering strategy in one industry in Scotland, namely the electronics industry, and then analyze how the concepts that lie at the center of networking and clustering can be found in one particular area in Scotland, Ayrshire. These two case studies will highlight the contrast between differing governance structures. One consists of a trans-public agency partnership, built on trust and cooperation established over many years. The other comes from the emerging clusters approach to industrial regeneration and development. It is based on a model promoted by SE but does not seem to reflect recognition of the full implications of the philosophical underpinnings of the industrial district.

5.4 Implementing the Clustering Strategy

Scottish Enterprise has identified the electronics sector as a key industry in Scotland, which is hardly surprising given the importance of the sector to the Scottish economy. There are problems fully embedding the sector in the local economy, and SE is aware of them. Clarke (1996), in his study of the Scottish software industry, reported on a sector that displays many of the characteristics of a high technology sector, requiring particular forms of support within a general program of assistance. Although sector-specific programs are seen positively, Clarke questioned the concentration of state business development agencies on a minority of export-oriented, product-based companies. In like manner, Turok (1993a) examined the development of the printed circuits industry in Scotland. Unlike much of the electronics sector here, it is dominated by indigenous enterprises that are growing strongly. He argued that the main reasons for this buoyancy are the local concentration of firms within Scotland, the avoidance of direct competition between companies, the particular demand conditions facing the sector - based as they are on batch production of customized products for technically close customers, and the need to satisfy just-in-time manufacturing processes. Turok recommended closer connections between enterprises and so the "growth of a Scottish industrial cluster in electronics," as the sector tends to supply original equipment manufacturers (OEMs) in a dedicated chain with few external economies obvious from enhanced linkages between companies. It is not clear, however, how agglomeration economies would be promoted through improved networking and why, by extension, the industry would support such moves.

In line with the clustering strategy, SE is attempting to encourage more local sourcing through a Strategic Alliance with the major electronics firms who are organized through the Scottish Electronics Forum. The objective is to provide "vital support and infrastructure" (SE 1998a) so that the industry can maintain its competitive edge. This is to be achieved by making sure that the electronics industry exploits developing markets by concentrating on more knowledge-intensive activities, enabling the development of a "value-added logistics hub." The Alliance identifies four ways to achieve this aim: commercializing academic and industrial research, increasing the level of Scottish content in electronics products, developing the skills base of the Scottish work force, and attracting R&D investment into Scottish plants (SE 1998b). The Alliance has now been adapted to fall in line with the clustering strategy of SE. This has resulted in a group of singularly functional operational departments combining to form the Information Industries Group. The information industries clusters team has a dominant role in working closely with the Electronics, Optoelectronics, Software, Multimedia and Information Society partners. The problems facing this cluster in the electronics industry concern job creation, local sourcing and technology transfer. "The Scottish electronics sector’s total output has nearly doubled in the past decade. But total direct employment today, despite some growth in the late 1980s is roughly where it was in the mid 1980s.... Nearly 80% of all components and sub-assemblies which go into Scottish-produced electronics output is sourced outwith Scotland" (Young 1997, 14).

In a study of linkages within the electronics industry in Scotland, Turok (1993b) suggested that there are opportunities for much higher levels of local sourcing by the foreign owned original equipment manufacturers (OEMs). Even where these do exist, he described them as corresponding to a "dependency model" rather than to a "self-sustaining economic development scenario." Linkages are seen as weak or based on dependency, therefore the industry is not embedded into the regional economy. With few high technology linkages between indigenous supplier and OEM, there are no effective clusters because connections are founded on market strengths, not trust and cooperation. Few cases of transfers of staff or technologies have been recorded. Classically, the retention of higher order functions (R&D, marketing, strategic management, financing) elsewhere limits the ability of the local economy to establish business services externally to the multinational enterprises themselves, and to furnish spin-offs, transfers, and the other components of a successful milieu.

5.5 Local Economy Regeneration Partnerships

In Ayrshire, through an initiative which is being replicated across lowland Scotland, the local enterprise company Enterprise Ayrshire (the locally managed government agency established to coordinate the delivery of training and business development services and infrastructure), the three local authorities (East, North and South Ayrshire Councils), the Ayrshire Chamber of Commerce, the government housing agency Scottish Homes, the trade unions through the Scottish Trades Union Congress, and SE have come together as Ayrshire Economic Forumto prepare a collective Ayrshire Economic Development Strategy. Over the last year, the Forum has discussed the issues facing the county in the next half century to produce a Consultative Document "A Vision for Ayrshire" (Ayrshire Economic Forum 1998). This has been used to include the whole community in a period of reflection and debate over the future development of the area. This "Challenge for the 21st Century" repeatedly stresses the need for partnership, cooperation and cohesion with a recognition of "our identity," "our collective voice," "our common cause," "our Vision" and "community."

Such phraseology and sentiment are supported by independent reviews of the local economy and local market. The report "Labour Market and Skills Trends in Ayrshire" claims to be "tangible evidence of the commitment to a partnership approach to identifying and addressing economic issues in Ayrshire" (Ayrshire Economic Forum 1998, 3), with again use of self-containment in the county labor market, integration and "a strong partnership amongst local agencies" promoted as evidence of a cohesive economic community. Social inclusion runs through the policy recommendations subsequent to the report and on into the plans and philosophies of the other agencies separately.

Thus, Scottish Homes in the region promises that "the majority of our [future] investment ... delivers against existing multi-agency commitments, with specific initiatives already identified and being prepared with partners" (Scottish Homes South & West 1998, 29). In a similar vein, South Ayrshire’s strategy document "2020 Vision" is built on the idea of partnership and cooperation with the other agencies operating in the area, and beyond. Joint campaigns in favor of infrastructure improvements (extension of the motorway system into the county) and in response to economic challenges (redundancies and closures) are strengthening. Within council areas, at a lower level of community, the former government’s programs for "Priority Partnership Areas," "Regeneration Areas" and "Smaller Urban Renewal Initiatives" are continuing to attract the support of a range of organizations and demonstrate a significant degree of cooperation to deliver synergies and effective performances in economic development delivery.

At a higher scale, the members of the Ayrshire Economic Forum are cooperating to secure enhanced levels of inward investment, European Union funds and central government resources. These initiatives illustrate a maturing of the partnership approach established under the Scottish Development Agency (SDA) and Strathclyde Regional Council in the 1970s, and nurtured over the intervening years. It is notable that they are still present after the dislocations precipitated by the creation of the local enterprise company network (as part of SE, to replace the SDA) in 1991 and the reorganization of local government in 1996. The trust secured and developed between organizations, and critically between the personnel of the successor bodies to the former SDA, District and Regional Councils, allows cooperation and partnership to survive and to be deepened in this environment.

By way of contrast with these developments, the recently promoted cluster approach in Scotland has shown less promise. Part 5.6 assesses the form and likely success of this approach to the economic development problems facing the Ayrshire economy.

5.6 The Clusters Approach at the County Level

In a development of the traditional industrial concept, the SE cluster approach calls on companies to establish strong partnerships to build trust and a shared vision. These specialist networks or clusters will "fuel innovation and generate synergies" that will enhance their international competitiveness. These clusters will "mean encouraging competition, co-operation and strong networks right across the community and between the public and private sectors" (SE 1998a, 1). The rhetoric, therefore, is very similar to the regional economic development partnership model described above.

Part 5.6 is not intended as a complete assessment of this sectoral reorientation of the SE economic strategy (see Botham (1997 unpublished) for an analysis). Rather, it is an analysis of those key components of "Scotland’s Cluster Development Approach" that illustrate the connectivity between the theory and practice.

The accompanying diagram (Figure 5.1), taken from the SE strategy document, suggests a coherent, inclusive partnership of all relevant development organizations. The approach focuses on "some of Scotland’s most important value-creating clusters": food, biotechnology, software, electronics, optoelectronics, and multimedia. Leaving to one side the geographical distribution of these sectors (most are under- or unrepresented in Ayrshire, for instance) and the dependence on foreign domiciled multinational corporations, one may see a number of divergences between the strategic approach as seen by SE headquarters and the attempts to create clusters more locally.

Within Ayrshire, traditionally two of the most significant sectors in terms of employment and gross value added have been textiles and engineering. Although both have a long history in the county, they have also seen major periods of restructuring, with new firms and products entering the economy locally and well established enterprises disappearing. Past forecasts for these sectors and an assessment of their respective prospects led to the creation of formal networking arrangements under two initiatives: the Ayrshire Textile Group (ATG) and the Ayrshire Engineering Group.

As is noticeable elsewhere in Europe, but especially in the United Kingdom, the clothing and textile industry has been considered a "sunset industry" since at least the late 1970s (Totterdill 1992, 22). Structural adjustments in Scandinavia, Germany and northern Italy to changing patterns of consumer tastes, competition from non-European countries and trading agreements prompted a reconsideration of the future for the industry in Scotland, and in Ayrshire in particular. Research suggested that the industry's successful adaptation to these changes would require:

• Intensive market intelligence linked to continuous design innovation

• High levels of technical expertise, particularly in production planning and problem solving

• A highly versatile system of production

• Effective use of distribution networks (Totterdill 1992, 24)

The idiosyncrasies of the United Kingdom’s relations with Europe are mirrored here in the response to the successful restructuring strategies adopted in the other areas of the European Union. Evidence from the regionally important Nottinghamshire sector in England shows a range of local responses, some positive others less so. The need for intervention and the appropriateness of the above conditions pointed to the advantages of the establishment of an equivalent partnership or network in Ayrshire. Totterdill, at least, was arguing generally for a model close to the Emilia Romagna policy in the Third Italy for such areas, representing a complex, multilayered and decentralized model of partnership (1992, 47). The plans for Ayrshire supported such an initiative.

However, problems in the development of the model locally illustrate the failure to achieve a positive restructuring of the industry, despite the creation of a partnership, because of the lack of understanding of the need to promote cooperation and trust (Danson and Whittam 1998). As argued below, this requires a degree of ownership by the constituent firms.

SE identified textiles as an industry in which clustering should be encouraged so that the industry can compete. At the local level Enterprise Ayrshire has been instrumental in trying to implement this policy via the ATG. The textile industry in Ayrshire now represents 25% of Ayrshire's manufacturing industry, employing 9000 people and exporting £60 million per annum. In 1991 a partnership arrangement between Enterprise Ayrshire and the textile sector was established. This led to the creation of the ATG in 1992 with the establishment of a program of assistance leading to the ATG acquiring its own premises in 1994. The commitment to working in partnership with the industry reflects the ethos of Enterprise Ayrshire’s approach to local economic development: "it seeks to develop and build relationships with companies rather than superimposing a structure onto a sector" (ATG 1994, 3). The ATG appears initially to have been successful in the "delivery of information advice and programs in response to proven needs ... with more than 60% of local industry participating in some meaningful way" (ATG 1994, 4). This has led to product development, moving products more up-market, increased diversification and marketing Ayrshire textiles as a group. However, there has been a failure to take the project forward to develop a "stand alone resource centre." To become "free standing," it is envisaged that the ATG must recover all its operating costs. In this context, Johnstone and McLachlan (1996) found textile companies reluctant to participate fully in the network. This lack of participation became an obstacle to realizing economies of scale and scope, with "a low level of trust and the strongly adversarial nature of the [local] sector" (755) a significant factor. Unwillingness to pool resources, concern over allocation of orders within the network, apprehension over cooperation, and a failure to communicate were all cited as contributory reasons for the lack of a full commitment to the project by the member firms. The need for training in networking protocol and processes, the key role of the facilitator, and the benefits of contractual agreements between members were identified as necessary elements if the local industry was to create a successful cluster. It would appear that although ATG has attempted to develop a partnership, the companies do not see the group as theirs. There is a tacit recognition of this problem in one of the reasons given for the establishment of the "free standing" facility: "The Ayrshire Textile Industry must view the ATG and its Resource Centre as their own" (ATG 1994, 13). This is one of the essential features of the ‘ideal model’ of the Strathclyde European Partnership.

Further, few companies were willing to pay for the services of the ATG, and where funds were provided for marketing, training and product development it was difficult to persuade the firms to follow the ATG's requirement to quantify "outcomes." Other problems also became apparent. For example, in the local lace sector, which produces some unique products and occupies significant niche markets, there was a strong reluctance to pass on skills, experience and expertise to younger recruits. This will have inevitable consequences for the industry in Ayrshire. However, a limited number of innovative enterprises recognized the partnership as beneficial; these companies tended to support joint seminars, the use of CAD/CAM, the potential of linkages with tourism, and technology transfer initiatives.

Another attempt by an LEC to deliver SE's clustering objective can be found in Ayrshire: the Engineering Ayrshire (EA) initiative. Engineering is the largest manufacturing sector in Ayrshire, with over 180 companies employing over 14,000 people. It has a turnover of £1.9 billion and generates £1.3 billion in export sales (EA 1997, 6). The original rationale for the establishment of the group arose because of the perceived lack of sales beyond the west of Scotland. To this end EA has organized trade missions, launched a public procurement initiative and provided individual members with export sales and product/process improvement support. The EA group is now seeking to widen its activities to capitalize on opportunities presented by changing market conditions. Of significance and giving grounds for optimism, vis-à-vis the possibility of the group becoming self-financing and realizing key objectives such as developing a skills base in a collective manner, is the structure of the organization. Unlike the ATG, the aims of EA state that it should "be an organisation run by its members for the benefit of its members and the Ayrshire engineering and electronics sector" (EA 1997, 9). Within its strategic objectives there is a responsibility placed on the membership to work in partnership with the relevant organizations (such as Enterprise Ayrshire itself, local councils, and trade associations) and to attend relevant seminars and programs. The group is managed by a steering committee, comprising senior representatives from six companies and two Enterprise Ayrshire executives, which meets monthly. A full members’ meeting is held at least once a year. By placing obligations and responsibilities onto the membership and by having an accountable framework for decision making of the group as a whole, it is hoped that the problems associated with the ATG in attempting to develop its strategy will be overcome. The essentials of an ideal network, outlined in the introduction, can be seen in the EA clustering initiative.

5.7 Conclusion

The above demonstrates that a cluster strategy can be an effective instrument in the regeneration of a regional economy. The synergies and mechanisms for resolving conflicts identified in the case study of the trans-public sector agency partnerships in Scotland have been significant in the adoption of the "Scottish partnership model" across the European Union. However, the lessons from this approach coupled with the theoretical underpinnings in the literature on industrial districts have not been incorporated fully into the strategies for industrial clusters. Trust and cooperation are essential if the advantages of innovation and networking are to be realized by all of the players in a sector, and if clusters are to be effective. In the successful partnerships described here, the long development of working relationships between organizations and between individuals have been critical to formulating a successful approach to regional economic development. However, where networks have been dominated by multinational enterprises or their structures and modi operandi have been imposed from the center, there have been significant problems in the perception and appreciation of the benefits of the new clusters, exemplified here by one of the case studies from Ayrshire. Without some sense of ownership over their cluster and network, the SMEs that may have most to gain from the promotion of industrial districts realistically will remain excluded from these partnership activities.

The issue of the distribution of power within the cluster can be critical, therefore, to its acceptance and success. What guarantees are there that all the key players are going to play the game fairly? In other words, how can the cluster ensure that a multinational corporation, which is not necessarily tied into a specific locality because of the relative mobility of capital, is going to share advances in knowledge acquired through the network?

As much of the output of knowledge is information, and given the public good aspect of information, these concerns may be resolvable; evidence from Wales (Morgan 1997) suggests that this is the case. However, given the recent processes of the economic development of the Scottish economy and the special relationship with multinational corporations, these concerns may not always be resolved. As we have argued here, there is a need to create a structure for clusters that meets the desires of regional SMEs, and that allows indigenous companies to regain control over future development and to have a stake in the growth and evolution of the industry.

ENDNOTE

1. This initiative is discussed further in section 8.

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