Creating competitive advantage in developing countries through business clusters: a literature review

Abstract

Globalization of trade is increasing the world competition and this has resulted in a growing number ofcountries and individual businesses seeking survival beyond their internal resources. Thus, the role ofbusiness clusters has become increasingly important and has gained more attention from both policymakers and academia, particularly in developed countries. This paper reviews the literature on clustersand their contribution to building competitive advantage for businesses. The review relies mostly onresearch that was conducted in developed countries, with only little evidence found in developing ones.The research reveals benefits that businesses can enjoy by clustering, among which are the sharing ofstrategic business information, innovation, market access, labour pooling and proximity to suppliersand customers. Associated challenges of clustering are also explored. The paper also points out somepractical insights for policy makers and research implications for researchers in developing countries.