Transforming Rural SMEs through Industrial Cluster Involvement: A Comparative Study

Micheal Porter (Porter, 1998) argued that industrial clustering help the participating business units to achieve competitiveness by surpassing the limitations of scale and scope through a special engagement which he called as coopetition. The review of the literatures on industrial clusters reaffirms this argument through empirical evidences from various countries. But the critical question here is whether just being in cluster locality would bring competitive benefit to participating firms.

The current study is an attempt to identify how mutual interactions and active engagement among/of clustered firms help them to achieve innovation performance. This study analyses the cases of two major industrial clusters in the South Indian state of Kerala ie. the Calicut footwear cluster and Alappy Coir cluster, to draw insights regarding the modalities of involvement and its impact on the local economic milieu. In line with the evidences drawn from the past studies, being in cluster locality should attribute to the competitiveness of firms in these regions. Despite having all the cluster attributes in place and governmental funds being pumped, the coir industry of Alappy-which possess a glorious history-is now slowly dying. Whereas, the footwear industry in and around Calicut is flourishing in a fast pace contributing to the overall economic development of the region. As these two clusters represent two contrasting realities and impact the local economy in distinct ways, it would be worth to assess their underlying aspects to arrive at a framework for successful cluster operations.