Welcome to Saskatchewan Clusters and Business Networks – two interconnected strategies to build community and economic development capacity in our province.

Our goal is to nurture and support the development of clusters and networks that will thrive and be unique to Saskatchewan.  A number of standard definitions and models are highlighted in our Knowledge Center. We also encourage cross sectoral applications and innovative adaptations of cluster and network theory.

Generally speaking, the cluster approach focuses on the linkages and interdependence between organizations or businesses in the network of producing or delivering products and services and creating innovations.

Networking offers an effective option route for individual businesses/organizations to address their problems as well as to improve their competitive position. By coordinating their activities, enterprises can collectively achieve economies of scale beyond the reach of individual firms. Examples are bulk purchase inputs, achieving optimal scale in the use of machinery and pooling production capacities to meet large-scale orders.

Several traditional and merging models on clusters and networks are provided as a benchmark.

Michael Porter
The concept of industry clusters was popularized by  Micahel Porter in Competitive Advantages of Nations (1990). Porter developed what he called the “Diamond of Advantages” in which he identified four key determinants of industry competitiveness:  factor conditions,

• home demand conditions;
• related and supporting industries;
• industry strategy, structure and
• competitiveness. 

Porter’s formal definition of a cluster is” a geographically proximate group of interconnected companies and associated institutions in a particular field, linked by commonalities and complementarities”..

Peter B. Doeringer, Boston University and Harvard University
David G. Terkla, University of Massachusetts-Boston

According to Doeringer and Terkla,  there is no single correct definition of an industry cluster.  They propose the following two basic types of industry clusters: 

Vertically-integrated cluster: made up of industries that are linked through buyer-seller relationships. 

Horizontally-integrated cluster: includes industries which might share a common market for the end products, use a common technology or labor force skills, or require similar natural resources.

Stuart Rosenfeld, Regional Technologies Strategies

Rosefeld views industry clusters as dynamic phenomena, and interaction between industries/organizations within the cluster is critical.  Incorporating the emphasis on the dynamic nature of clusters, the basic definition can be expanded as follows
a geographically bounded concentration of similar, related or complementary businesses, with active channels for business transactions, communications and dialogue, that share specialized infrastructure, labor markets and services, and that are faced with common opportunities and threats. 

Clusters can be organized around products, processes, value chains, technologies, skills, natural resources, or many other sources based on regional challenges, problems and opportunities.

United Nations Industrial Development Organization

Clusters and networks are different yet linked phenomena. Clusters are agglomerations of interconnected companies and associated institutions. Firms in a cluster produce similar or related goods or services and are supported by a range of dedicated institutions located in spatial proximity, such as business associations or training and technical assistance providers. Vibrant clusters are home of innovation oriented firms that reap the benefits of an integrated support system and dynamic business networks. 
What binds the firms in the cluster together?
– Value-chain clusters: Firms that are members of the same extended value (product) chain
– Labor-based clusters: Firms that share similar labor requirements (utilize a shared labor pool)
– Innovation clusters: Firms that exchange key information, knowledge that leads to technological improvements or change

Are member firms co-located in specific regions?
– Localized: Clusters in which firms are co-located in specific regions of state (or regions that span state borders)
– Non-localized: Linked firms that are not localized in any particular region but exist across the state or that are concentrated in multiple regions

Networks are alliances of firms that work together towards an economic goal. They can be established between firms within clusters but also exist outside clusters. Networks can be horizontal and vertical.

• Horizontal networks are built between firms that compete for the same market, such as a group of producers establishing a joint retail shop

• Vertical networks, particularly supplier development schemes, are alliances between firms belonging to different levels of the same value chain, such as a buyer assisting its suppliers for upgrading.
  
  

Hubs and Nodes

Hubs and Nodes is a geographic model explaining how linked regions can cooperate to fulfill elements of an industry's value chain and collectively gain sufficient mass to drive innovation growth. The model of hubs and nodes builds on Porter’s cluster model which served well in the past, but which may becoming outdated.

Companies are realizing that they may not require a particular stage of production to be in close geographic proximity. As barriers to long-distance national and global transactions have fallen through advances in technology and logistics, such as the growth of the internet and overnight courier services,  it has become increasingly possible to relocate operations such as research, product development, and manufacturing to countries and regions with relevant expertise and lower costs. It is common among consumer goods, for example, for concept generation to be centered in one locale, product testing and refinement in another, and manufacturing and distribution in yet other locations. Increasingly, elements of development, production and distribution are being completed beyond the borders of historical clusters.

As more companies progress beyond the cluster model, they increasingly expand and diversify their operations to locations where their investments will be most profitable. For companies adequately prepared for this rapid globalization process, their R & D, manufacturing and distribution stages fare better as these businesses are able to reduce their costs, while potentially realizing new efficiencies and increased speeds of product development. The spirit of the cluster model may remain intact — the various stages of production will still be shared by a number of different entities — but geographical proximity need no longer bind these entities together.

Cluster Websites