Industrial Clusters re-visited

Chris Blattman points us to new research on shoemaking industrial clusters in Ethiopia:

A major finding is that the growth ofthis industry was driven initially by the massive entry of new enterprises established by former employees of the existing shoe factories but more recently by the growth in enterprise sizes due to improvements in the quality of products, marketing, and management.Such improvements were first made by highly educated entrepreneurs and subsequently followed by other enterprises. While the followers have grown in size, the leading enterprises have grown faster.Such a development pattern appears similar to the experience of successful cluster-based industrial development in China,Taiwan, and Japan.

An industry ceases to grow when the profitability of producing low-quality products falls as their market supply increases relative to marke tdemand. This is typically the case if the increase in market supply is not accompanied by improvements in product quality. By contrast, those clusters where product quality was successfully improved have continued to grow