Types of Manufacturing Clusters

Types of Manufacturing Clusters

Source: adapted from Markusen, A. (1996) “Sticky Places in Slippery Space: A Typology of Industrial Districts”, Economic Geography, Vol. 72, No. 3, pp. 293-313.

The above figure portrays three types of manufacturing clusters (or districts):

  • Marshallian industrial cluster. Based on the initial work of the economist Marshall in the 1910s, who tried to articulate the reasons why industrial firms are usually found in districts, localities, or clusters. Given enough time, an area will develop a series of manufacturing skills, expand its assets of specialized machinery and experience the setting of leading firms. This cluster is characterized by a division of labor between small firms both engaged in competitive and complementary activities and an advanced specialization. It reflects a flexible regional specialization where networking is an important component of industrial dynamics. The distribution system is commonly serviced by small-batch flows between numerous suppliers and customers. This propensity to cluster characterized proto forms of industrialization such as specialized towns during the Middle Ages (e.g. glass making, silk weaving) and also took place during the industrial revolution (e.g. cotton) and was often represented by guilds and trade associations. More recently, specialized manufacturing clusters have emerged around this principle as well, such as clusters focusing on apparel, shoemaking, and toys in several Chinese cities, which are servicing global supply chains.
  • Hub-and-spoke cluster. A situation in which an industrial sector has suppliers clustering around one or several core firms. The hub-and-spoke district is distinct from a Marshallian district, as its dynamics are a function of a dominant firm rather than networking among smaller firms. This can only emerge when economies of scale allow for the setting up of a leading firm manufacturing larges quantities of a product (and related products) for a significant consumer market related to exports. The development of assembly-line techniques at the onset of the 20th century allowed the formation of hub-and-spoke clusters around the steelmaking, petrochemical, and vehicle manufacturing sectors. The fate of the cluster is often linked with the fate of the core firm. The firm Boeing and the region of Seattle are a common examples of a hub-and-spoke district. The distribution system is bound to the requirement of the large firm, which is large enough to have its own transport operations. Economic development theories, such as growth poles, rely on the type of cluster as a rationale to explain the economic multiplier that large firms can have on regional economies. The core matter is the setting of a main firm in a competitive sector subject to growth and the expectation that a cluster of related firms will eventually emerge.
  • Satellite platform cluster. A set of unconnected branch plants or distribution centers embedded in external organization links, each part of its own globally-oriented supply chain. A satellite platform cluster often corresponds to a location of high accessibility around which branch plants have clustered, such as a transport terminal (ports, airports, intermodal terminals). These are the characteristics of many logistics zones built around the principle of co-location and localization economies. Since plants are part of separate supply chains, there are limited intra-cluster links outside service activities. On occasion, a border can be the reason for clustering, mainly for cost differences such as labor and land. For instance, the Maquiladoras along the US/Mexico border are manufacturing and distribution clusters granting access to the large American consumption market.