The Role of Human Capital in Cluster†Based Industrial Development

Keijiro Otsuka () and Tetsushi Sonobe

The Developing Economies, 2018, vol. 56, issue 2, 104-116

Abstract: More often than not, manufacturing industries are clustered in small areas in developing economies of Asia and sub†Saharan Africa (SSA). While agglomeration economies arising from low transaction costs are a clear advantage of industrial clusters, a drawback is the ease of imitation, which leads to the gap between social and private benefits of innovation. An important observation is that multifaceted innovation, consisting of the quality improvement of products, improved internal management, and the introduction of new marketing systems, takes place in many industrial clusters in Asia, but such innovation seldom occurs in SSA. This article attributes this to greater endowment of entrepreneurial human capital, and increased possibility of learning advanced technologies and management methods from neighboring countries in Asia than in SSA. This article also discusses evidence suggesting that multifaceted innovation can be stimulated by offering management training to entrepreneurs in SSA.

Date: 2018
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