Clusters and their adaptation to Global Value Chains

Abstract

Since 1970, production has fragmented internationally, minimizing costs, shifting the more labor-intensive stages of production to the countries of abundant and cheap labor. Global networks based on transport, telecommunications and information technology are intensifying. Research and development, design, manufacture and distribution, have reshaped production in Global Value Chains (GVCs), forcing industrial districts(IDs)/clusters to adapt, change, reinvest or decline. Thus, via a bibliographic review, we sought to answer the question whether IDs /clusters would lose or gain relevance in globalization. Italian districts changed their specialization from final goods to capital goods, with one third of the enterprises moving to the mechanical industry in related activities, exploring their connections with GVCs, coordinating suppliers, redirecting themselves to high quality products, increasing investments in marketing and brands. In the Brazilian case with the restructuring process, the clusters abandoned the cost reduction strategies and started to innovate, increased the import of intermediate goods and used the outsourcing and relocation of factories to the Brazilian Northeast. Italian districts are increasingly connected to GVCs, while Brazilians are linked to national chains, and only marginally connect to GVCs in governance networks. Thus, IDs /clusters have not lost relevance in globalization, instead industrial districts/clusters sought new ways of producing, making them more flexible, responding to the consumer market, seeking quality through advanced technology, differentiating products, using outsourcing, negotiating with suppliers, manufacturing smaller batches. In this context, the analyzed IDs/clusters survived and are active in the market.