Local ICT Developer (LID) Networks A new understanding of ICT sector development
GBI Innovation Series Working Paper #3
by Eric White
Ever since Michael Porter published The Competitive Advantage of Nations in 1990 Ministries of National Planning throughout the developing world have focused their national development strategies, at least partially, on creating and fostering sectoral “clusters.” Clusters are groups of related firms -‐ suppliers, buyers, competitors, and collaborators -‐ all in the same industry, and all in one place. The two most famous clusters in the world are likely the entertainment cluster based in Hollywood, California, and the technology cluster in Silicon Valley. Everyone generally agrees that clusters in and of themselves are a good thing, and generally for the reasons that Mr. Porter cites in his book. His central claim is that economic growth in a modern world, where natural comparative advantages in resources and labor can be rendered meaningless by globalization, is all about productivity; and the productivity of firms is dramatically improved by operating in a cluster. In his words, “clusters allow companies to operate more productively in sourcing inputs, accessing information, technology and needed institutions; coordinating with related companies; and measuring and motivating improvement.” Translated, this means that companies spend fewer resources looking for things they need: employees, supplies, and know-‐how, because they are all available to them within the same geographic area. Consequently, more of those resources go into production. Further-‐ more people in close proximity working to solve the same problems (i.e., how to streamline production or build a better product) means better solutions are continually developed and disseminated more quickly, and the outputs of everyone in the cluster improve. In economics this is called a “positive production externality,” and is one of the textbook justifications for government intervention in a market. So it makes sense that so many governments have decided they are going to intervene in their national markets to help create clusters. Further, they tend to follow Porter’s advice when picking clusters to support. He argues, “governments, working with the private sector, should reinforce and build on existing clusters, rather than attempt to create entirely new ones.” So when developing countries take stock of their existing economic assets they tend to emerge with strategies that focus on a handful of similar clusters: notably agriculture, tourism, and ICT. Why ICT? In most countries, even very poor ones, there is generally a small community of well-‐educated and computer-‐savvy young people. They may already be programming. So the “firms,” in this case individuals, already exist. A focus on ICT is a logical choice. But despite the reasonableness of the decision, and all the resources being poured into the creation of ICT clusters, very few, if any have taken off. Why? The problem comes when we translate strategy into tactics. Cluster theory focuses on contact as the mechanism through which productivity is improved. Porter writes: “tapping into