Industry clustering occurs because of geographical natural advantages such as a certain climate or an abundance of a certain resource. However, industry clustering also occurs because of relative advantages, which the industry itself creates organically through economic forces. Interdependencies develop between facilities, customers, suppliers, technology, and labor markets. “Clustering, therefore, is mutually advantageous” (De Kluyver & Pearce, 2012, p.138). It is important to note that in some industries clustering is unattractive and therefore economic forces result in decentralized patterns instead (De Kluyver & Pearce, 2012).
One example of a geographic industry cluster is the technology industry in Asia. More specifically, the Hsinchu Science Park in Taiwan is a world leader in the development of industrial clusters with six science parks and many companies within the cluster reaching global eminence (Hsinchu Science Park Bureau [HSPB], 2011). The park includes 479 companies and 148,000 employees (Huang, 2011). A wide variety of technological fields are housed in Hsinchu Science Park including, but not limited to, semiconductor, biotechnology, medical care, and green energy. Government, industry, and academia sources work collaboratively within the park to create more creativity and innovation (HSPB, 2011). “More than 70% of global IT industry products are initiated from companies at the Hsinchu Science Park” (World Economic Forum [WEF], n.d.). Many of these products have also won awards and been rated first in their class (WEF, n.d.). The Hsinchu Science park is best known for state of art manufacturing and design (Huang, 2011)
The government was one of the economic forces behind the industry cluster of Hsinchu Science Park — it is the first government planned industrial park in the world. In order to entice companies as well as sought after employees that tended to move overseas after graduation, the government provided many incentives including: a five year tax holiday, a maximum income tax rate, duty free imports, and capitalization of patents. Many prestigious academic institutions were also placed near the park allowing for high-level human capital to collaborate and receive on the job training (WEF, n.d.). This Local Industry Enhancement Research Project combining industry and academia saved a financial crisis in 2008 and bolstered revenues (Huang, 2011). “The park will further aim to reinforce its collaboration with universities to better integrate various companies from inside and outside the park into the global supply chain.”
De Kluyver, C. & Pearce, J. (2012). Strategy: A View From the Top (4th ed.). Boston: Prentice Hall.
Hsinchu Science Park Bureau. (2014). Introduction to Hsinchu Science Park. Retrieved October 5, 2015, from http://www.sipa.gov.tw/english/home.jsp?serno=201009060001&mserno=201009060001&menudata=EnglishMenu&contlink=content/20100906114346.jsp.
Huang, E. (December 15, 2011). Hsinchu Science Park continues to upgrade Taiwan’s IT industry. The China Post. Retrieved October 5, 2015, from http://www.chinapost.com.tw/supplement/2011/12/15/326031/p3/Hsinchu-Science.htm.
World Economic Forum. (n.d.). Hsinchu Science Park. Retrieved October 5, 2015, from http://www.weforum.org/best-practices/talent-mobility/hsinchu-science-park.