Promoting Competitiveness in Practice - Economic Growth - usaid

An Overview of Competitiveness Practice
Over the past decade, there has been tremendous growth in the practice of cluster-based
competitiveness initiatives. As a result, today, there are literally hundreds of cluster initiatives in
action around the world, all with their unique shape and twist depending on where and how they
emerged and, often, who started the initiative. This has important implications for USAID.
Most importantly, USAID is clearly not going down the path of exploring cluster-based
approaches alone. Hence, while they may seem new and experimental to many leaders and
officers within the Agency, there are many other organizations – both within the donor
community and outside of the donor community – that are also implementing cluster initiatives.
This is very much of a global phenomenon.
Much of the significant growth in the use of cluster-based approaches has emerged over the past
five years. This is particularly true for USAID and other donors such as the World Bank and the
Inter-American Development Bank. USAID launched its first major cluster-based
competitiveness initiative in Lebanon in early 1998. However, as of January 2003, its portfolio
of competitiveness initiatives had grown to nearly $60 million in 26 countries, including major
initiatives in seven countries: Lebanon, Sri Lanka, Mongolia, the Dominican Republic, Uganda,
Croatia, and Macedonia. Since January 2003, many USAID missions have expanded or added
new competitiveness initiatives; the portfolio is definitely growing – in fact, quite rapidly.
What is a Competitiveness Initiative?
Each competitiveness initiative is unique. Despite their many differences, our review of the
practice of competitiveness initiatives has revealed that they also have a lot in common. It is
these shared or core elements that help us understand what a competitiveness initiative is in
concrete terms. The core elements of competitiveness initiatives are best described in terms of:
(i) their guiding principles; (ii) their key components; and (iii) the process or approach used to
implement competitiveness initiatives.
The Guiding Principles
In looking at the collective experience of practitioners, we found that there is a core set of
principles or concepts that serve as the foundation for their work. Many of these principles are
closely aligned or derived from the theoretical foundations for competitiveness articulated by
Michael Porter and other leading thinkers on competitiveness; however, many of the same
principles have emerged through the practice of competitiveness initiatives. Today, theory and
practice are closely intertwined in these guiding principles.
Individual firms cannot become competitive and stay competitive in the global market on
their own; building competitiveness involves sustained change throughout the value chain.
The close interplay between firms, their suppliers, and the business environment is why
competitiveness theorists and practitioners focus on “clusters” as the locus of action, as opposed
to individual firms or broad sectors. Clusters are “geographic concentrations of interconnected
companies, specialized suppliers, service providers, and associated institutions in a particular
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