OECD Culture and Local Development.pdf - PACA

3. PROMOTING LOCAL DEVELOPMENT BY CREATING CULTURAL PRODUCTS
famous “hierarchy or market” dilemma described by Coase and Williamson, the key
point being to minimise transaction costs and to choose whichever mechanism will
do that more successfully (Coase, 1937; Williamson, 1975). Yet even if the firm decides
to turn to the market, there will be transaction costs and the firm will have to look for
means of cooperation that will minimise them, such as belonging to the same network
or the same district 86 .
This choice between network and cluster can be explained, then, by the degree
of uncertainty inherent in in-house production (Knight, 1921).
- When the uncertainty is limited and there are stable businesses that can be
networked, firms will have an interest in doing so. Operation of the network will
reinforce trust and the capacity of each of its members to meet demands under
the best possible conditions. This “trust capital” will accumulate to the point
where none of the partners has an interest in leaving the group or in being excluded
from it, as would be the case if it acted opportunistically to the detriment of
the others 87 .
- When uncertainty is high (and cannot be reduced by accumulating information),
for example when consumer tastes shift or are found to have been misinterpreted,
the situation will be different and the district or cluster formula will be more
appropriate than the network. This uncertainty means that the aspects of the
product and the factors of production used must be promptly redefined 88 .
Networking will no longer work, for there is no reason to think that the partners
in a network can cope with radical changes. On the other hand, geographic
proximity may offer “weak ties” that can be drawn upon immediately to deal
with unforeseen changes (Granovetter, 1973). Thanks to their close proximity,
there will be a certain flow of information among these firms on their respective
possibilities. Moreover, there exist a great variety of production factors that can
be more easily captured. While seeking to join a network reflects a long-term
outlook among firms facing comparable challenges, the idea behind clustering
is to adjust more effectively to sudden shifts in demand 89 .
Cultural products are subject to high uncertainty. Because they are by their nature
new, they are hostage to the whims of public tastes, and the equally unpredictable
appearance of other cultural products. Producers will of course try to reduce this
uncertainty by researching market tastes or attempting to revive and recycle former
successes. But cultural activity remains in its essence uncertain, and this will encourage
firms to network their projects with others, even though a single successful hit can
offset cumulative losses for many of them.
Maskell and Lorenzen have shown that in the pop music industry, where there is
great uncertainty about tastes and the status of demand, there has been a heavy
CULTURE AND LOCAL DEVELOPMENT - ISBN 92-64-00990-6 - © OECD 2005 105