SME CLUSTER AND NETWORK
DEVELOPMENT
IN DEVELOPING COUNTRIES:
THE EXPERIENCE OF UNlDO
Giovanna Ceglie and Marco Dini
Bizzarri Fabio
Elian Omar
Mazzoni Lorenzo
A.Y. 2013/2014
Prof. Alessandro Arrighetti
The United Nations Industrial Development
Organization (UNIDO), is a specialized agency in the
United Nations system, headquartered in Vienna, Austria.
The Organization's primary objective is the promotion
and acceleration of industrial development in developing
countries and countries with economies in transition and
the promotion of international industrial cooperation.
The Experience of UNIDO
The paper describes the background and experience of
the UNIDO technical assistance programme for SME
networking.
This programme is emphasizes:
- on the Promotion of efficient Systems of Relations
(between enterprises and between enterprises and
institutions) which allow enterprises to overcome their
isolation and common problems due to SIZE,
- on the Development of Local Institutions to act as
facilitators of the networking process.
SME in Developing Countries
SMEs can play a key role in developing countries.
However, this potential role is often not fulfilled because of
a particular set of problems related to their SIZE. In
particular:
- Achieving economies of scale in the purchase,
- Internalization of Functions
- Introduction of innovative improvements to their
products and processes
Individually, SMEs are often unable to capture market
opportunities which require large production quantities,
homogenous standards, and regular supply.
SME & Cooperation
Cooperation  with other SMEs occupying
the same position in the value chain.
• Horizontal
‘enterprises can collectively achieve scale economies beyond the reach
individual small firms and can obtain bulk-purchase inputs, achieve optimal
scale in the use of machinery and pool together their production capacities to
satisfy large-scale orders’ (Pyke, 1992).
cooperation  with other SMEs as well as with
large-scale enterprises along the value chain).
• Vertical
‘enterprises can specialize on their core business and give way to an external
division of labour’ (Marshall 1990)
‘Inter-firm cooperation also gives rise to a collective learning space’ (Best,
1998)
MAIN CONCEPTS.
DEFINITIONS
• Network refers to a group of firms that cooperate on a joint
development project complementing each other and
specializing in order to overcome common problems, achieve
collective efficiency and conquer markets beyond their
individual reach.
• Cluster is used to indicate a sectoral and geographical
concentration of enterprises which produce and sell a range of
related or complementary, with common challenges and
opportunities.
• Networking refers to the overall action of establishing the
relationships characterizing both networks and clusters.
Source: Pittaway et al. 2004
CASES
HONDURAS
1993 – Honduran government requested
UNIDO a technical cooperation project for
SME sector focused on the enterprise level.
The project consisted initially in two phases:
1) identification of groups of enterprises with
similar characteristics and weekly joint
discussions to support the group of
enterpreteneurs in analyzing problems and
solutions.
2) Creation of a work plan that suggested a
division of tasks among members and the set
up of a common fund to finance common
activities.
RESULTS
After 5 years:
33 NETWORKS ESTABLISHED involving
300 enterprises
Sales increased between 35% and
200%
Employment increased between
11% and 50%
Investment in fixed assets increased
between 10% and 100%
How to increase the impact of the
project:
• Training of network brokers to
diffuse networks
• Draft a methodology to facilitate
the transfer of knowledge
• Integration of vertical networks
and the development of clusters
How to guarantee the sustainability:
Process of project “privatization”
with the creation of a foundation
NICARAGUA
• 1995 – PAMIC (Programa Nacional de Apoyo a
la Micro Empresa) started the networking
project with the establishment of 20 horizontal
networks by a team of seven national
consultants
The public sector counterpart has had three
distinct consequences:
• An easier entry into local policy dialogue and
formulation
• The project had a prominent role in interinstitutional coordination
• A clear prospect of sustainability
The second part of the project contains other
three important points:
• Establishment of a inter-institutional
committee and a more important role of the
project in the National Committee for
Competitiveness and Sustainable
Development.
• Increase the local capacity building.
• Diversification of activities to include
horizontal networks and the promotion of
industrial districts.
MEXICO
1997 – Mexican Confederation of Industrial
Chambers launched the “Programme of
Industrial Integration” (PII).
The PII aim is to stimulate and supporting
local projects to promote networks by a
deeper and broader integration with the
locally established multinational corporations.
Two projects initiated in the states of
Chihuahua and Jalisco, both of them are in
the projects of establishing two technical
centres.
The experience gained until now highlighted
strengths and weaknesses of this kind of approach:
1) The important role of leading firms provides a
direct financial support.
2) A center for supplier development can
coordinate the demand for the goods and
services with the possibility of economies of
scale.
3) Speed-up decision making process.
4) The leading firms must provide their own
technical personnel.
5) Technical support initiatives
JAMAICA
Project initiated in 1994 and a second phase launched in
1997 for a duration of three years.
The project was requested by the government of
Jamaica to assist the public development agency,
JAMPRO, in the local SME sector.
The productivity center is now performing some important
functions:
Like the identification of SME needs and Networking and
communication activity.
The center provide technical competencies to local
enterpreneurs.
An high degree of local ownership is guaranteed, so
there are good prospects of sustainability.
Metodology of Unido
• The promotion of network;
• Restructuring at the firm
level;
• Improving the institutional
environment;
• Improving the dialogue
between the private and
public sector.
The promotion of network
•
•
•
•
•
Promotion and motivation;
Strategic planning;
Pilot project;
Strategic project;
Self-management.
Restructuring at the firm
level
The individual enterprises will be
pushed to improve their internal
organization to respect the quality
standards, production schedules and
pricing levels decided by the group.
Group pressure will stimulate
individual enterprises, and will
sanction members for failing to
accomplish common objectives
Improving the institutional
environment
The cluster/network brokers and the
networking unit belong to the first type
of institutions and play a pivotal role at
the level of direct assistance to the
enterprises.
The external institutions, essentially
support the realization of the networks’
work plans requiring a wide range of
technical and financial services.
Improving the dialogue
between the private and
public sector
The aim of such relations is to promote
the emergence of a coordinated
industrial policy and identify, develop
and implement coherent actions to
support the entrepreneurial effort.
CONCLUSIONS
Developing countries are afflicted by big handicaps: lack of economic resources,
experience, and the capability to innovate.
It is noticeable the absence of multinationals enterprises that can help the market
growth and the creation of specialized services.
Individually, SMEs are often unable to capture market opportunities which
require large production quantities, homogenous standards, and regular supply.
Cooperation is the fundamental requirement to solve SMEs problems in relation
with their size.
SMEs need to cooperate each other, but in some cases is not enough and a
massive intervention by external associations is required.
Agreements between enterprises may emerge spontaneously or can be guided by
institutions or entities like showed before with UNIDO.
The final result achieved by those kind of programs is not always positive, but it
can also be negative because is the direct consequence of a big series of factors
not easy to manage all together.
Networking is a phenomena in continuous evolution and there are no common
rules that describe how to manage it.
THANK YOU FOR
YOUR ATTENTION