Chapter 27. Cluster theory and purchasing science: geographical proximity as a strategic decision factor in sourcing

Clusters are regional-sectoral agglomerations of related and supporting industries within one value chain. While geographical industry agglomeration has been studied since long, Porter gave it a theoretical basis by proposing the 'diamond of competitive advantage'. According to this theory the simultaneous presence in a nation or in a region within a nation of (1.) several competing producers of a good, (2.) trend anticipating customers, (3.) a dense infrastructure of supporting institutions such as associations and specialized education and (4.) many suppliers of intermediary inputs is key to competitiveness, expressed as export success. For purchasing theory and practice, knowledge on clusters contributes, at least, to explaining and improving supplier location decisions, innovation with suppliers, risk and resilience management and strategic positioning of firms through differentiated supplier selection.