Productivity Growth and Job Creation in the Development Process of Industrial Clusters

Poor management has long been suspected as a major constraint on job creation in the manufacturing sector in low-income countries. In this sector, numerous micro and small enterprises in industrial clusters account for a large share of employment. This paper examines the roles of industrial clusters and entrepreneurship in improving productivity and creating jobs, by reviewing the literature and case studies, including recent experiments. We find that the managerial capacity of entrepreneurs largely determine firms’ employment sizes, that their innovative capacity is a major determinant of productivity growth, and that entrepreneurship consisting of these capacities boosts cluster-based industrial development.