Content area
Full Text
According to Porter (1990) successful firms in competitive markets generally consist of clusters of firms within industries that are linked via vertical or horizontal relationships. The present paper modifies Porter's so-called diamond model of competitive advantage to take into account what is required for service firms to be competitively successful, rather than just the manufacturing firms manly in primary industries upon which the original model of Porter was based. In our analysis, service clusters are defined as agglomerates of firms which provide a service of one kind and are consumer-oriented. It is argued that such a service-based view of Porter's model extends the model's applicability besides providing insights of its own.
Introduction
During the last decade, interest has grown in the phenomenon of clustering of firms within and across particular industries. This field has seen research on economic geography (Hall and Markusen, 1985; Storper and Salais, 1997a, 1997b; and Saxenian, 1985, 1994), agglomeration economies (Harrison, Kelley and Gant, 1996), urban and regional economies (Beckman and Thisse, 1986 and Stahl, 1987), regional science (Scott, 1991 ; Glaeser, 1994; Henderson, 19%), and social networks (Burt, 1997; Harrison and Weiss, 1998). From the perspective of clustering, the bases of the competitive advantage of firms need to be sought beyond its own immediate organizational context. Firm survival is increasingly contingent on the ability of firms to adopt a holistic perspective on their business, encompassing all stakeholders including customers, employees, retailers, suppliers and shareholders. Studies on clustering have typically been developed from, and used to explain, competitive advantage among manufacturing firms making one or more products. Since the early 1990s, the dominance of service firms and industries over manufacturing or primary firms and industries has been a global trend. Growing international competition has driven many primary firms to transform themselves into customer-oriented, service-focused enterprises regardless of the products they sell (Kandampully, 2002). Customer satisfaction has become the mission and purpose of most firms (Drucker, 1973). When such firms understand the needs of customers and realise that those needs cannot easily be met, if at all, by relying on their traditional skills or abilities, they typically find it necessary to establish strategic alliances with other firms (Peppers/Rogers, 1997). Successful strategic alliances depend on the capacity of firms to creatively...