Textile and clothing (T&C) industries are important sectors that contribute to gross domestic product and provide high-level employment opportunities, especially for developing countries. However, these two sectors have been transforming over the last years due to technological changes, the emergence of new important competitors, and the abolition of import quotas. Contrary to these challenges, T&C industries have undertaken a process of restructuring, modernization, and technological progress. In order to generate competitive T&C industries, clusters are playing a key role so as to enhance their efficiency and competitiveness in the T&C market. This paper is to investigate the effects of clusters on competitiveness levels in these sectors.
There are diverse definitions of clusters in conjunction with specific circumstances regarding economic activity and the institutional structure of the region or country. Yet, the most popular definition of a cluster is based on Michael Porter’s study named “The Competitive Advantage of Nations”. Porter describes a cluster as “a geographically proximate group of companies and associated institutions in a particular field, linked by commonalities and complementarities.”
Clusters have crucial roles from the point of enterprise since they are more creative and productive while located in a cluster instead of individual firms. Also, clustering can enhance the performance of firms since clustering facilitates cooperation and networks based on joint work among local suppliers, customers, rivals, universities, and research institutions, among others in specific geographic borders. These are the basic features and definitions of clusters. Yet, whether the national, regional, or cross-border clusters and no matter which business structures, all of the cluster practices have to obtain the idea of shared proximity, networking, and specialization. The cluster can approach these goals mentioned above thanks to these three significant features and advantages, as discussed below in detail.
Three main characteristics arise from literature as the most significant for the success of clusters: proximity, networking, and specialization.
· Proximity: Firms tend to locate each other closely due to the advantages of transferring tangible and tacit knowledge, and obtaining specialized workers. Proximity does not only comprise geographic proximity, but also social proximity, technical proximity, market proximity, and economic proximity.
· Networking: Clusters differ from geographical agglomerations due to existing various networks in geographic boundaries. Networking provides an opportunity to link and collaborate working among customers, suppliers, universities, and research institutions. In addition to this, when trust builds up within a cluster, the flow of information and knowledge increase between firms and institutions. And thus, the foundation of the trustable environment is essential for clusters in order to provide resources for growth.
· Specialization: A cluster and its members must specialize so as to constitute a substantial structure. Firms focus on their main activities, and they leave other aims to other firms and cluster actors. Clusters may specialize in a specific sector, but they tend to spread beyond other sectors and can comprise supporting and related industries. Furthermore, specialization increases the demand for complementary and additional resources and makes a cluster more powerful thanks to raising reciprocal dependence among actors within the cluster.
Advantages of Clusters
It is widely accepted that being a member of a cluster offers advantages for each firm. Enterprises tend to enhance their knowledge level and skills by means of being more compatible and flexible in changing environments. In other words, firms can expect to reach high-level effectiveness within a cluster. Within this framework, the advantages of clusters (are to be explained below:
· Productivity and flexibility: Clusters facilitate the increase of productivity by reducing transaction costs, and enhancing flexibility and access to specialized workers. Firms within a cluster can reduce transaction costs thanks to the proximity of related institutions and can shorten reaction times in order to respond to demands. Clusters can benefit from efficient access to specialized labor, services, research institutions, information, and some public goods like training and education. Also, contrary to the production of a model that is stricter and more hierarchical, clusters can be platforms for implemented models of flexible specialization based on small and specialized firms. In addition to this, clusters can lessen their failure and testing costs and thus, can contribute more to innovation capability.
· Economies of Scale: Clusters can facilitate firms to reach economies of scale by means of specialization. To give an example, joint purchasing, and marketing activities, access to venture capital, and supporting specialized services are essential keys that make companies more focused on their main goals and reach more levels of output. Basically, small and medium enterprises gain more advantages within clusters than they are in isolation.
· Commercialization: Clusters can enable commercialization by facilitating the startup of new firms and creating new products thanks to the availability of suppliers, customers, and other support mechanisms.
· Innovation: The most important thing that clusters present is to generate an environment where innovation is stimulated comprehensively. The multilateral interaction between firms and institutions is an essential process of creating technological and nontechnological innovativeness. Relations between social and unofficial linkages facilitate the circulation of knowledge. And clusters thus can enhance the flow and dissemination of information besides processes of intra-firms and collective learning. These can be called micro-institutional company-specific advantages. On the other hand, there are also macro advantages to the aggregate frame. For instance, clusters can also stimulate the attraction of regions where it is established by gaining a positive reputation. Basically, they can be the key factors in order to encourage foreign investment within a cluster. Moreover, when firms in a cluster make interaction, relation, and competition with each other, they create competitive advantages in the long term. So long as the micro advantages mentioned above are combined with such macro advantages, the competitiveness of the region is to increase, and consequently national competitiveness may also improve due to the cluster activities.
Textile and Clothing Industries
In general, T&C industries get involved with each other. Yet, contrary to common belief, the textile sector is much more capital-intensive than the clothing sector. And the textile industry is highly automated, especially in developed countries. In this regard, when the leading textile exporters are analyzed, three developed countries are observed in the first five countries, namely the USA, Germany, and Italy. On the other hand, in the clothing industry, just two developed countries rank among the top five.
Less developed countries have an advantage as a result of low wages. Since labor costs can account for up to 60% of total production cost these countries can increase their production and export volume without research and development (R&D) or innovation. On the other hand, this is not an advantage sustainable for developing and developed countries in order to maintain their trade performance in these sectors. New competitors have emerged due to this agreement
And enhancing competition has made other existing countries have difficulties in terms of trade performance and they had to find alternative ways in order to protect or increase their market share. Then, the importance of quality, R&D, technology, innovation as well as design and fashion is an unquestionable reality to enable finding new alternative ways which will be elaborated further.
Role of Technology and Innovation in Textile and Clothing Industries
A schematic of cluster, where associated industries and institutes are located in a proximate group to benefit each other in the most efficient way
Technological improvement has had different impacts on T&C industries. While enormous productivity gains have been accomplished in terms of technology and innovation in textile sector, the clothing sector has acquired diversified improvements. The competitiveness of the clothing industry is linked to mostly low labor costs which still enable countries a competitive edge in this industry. On the other hand, the situation is becoming more sophisticated, since time factors now play a far more significant role in determining competitiveness in these fashion-oriented and time-sensitive markets. However, so as to enhance or remain competitive in the textile industry, developing and developed countries have to invest in technology through product and process innovations. In this regard, technical textile is playing a key role to satisfy this demand from various perspectives. It is widely accepted the definition of technical textile is adopted from the following definition by The Textile Institute: “technical textiles are those textile materials and products manufactured primarily for their technical and performance properties rather than their aesthetic or decorative characteristics”. Application areas of technical textile are definitely comprehensible and its content has been broadening constantly as a result of exploring new types of usages. Technical textiles have started to constitute great market share of T&C industries with high level of growth rate in the last years. It is seen that the technical textiles is the most dynamic and the most promising area of the textile industry. As the days go on, new products, new processes, new tools are presented to markets. And this sector has various application areas in terms of usage. Also, technical textiles have huge potential due to exploring of new products, meeting new demands and substituting conventional products. As a result of that, it is expected that this market will grow faster than ordinary textile products in point of both totally and sub groups. On the other hand, technical textile is accordingly more known as an intermediate sector. Therefore, development of this sector depends on development and demands of construction, transportation, agriculture, medical, automobile industries, among others. In this respect, technical textile is expected to grow at approximately twice the rate of textiles for the clothing industry. When the countries that produce and consume technical textile are analyzed, North America and Western Europe come to the forefront. In these countries, share of the technical textile in T&C industry is very high and its share increases exponentially. Meanwhile, thanks to the low level of labor cost within the total expenditure, the necessity of high level research and development and the requirement of intensive capital less developed and developing countries receive fewer shares in technical textile market than in T&C industries. Due to investing in R&D, new products and new processes, developed countries are still leading exporters in T&C sectors. Furthermore, because of the fact that textile industry is related with other industries, it is not sufficient that textile industry remain competitive but also other related industries have to cooperate with T&C sectors.
T&C industries are the important sectors thanks to its contribution to gross domestic product and employment especially for developing countries. On the other hand, it is widely accepted that the importance of these industries are known also by the developed countries. Yet, owing to the technological changes, emergence of new important competitors and the elimination of import quotas, to remain competitive in these industries is quite challenging. In order to cope with these challenges, structures and needs of this sector must be determined correctly and comprehensively.