Key Trends

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Clusters and the New Economics of Competition

Michael Porter

In this article, Michael Porter, the C. Christensen Professor of Business Administration at the Harvard Business School, explains how clusters foster high levels of productivity and innovation and lays out the implications for competitive strategy and economic policy. Economic geography in an era of global competition poses a paradox. In theory, location should no longer be a source of competitive advantage. Open global markets, rapid transportation, and high-speed communications should allow any company to source any thing from any place at any time. But in practice, location remains central to competition. Today's economic map of the world is characterized by what Porter calls clusters: critical masses in one place of linked industries and institutions--from suppliers to universities to government agencies--that enjoy unusual competitive success in a particular field. The most famous examples are found in Silicon Valley and Hollywood, but clusters dot the world's landscape.

Porter explains how clusters affect competition in three broad ways: first, by increasing the productivity of companies based in the area; second, by driving the direction and pace of innovation; and third, by stimulating the formation of new businesses within the cluster. Geographic, cultural, and institutional proximity provides companies with special access, closer relationships, better information, powerful incentives, and other advantages that are difficult to tap from a distance. The more complex, knowledge-based, and dynamic the world economy becomes, the more this is true. Competitive advantage lies increasingly in local things--knowledge, relationships, and motivation--that distant rivals cannot replicate.

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The Competitive Advantage of Corporate Philanthropy

(HBR OnPoint Enhanced Edition) by Michael E. Porter, Mark R. Kramer
Publisher: Harvard Business School Press

This is an enhanced edition of HBR article R0212D, originally published in December 2002. HBR OnPoint articles include the full-text HBR article, plus a synopsis and annotated bibliography. When it comes to philanthropy, executives increasingly see themselves as caught between critics demanding ever higher levels of "corporate social responsibility" and investors applying pressure to maximize short-term profits. Increasingly, philanthropy is used as a form of public relations or advertising, promoting a company's image through high-profile sponsorships. But there is a more truly strategic way to think about philanthropy. Corporations can use their charitable efforts to improve their competitive context--the quality of the business environment in the locations where they operate. Using philanthropy to enhance competitive context aligns social and economic goals and improves a company's long-term business prospects. Addressing context enables a company not only to give money but also leverage its capabilities and relationships in support of charitable causes. Taking this new direction requires fundamental changes in the way companies approach their contribution programs. Adopting a context-focused approach requires a far more disciplined approach than is prevalent today. But it can make a company's philanthropic activities far more effective.

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Article: Working Better Together

How government, business, and nonprofit organizations can achieve public purposes through cross-sector collaboration, alliances and partnerships.

This report is the most recent and comprehensive report that confirms the direction of Corporate Communities Consulting. The media release issued in Washington, DC, April 11, 2002 suggests technological, social and political changes have had far-reaching implications for the way government, business and nonprofit organizations fulfill their missions and work together. These changes have led the business community to redefine its performance standards, government to rethink its goals and nonprofits to redouble their efforts to meet rising demands.

Published by the Three Sector Initiative, seven leading organizations (The Conference Board, the Council on Foundations, Independent Sector, the National Academy of Public Administration, the National Alliance of Business, the National Civic League and the National Governors Association), studied how cross-sector collaboration can better serve the public and the missions of organizations representing business, government and nonprofits, and collaborate to form partnerships with each other to address complex problems that no one sector can handle on its own.

Highlights from the Three-Sector Conference: May 30, 2002

Center for Corporate Citizenship, U.S. Chamber of Commerce

The United States Chamber of Commerce hosted senior government, business and non-profit officials in a two-day conference to explore ways to advance civic, philanthropic, and development partnerships within the United States and abroad.

The goal of the Three-Sector Conference is to help government agencies, non-profit organizations and the business community develop strategies to support effective civic engagement and community development.

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Changing Roles, Changing Relationships:

The New Challenge For Business, Nonprofit Organizations, and Government

This discussion paper, first released in 1999, was a three sector collaborative project of six of the seven groups listed above. Its purpose was to determine how business, government and nonprofit sectors could respond to the challenge of change, and work more effectively to accomplish public purposes common to all of them and to society as a whole.

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Business in the Community

A Unique Movement of over 700 of the UK's Top Companies Committed to Improving Their Positive Impact on Society

BITC aims to inspire businesses to increase the quality and extent of their contribution to social and economic regeneration by making corporate social responsibility an essential part of business excellence.

One of the programmes, Business in the Environment, inspires businesses to work towards environmentally sustainable development as a strategic, mainstream business issue.