Can cooperation boost the competetiveness of small enterprises in new market environments? Local cooperation between small firms in the same sector can help overcome growth constraints as firms gain from collective efficiency. Clustered firms may also shift gears more rapidly as they respond to trade liberalization and international competition. Research in Mexico, coordinated by the UK Institute of Development Studies, examined the impact of trade liberalization on the cooperative behavior of clustered shoe firms in Guadalajara. The report suggests that while currency devaluation has helped small firms, cooperation has an even stronger influence on economic performance and can hasten a cluster's recovery within favourable market conditions.

The study focused on structural changes in vertical relationships between shoe firms and their suppliers, subcontractors, and buyers, as well as the changes taking place in horizontal relationships between competitors and supporting institutions. Drawing on qualitative and quantitative survey data covering a sample of sixty three shoe manufacturing enterprises in Guadalajara, findings indicated that cooperation has increased. The most significant increases in cooperation were among shoe manufacturers, suppliers, and buyers. Further findings suggested that:

• Performance is positively related with both vertical and horizontal cooperation between firms.
• Devaluation boosted recovery in the short term, but clustering could well be paying longer term dividends.
• Structural changes caused by liberalization has increased heterogeneity within the cluster.

The temporary reintroduction of trade barriers and the devaluation of the peso have both been essential in giving local producers breathing space to upgrade. Yet, further policy measures might help build awareness of the necessity to improve performance within the cluster, such as:

• local initiatives to help disseminate the benefits of cooperation
• fostering a more cooperative attitude within the cluster
• extending vertical and horizontal cooperation beyond the firms already taking advantage of clustering.

Source(s):
'Recovery of a Mexican Cluster: Devaluation Bonanza or Collective Efficiency?' World Development, Volume 27, #9, by R. Rabellotti, 1999
'The Internal Heterogeneity of Industrial Districts in Italy, Brazil, and Mexico', Regional Studies, Volume 33, #2, by R. Rabellotti and H. Schmitz, 1999
'External Economies and Cooperation in Industrial Districts. A Comparison of Italy and Mexico', Macmillan by R. Rabellotti, 1997

Funded by: Department for International Development, UK

id21 Research Highlight: 22 October 1999

Further Information:
Roberta Rabellotti
Roberta Rabellotti
Department of Economics and Quantitative Methods
Università del Piemonte Orientale
Via Lanino 1
28100 Novara
Italy

Tel: +00 39 0321 657 551
Fax: +00 39 0321 657 512
Contact the contributor: rabellotti@decon.unipd.it

Università del Piemonte Orientale

Institute of Development Studies (IDS), UK

Other related links:
IDS Collective Efficiency Project

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