Abstract:
The concepts of cluster and networking emerged in 1960s in Small and Medium
Scale Enterprises (SMEs) literature but the formation ofSME clusters and networking
is a very new strategy for Sri Lanka started in 2001 and Pakistan started in 2003. But
it shows some positive sign of growth by increasing competitiveness of SMEs by
opening-up new opportunities due to good innovative networking, common facility
usage and collective efficiency of economies of scale, scopes and synergies, etc. The
problem of many SMEs in both countries is not their size, but being isolated and working
in enclave nature, therefore SMEs individually have little capacity to respond to
competitive pressure and to generate factors for expansion and innovation. Especially,
SME Apex bodies and Authorities see the formation of clusters and networking as the
way to reduce transaction cost of facility provision by creating new form of co-operation
for sharing resources, information, technical expertise and knowledge, etc. But in turn,
this can strengthen the competitiveness as well as facilitating learning and technical
innovation and ultimately it helps SMEs to mobilize human, financial and other resources
to one place by opening avenue for long lasting networking. Many successful empirical
stories available regarding the effectiveness of SME cluster and networking formation
around the world but Sri Lankan and Pakistan cases may be too early to judge the exact
relationship between SME's success and cluster and networking formation as they
recently started these concepts. But available evidences in some clusters and networking in both countries show that due to this SMEs growth and competitiveness have been increasing during the last few years in terms of various indicators. Therefore, this paper ascertains the implications of cluster and networking formation on growth and
competitiveness of Sri Lankan and Pakistan's SMEs. This paper concludesby emphasizing that formation of clusters and promotion of networking is a very good start to develop and increase competiveness of SMEs but at the same time many other right policy initiatives, incentives, business development services and infrastructure facilities must be in place to better perform these clusters and networking relations to address SMEs complex and diverse problems. Especially, clusters and networking alone cannot be solved the complex problems and constraints encountered by SMEs in Sri Lanka and
Pakistan to break the vicious cycle of SMEs.
