Formation and function of industrial districts in the rural Northwest: two cases
One of the great contributions of recent research into industrial districts is the elaboration of how clusters of small firms in relatively peripheral places can and do generate new competitive advantages. Relatively unexamined in the American research is how flexible specialization is playing out within sectors that are deeply embedded in, and indigenous to, American rural areas.This study is based on intensive interviews in the log home manufacturing district around Hamilton, Montana, and the boat building district of Port Townsend, Washington. In general, the districts appear to have emerged in a rough sequence of three development "moments" or processes: (1) prior location advantages were exploited by a few firms, (2) external economies fostered the growth of the industries, and (3) localized agglomeration effects developed that fostered an accumulation of benefits to clustering.In both cases, businesses began to cluster in these locations in the mid-1970s at the impetus of a few businesses, with the division of firms through worker departures an important factor in the early proliferation of firms. Craft organization of the local industries appears central to in these cases, as it both fosters "firm fission" and "circles" of firms whose interaction fosters specialization and exchange.In neither case does district development appear to have been an accident of external forces, but rather came about through early efforts to foster location and agglomeration benefits. The role of inter-firm local contracting as a primary driver of agglomeration effects is clear in only one of these cases; in the other, contracting appears as one facet of supportive relations within peer circles of firms. Also markedly different between cases is the rule of institutions in fostering location advantages and lowering barriers to entry by new firms.