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Research across the world shows that when businesses cluster togeth- er there is bound to be an exchange of knowledge. This can be through spillovers or conscious transfers. With more than 4 000 businesses, Otigba should be no exception. So, I set out to test this by surveying 200 business units, representing about 5% of the size of the cluster. I wanted to under- stand how knowledge is being identi- fied, acquired, developed, used and diffused in the cluster.
The study also sought to understand how the spread of knowledge within the cluster led to innovation and the scaling of business operations. Innova- tion here refers to significant technical changes in the product, services, pro- duction processes or delivery method. To measure the scaling up of busi- nesses, the study examined:
• inputs (access to more finances, number of employees),
• activities (sub-contracting, outsourc- ing and collaborations),
• outputs (turnover, quality, quantity) and
• impacts (compliance to internation- al standard, technology upgrading and net export).
The study used these indicators be- cause they are yardsticks for measur- ing growth in firms in the formal sector.
Some interesting findings
When businesses operate in close proximity, as they do in clusters, knowl- edge sharing is inevitable. I found this to be true in Otigba. This is mainly be- cause the daily routine of the business- es involves: rotation of tasks and the regular training of employees (mainly apprentices) by highly skilled technical personnel, usually the owner of the business or someone appointed as se- nior manager.
Most businesses didn’t give prefer- ence to employees with relevant expe- rience when hiring. Instead, they used the expertise of qualified technicians to train new employees. As a result ap- prentices learnt on the job.
By and large, it took new employees less than two years to acquire all the necessary knowledge they needed to do the jobs they were hired for. The re- sult is that apprenticeship has become one of the major channels for skills ac- quisition and knowledge diffusion with- in the cluster. Apprenticeship involves on-the-job learning by young employ- ees under the supervision of experts. During this period, tacit knowledge is passed on to the apprentices until they become experts themselves. These apprentices thus graduate, ready to start their own businesses or secure employment as technicians in the for- mal sector.
The other channel for diffusion of knowl- edge within the clusters is the trade as- sociation and the unions. These have enabled collaborative innovation in the cluster which has made it possible for firms to compete as a cluster against international players. This is because of the monitoring role played by trade association and unions, such as the Computer and Allied Product Dealers Association of Nigeria. The union en- sures that new knowledge about new technologies (product and process) are made known to all it members. The union facilitates collective importation of expensive equipment, as well as sharing tools and technicians among its members.
Because of knowledge sharing in the cluster, the majority of new businesses were able to scale up their operations within the first three years of operation. This is remarkable given that research shows that a third of new small busi- ness die within two years, and half within five years of starting up. Thus knowledge sharing through cluster- ing is organic incubation – one viable way to survive the first three years as a start-up.
Knowledge sharing also enabled most of the enterprises to increase their capi- tal resources within three years of start- up. They did this either through their own generated resources or through loans. The main source of loans came from commercial banks followed by
co-operative societies, business an- gels and micro-credit organisations.
Most enterprises increased their work force to run their businesses because of good business performance. During the scaling-up period, there was lots of collaboration between firms within the cluster, as well as with other business- es, organisations and institutions out- side of the cluster. This facilitated the transfer of knowledge among cooper- ating firms.
Finally, the effects of scaling-up en- hanced the ability of businesses to:
• satisfy customers’ demands;
• comply with Nigerian regulations
and standards;
• develop more environmentally friend-
ly products/processes; and
• improve product quality.
Also, knowledge sharing that hap- pened during the scaling-up enabled businesses to extend their product range, deal successfully with new competitors abroad, and lower their production costs.
Conclusion
My research found that openness and proximity increased access to informa- tion, customers, new domestic mar- kets, tools and technology, suppliers of raw materials and inputs. In addition, all the enterprises that benefited from proximity in the cluster were involved in at least one form of innovation.
In conclusion, the study posits that knowledge need not be protected in clusters or in the informal sector gener- ally. Instead, it should be shared widely so that other businesses can adopt, or adapt, it. This in turn spurs further in- novation and the rapid development of the sector. Openness will also aid the development of other sectors through knowledge spillovers. This, in turn, will create healthy competition among businesses.
*This article originally appeared in The Conversation Africa online publication and is reused under the Creative Com- mons licence.
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Volume 12 No.3 of 2019 | SERVICE DELIVERY REVIEW 21