Colombiapaperingles JUNE2000

Enterprise Clusters and Industrial Districts in Colombias
*
Fashion Sector: A Competitive Alternative?
Tatiana Olarte Barrera and Carlo Pietrobelli

Universidad Javeriana Ministerio de Universit del Molise, Campobasso, and
Hacienda, Santa Fe de Bogot, Colombia CEIS, Universit di Roma Tor Vergata, Italy
carlo.pietrobelli@uniroma2.it
Viale Regina Margherita 249, 00198 Rome
Ph.*39.064402547
Abstract
This paper presents the theory of enterprise clusters and industrial districts, and contrasts it with the evidence of
two productive agglomerations in the fashion sector in Colombia.
The empirical evidence on Bucaramanga and Medelln, that host the largest groups of Colombian textile and
clothing producers and exporters, is based on a survey questionnaire, carried out in November-December 1998
on sixty enterprises in the sector, as well as on several local institutions.
The results of the survey confirm the existence of an enterprise cluster in both Medelln and Bucaramanga,
although with different characteristics in each place. The textile and clothing firms share the typical feature of a
remarkable geographical agglomeration. The structural differences between the two cases and the 'ID textbook
model' are singled out by looking at productive specialisation, the organisation of production, export
performance, inter-firm trade and market and non-market linkages. In addition, the relationships among cluster
and non-cluster agents and institutions are analysed, as well as the role of played by the local labour market.
The evidence reveals that these clusters share some interesting common features with the textbook model of ID,
but also numerous important differences, especially regarding the organisation of production, marketing and
distribution. Several of these differences appear to be related to the prevailing economic policy environment
under which the two clusters have developed.
Submitted to LACEA Rio 2000, 12-15 October

Departamento de Economia,
PUC-Rio, Brazil
A preliminary version of this paper was presented at the 9th General Congress of the European
*
Association of Development and Training Institutes EADI -, Paris 22-25 September 1999. We thank
the participants for their useful comments. Corresponding author: Carlo Pietrobelli.
Olarte Pietrobelli Industrial Districts in Colombias Textile and Garments
Industry
1. Introduction
The debate on the industrialization strategy in developing countries has recently focused on the
possible lessons to learn from the success obtained by Small and Medium-sized Enterprises (SMEs) in
the developed countries. The experience of agglomeration and clustering of SMEs, and the collective
efficiency resulting from this form of organization, have contributed to the successful performance of
many SMEs in the last decades (Schmitz, 1995)
Traditionally, in developing countries small enterprises have been socially desired as a strategy for job
creation and better income distribution, but their economic viability has often been questioned. Small
enterprises have rarely been able to achieve international competitiveness and their productive life is
generally short. However, Industrial Districts (IDs) have proved that SMEs can be profitable and
strongly contribute to a countrys industrial growth (Rabellotti, 1994). The evidence presented by
several studies in developing countries demonstrates that the district model of industrial organization
may be a useful starting point for efficient production and competitiveness. However, the diversity of
experiences and the heterogeneous socioeconomic realities of these countries, as well as the
understanding of the processes by which firms and sectors are restructured and transformed always
1
needs to be taken into account .
This paper analyzes the development of the textile and garments sector in two Colombian regions,
using the ID model as an instrument of interpretation. The Italian variant of ID is the benchmark for
the present analysis (Becattini, 1987, Markusen, 1996). This paper does not mean to be a feasibility
study for this model in Colombia. Instead it aims at testing for the existence of some key elements of
this model in two Colombian cities, Medelln and Bucaramanga, traditionally known for their textile
and garments production in Colombia.
The theoretical hypotheses are presented and discussed in section 2. The empirical analysis has been
carried out through a survey questionnaire administered to 50 enterprises of the sector in both cities.
The survey employed the same methodology used to study enterprise clustering in Italy, Europe and
2
Asia in a different project . The results of the survey are presented in the third section, and are
compared to the elements that the literature has defined as typical of the Marshallian industrial
districts. The study concludes with a short analysis of the possible policy implications.
1
See, among the others, Bagella (ed.), 1996, and UNCTAD and Deusthes Zentrum fur EntwickJungstechnologien,1994,
Nadvi and Schimtz, 1993.
2
TSER -European Union project SME in Europe and east Asia: Competition, Collaboration and Lessons for Policy
support. See Guerrieri et al., 2000.
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2. Networks, Cluster, and Industrial Districts. Theoretical

Hypotheses of the Analysis.
A network may be defined as a group of persons sharing a common cultural, economic, social, or
3
political objective. Initially, it can exist independently of its members physical proximity because it
is based on their communication exchanges; nevertheless, the frequency of exchanges reveals the
different levels of bonding between their participants. This implies that the range of relationships is
limited by the affinity of the objective that binds them, and by their spatial proximity, that facilitates
the frequency of exchanges.
In the industrial districts, the network is frequently based on the mutual trust among the participants.
Rabellotti (1994) defines trust as a positive attitude towards a person or group based on previous
experience, a common relationship, frequent interactions, or a shared background. In this type of
networks, a wide and common behavioral code is created, accepted and followed by the agents
involved, and this allows them to obtain a greater degree of commitment. This code of behavior can
be explicit o more frequently implicit, and determines the type of relationship prevailing within the
district: formal contracts, informal cooperation, competition.
In economic terms a network, based on the trust of its agents, reduces the transaction, coordination
and control costs of the productive activity, and more in general, market costs. Furthermore, it
enhances the information flows, reduces the asymmetries, and stimulates the technology diffusion,
often through imitation. Additionally, the fact that its development takes place in a defined
geographical area, like in the industrial district case, contributes to the consolidation of the
relationships among the agents, adding to the presence of socio-cultural homogeneity and the
possibility of face-to-face contacts. Inside this type of networks, reputation and public acceptance are
highly valued, and the limits to commercial behavior are easily accepted and respected. The extreme
sanction to non-complying agents may be the exclusion from the community. In contrast, outside the
network economic agents tend to follow opportunistic behavior and information is imperfect, while
inside the network the inter-agent relationships are stable and the risk of an opportunistic behavior is
lower.
Although in principle geographical proximity is not essential to a network existence, in a strict sense,
a cluster is defined as a group of enterprises spatially close, and specialized in the development of a
similar or the same product. (van Dijk and Rabellotti, 1997). This form of organization generates
additional benefits no only to the enterprises but to the cluster as a whole. The product specialization:
stimulates the division of labor to obtain a more efficient process.
enhances product differentiation to obtain competitive advantages.
3
For example an enterprise, ethnic, or professional association.
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Increases the flexibility (Schmitz, 1990) of the productive process, consequence of its
decentralization in smaller production units, and of the product, to respond to variable market
conditions.
The spatial clustering permits a reduction in transaction, transportation, coordination and control
costs, and facilitates the flow of information for enterprise development, through the binding effect of
the enterprises involved in the network.
Formally, the cluster theory makes reference to three types of economies present in this form of
industrial organization that in many cases are determinant to the cluster success.
The economies of scale that are generally the result of work division and intra-cluster
specialization.
The economies of scope that is the advantage of producing different products by using the same
productive factors.
External economies that is the side effects of the action of an economic agent over others, without
payments related to this action. Theoretically, an externality of production is a situation where the
production function of a firm is affected by activities carried out out of the market.
The concept of external economy, introduced by Marshall (1891) is related to the increase in the
knowledge about markets and technologies that localized industrial production brings about. This may
also occur through the creation of a market for qualified jobs, specialized services or support
industries, the possibility of dividing the productive process into specialized phases easily
decentralized, and finally, the improvement of physical infrastructures.
The agglomeration economy is a particular type of external economy. This concept is derived from
the theory of neoclassical static equilibrium, in which individual enterprises interact within
anonymous markets. A distinction that is frequently made is between two types of agglomeration
economies: the localization and the urban economy. With localization economies, the advantages
derive from the spatial concentration of enterprises belonging to the same industry. The urban
economies derive from the localization in an urban area, typically limited, with generic infrastructure,
information and labor market available for all the agents in the area. Cities can be considered a big
4
market, easily accessible to local enterprises enjoying reductions in transactions and transport costs.
Agglomeration economies are usually illustrated by the industrial organization of the cluster type.
Schmitz (1995) uses the term collective efficiency to portray the benefits accruing to the firms
working in a cluster. This concept presents two dimensions:
4
Sullivan (1990) argues that the majority of the clusters are not isolated from other activities, but are typically in the cities
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a. The external economies increase with the spatial agglomeration. These economies
include the local supply of skilled labor, and the easier access to suppliers of raw materials,
components, new machinery, special equipment.
b. The cohesion, or glue, achieved by working together through business associations and
production consortia. This aspect can be divided into two elements:
The cooperation between individual firms, of a vertical nature enterprises sharing different
phases of production - or of an horizontal nature e.g. jointly fulfilling an order.
The collective action of groups or firms in a cluster and local institutions. The workers
associations, trading groups or the local government, may improve the business conditions for
the cluster firms. This may imply government lobbying, information and service provision,
set up and implementation of technical institutions.
However, Schmitz (1995) rightly notices that a cluster by itself does not necessarily produce these
effects. While the type (a) effects may originate without any effort from the participants, the type (b)
effects need to be constructed by the participants, eventually with the help of local institutions and
organizations. The ID may be seen like a type of cluster in which type (b) effects are present.
Since the times of Marshall (1891), a huge variety of definitions of ID have been proposed in the
literature. Marshall himself defined the industrial district as a cluster characterized by at least some
degree of division of labor and by an industrial atmosphere, consequence of the dynamic effects of
industrial growth. Enterprise-level specialization may enhance the industrys efficiency. The
necessary inter-firm relationships, may facilitate the creation and strengthening of a common social
and cultural background, that in turn stimulates the creation and diffusion of knowledge and of
technical skills in the sector.
The concept of industrial district has evolved over time with the increasing complexity of industrial
activities. In a way the model of ID is often considered as a list of stabilized phenomena used to
organize empirical investigations and make comparisons possible (Rabellotti, 1994). It represents a
naturally-generated form of industrial and social organization, with its own specific characteristics
consequence of social and historical events that have contributed to its creation and growth
(Pietrobelli, 1998).
From an economic perspective, Pyke and Sengenberger (1992) define an ID as a productive

system that is geographically defined, and characterized by a large number of enterprises working
together in different ways for the production of a homogenous good. A great part of these enterprises
are small or very small. A distinctive feature is the form of organization present in the system. In other
words an ID is a type of cluster geographically limited, where a network is created by the participants
that are part of it, based on trust and interdependence. The enterprise is not seen as an individual unit
but as a part, depending on and simultaneously influencing the collective network.
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From a sociological point of view, Holmstrom (1993) defines the industrial district as a moral
community, where the limits of the trust and the individual interests are understood and supported by
a public consensus. An ID therefore should be meant as a unique social and economic group, based on
strong interlinkages between its social, political and economic dimensions. Two districts are never
exactly identical, and their differences are based on the specificity of local culture, politics, on the
kinds of relationships between the enterprises, and between them and the institutions.
Taking into account that we are considering a context characterized by a multiplicity of agents, of
complementary and competitive enterprises, without a hierarchical decision making process, the key
element is specialization. Each enterprise or enterprise group specializes in a particular phase of
production or in a complementary service, producing a series of positive effects, not only for the
individual enterprises but for the district as a whole. In a way, a type of organic interdependence,
result of the complementarity between them, is created, and this also involves social relations. This
effect inevitably leads to an increased affinity between the agents in the district, and to a higher
collective efficiency. Rabellotti refers to this type of efficiency as effects of a industrial atmosphere
where the contractors cooperate and compete at the same time, promoting the fast circulation of ideas
and improving their own performance. Collective capabilities are developed, and the entire
community of small enterprises obtains some scale economies, that before were reserved to large
enterprises.
The typical flexibility of the cluster, that is itself a determinant factor of the ID performance, is a
function of this specialization of tasks. Flexibility is obtained as a result of collective processes of
decentralized cooperation in decision-making, and it is strengthened by the culture and the know-how
accumulated by the local agents. In turn, the collective capabilities that are the result of subcontracting
some of the production phases, raise the offer of technical skills, and of support services for
production, thereby improving flexibility (Bagella and Pietrobelli, 1995). This is crucial in markets
that are greatly variable and very competitive, where enterprises are forced to innovate permanently to
offer a wider range products, and to rapidly adapt to new demands.
The high adaptability and the propensity to innovate are characteristic elements of an ID, that
crucially relies on the presence of a qualified workforce and of flexible productive networks
(Humprey, 1995). An additional characteristic of IDs is the inter-firm and inter-agent collaboration.
Different degrees of collaboration determine different types of networks. Thus Brusco (1990) affirms
that competition is stronger when enterprises produce the same good; in contrast, the cooperation and
collaboration, especially in technology innovation and design, occurs more frequently among
enterprises carrying out different phases of production. The interdependence and the mutual
adaptation within and outside the cluster determine the terms of the relationships and thereby
influence the degree and improvement of collective efficiency (Pedersen 1996).
In sum, the typical structure of the Italian model of ID contains four main elements (Pietrobelli,
1998):
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1. It is a system, in which the relations between the independent agents with the district, are
regulated by a set of informal norms, that characterize and mould social aggregation and the
nature of the district itself.
2. A local dimension exists. The district is geographically limited, and the productive cycle is carried
out by multiple agents that belong to the same district.
3. The cluster firms are independent and maximize their benefits through the specialization of
interdependent tasks.
4. The presence of institutions reinforces and improves the relations between the agents and the
district, and enhances the district growth potential. These institutions interact with the firms
within a system of informal relations, promoting the exploitation of flexible production through
the external division of the work.
In the context of the broader discussion about different types of enterprise agglomeration, Markusen
5
(1996) describes the model of a Marshallian ID pointing out the main following elements :
Predominance of SMEs in the local industrial structure.
Geographical and industrial concentration of SMEs.
Independent firms decision-making.
High level of disintegration of the productive process, often through subcontracting.
Important trade and exchanges among the agents within the district.
Scale economies relatively small at the enterprise-level, but high at the district-level.
Substantial economies of scope, consequence of the product differentiation.
Flexible and efficient local labor markets.
Important local cultural identity.
Important role of local institutions.
Dynamic entrepreneurial attitudes to compete through quality, flexibility, and innovation.
These elements define the model of Marshallian ID, and they represent the hypotheses of work for the
present study on the two Colombian cases of Medelln and Bucaramanga.
2.1 Peculiarities of the Italian Case
The only operational, and legally recognized, definition of an ID was introduced with the Italian Law
N.317/1991 on the Promotion of small and medium-sized enterprises. This law foresaw the
possibility of financial support to the district itself and not to its individual enterprises. In a later Law
5
Following her analysis, other types of enterprise clusters are: hub-and-spoke, satellite platforms, and state-anchored
industrial districts (Markusen, 1996)
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(No.21/4/1993) the Ministry of Industry gave the precise statistical criteria that each region should
use in the individualization of a district, which are (for each geographical area):
Strong presence of manufacturing activity in the area (more than 30 per cent of the national
average)
High enterprise density (presence of enterprises in relation to the population larger than the
national average).
High productive specialization (larger than 30 per cent of the national average in terms of
employment). Monosectoral districts are therefore favored.
Substantial employment in the specialization sector of the area (more than 30 per cent of the total
of the manufacturing activity in the area).
Strong presence of SMEs in the area (more than 50% of the enterprises in the sector must have
less than 200 employees).
In reality the law has not operated as it was expected (Achilli, 1999). In fact, traditional areas
unanimously recognized as IDs like for example Carpi and Sassuolo in Emilia Romagna, would not
be DI according to this statistical definition, making the legal definition of ID often distant from the
actual experiences of IDs in Italy. For example, this would exclude areas where large enterprises play
a important role together with SMEs (like in some areas of Italys Mezzogiorno), or where many
productive specializations coexist, like in the case of urban districts, with a strong presence of service
sector firms.
Moreover, the difficulty of measuring and statistically detecting an ID compounds the actual
differences in the variety of product specialization, in the degree of complexity of the organization
and in the cultural and social traditions. Therefore additional peculiarities of the Italian model have
been emphasized by various authors:
Strong tendency to specialize in traditional sectors, such as fashion, furniture, ceramics (Sforzi,
1991)
Urban dimension, which implies positive effects such as accessibility to a labor force and
services, direct bonds between local financial institutions and industry, strong social cohesion
and historic homogenous background.
Strong bonds with rural cultural origins that permits the blend of traditional and modern
components of the economic and social structures. Many Italian IDs have transformed moving
from rural to industrial areas, without major structural breaks and through a gradual transfer of the
rural labor force to industry (Capello, 1997).
The role played by the family ties has often been crucial. The informal networks are frequently
based on the relation among entrepreneurs family groups, engendering trust and collaboration in
the network. Moreover, families ease the intergenerational transfer of abilities and knowledge,
and the flexibility of the organization of work in the district.
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A high social mobility, with workers becoming contractors, relying on experience

and abilities acquired.
Political homogeneity, with political subcultures tracing back to the start of the century. Thus, as
institutions often share the same ideological mould, a strong sense of community has developed,
frequently avoiding major conflicts in industrial relations.
A diffuse entrepreneurial spirit and capability in Italy (Pyke, Becattini and Sengenberger, 1991)
Nevertheless, these dimensions make the formalization of a model of the Italian industrial district
extremely difficult, and sometimes more a sum of stylized facts beyond any deterministic behavior.
Moreover, the model itself is increasingly subject to profound transformations (Guerrieri et al.,
6
2000).
3. The Colombian Case

3.1 Methodology
The methodology used in the empirical analysis is based on interviews to SME managers following a
detailed survey questionnaire, which summarizes the key characteristics of the industrial district text
model.
The survey questionnaire used was the same used in the analysis of European and Asian clusters, by a
7
network of research institutes financed by the European Union . Some questions were added to deepen
on the inter-industrial, collaboration-competition and on some socioeconomic relations.
Fifty enterprises were randomly selected from the databank of the Chamber of Commerce and other
local associations of the formal fashion sector, in the Bucaramanga and Medelln urban areas. These
are all SMEs having less than 100 employees. It is important to stress that the sample has been
randomly selected, but it does not statistically represent each region, nor the enterprises necessarily
have relationships among themselves. Social aspects were also considered with the analysis of the
history and tradition of the two cities.
3.2 Background of the Fashion Sector in Colombia
The textile and garments industry in Colombia represents the second largest manufacturing sector,
8
after the food and followed by the oil industry. This industry was already present in the country in the
XVII century, but it took off only in the first decades of the XX century, fostered by the capital
surplus generated by the coffee boom in a rigidly protected economy. As a consequence of the longest
6
For example, the family ties and political homogeneity, which acquired fundamental importance for the creation and
development of the Italian IDs are losing their importance with the later economic and social transformations (Pietrobelli,
1998).
7
EU-TSER project. SMEs in Europe and East Asia: Competition, Collaboration and lessons for policy Support. See
Guerrieri et al. 2000 forthcoming.
8
Cuentas Nacionales, DANE.
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civil war of the country during the first years of the century, an aggressive economic
reconstruction program was implemented. Since 1903, the government used protectionist policies to
foster the new development of the Colombian industry. The increase in custom tariffs for most
manufacturing products, with the important exceptions of the imports of machinery and raw materials,
the introduction of subsidies and guarantees, especially relevant in the textile sector, stimulated the
fast growth of the following years. The coffee boom generated the means to invest in the development
of the industry. Coffee producing cities like Medelln, Pereira and Manizales experienced a fast
growth in textiles and clothing production, and quickly became the biggest national production
centers.
Following the 1930s recession, the three largest textile firms in Medelln acquired many of the
medium-sized enterprises of the textile sector, thereby increasing the concentration of production in
this city. IN the early 1960s the cotton boom increased the local supply of raw material, boosting the
growth of the Colombian textile industry. At the same time, the clothing industry started to develop
9
on the basis of cheap labor and the local availability of raw material. In the late 1960s, a garment
industry based on SMEs and specialized in girls clothing rapidly developed in Bucaramanga, that
used to be essentially a traditional oil producing center. Design creativity, good raw materials and the
good quality of the final products, earned them international recognition.
Table 1 shows the geographical distribution of manufacturing in Colombia in 1998. If the annual
manufacturing survey is short in showing the universe of manufacturing in Colombia, it indeed shows
10
its general trend. Textile and garments represent an important sector in Colombias manufacturing
(Table 2).
The textile sector is characterized by an oligopolistic structure with the largest Colombian enterprises
operating in Medelln: Fabricato, Coltejer, and Tejicondor. The government has always intervened in
this sector to finance the
Table 1 Geographical Distribution of Manufacturing in activities in crisis and
Colombia, 1998
Cities Gross Manufacturing Establishments protect the market from
Production
Santa Fe de Bogota 27% 32.4% foreign competition, with
Medelln (and metropolitan area) 16% 19.4% the target of supporting
Cali 11% 18.5%
Bucaramanga 2% 5.8% this important
Source: Annual Manufacturing Survey, 1998.DANE
employment source.
Table 2
Share of Textiles and Garments in Colombias Manufacturing Sector In contrast, the garments
Sector Gross Manufacturing Establishments Employment Value sector shows a fragmented
Production Added
Textiles 5.4% 11.3% 10.2% 6.0% industrial structure based
Garments 3% 5.9% 10% 3.3%
Source: Annual Manufacturing Survey, 1998.DANE
9
Table 3 SMEs in the Garment
Colombia Sector,
is in the group of countries
Colombia 1997 where the cost of an hour is US$1.88. Source: Colombia Statistics 1998
10
Cities are drawn
The figures Percentage of SMEs
from the 1998 annual manufacturing survey, realized by DANE on a sample of 8,282 randomly
Bogotestablishments in the country,
selected 36.3% and employing more than 10 people.
Medelln 28.4%
Cali 9.5% Page 10
Bucaramanga 8.1%
Total Colombia 100.0%
Source: DNP, 1997
Industry
on SMEs. Notwithstanding the difficulty to determine their exact number, according to the
1990 DANE Industrial Census, more than 19.500 clothing producers operate in Colombia, and SMEs
account for 95 per cent of them. In 1990 the employment in the clothing industry was at 240,000,
more than 13 percent of the countrys total labor force. Informal enterprises have been estimated to be
around 40,000. The industrial concentration is a lot smaller in the clothing sector than in textiles,
consistently with the international evidence. Thus, in 1993 the thirteen largest enterprises represented
27% of the national production (DNP, 1993). Moreover, SMEs in the garments sector are clearly
geographically clustered around a few centers (DNP, 1997, Table 3).
A very important feature of Colombian fashion sector is the maquila operations, that is the service of
11
clothing manufacturing to large enterprises looking for lower wages . Cut pieces arrive in large
containers, and small enterprises sew them together and return them to the country of origin. Even
though the value added for the industry is low, in Medelln and in Bucaramanga an important maquila
activity appears to be emerging.
Summarizing, the clothing industry in Colombia appears to have traditionally developed along lines
similar to the textile industry as regards its localization, and its internal organization. As a result,
clothing and textile enterprises tend to be vertically integrated with strong economic groups. One of
the causes of this integration is the crisis that the sector has been facing since the process of opening
of the early 1990s. An alternative that has often been followed is vertical integration from raw
material production and processing to garments production, often through subcontracting.
Bucaramangas much younger clothing industry, has shown a dynamic development, consequence of
the structurally different path followed, and with a new tendency to increase industrial agglomeration.
The non existence of a strong textile sector has limited its participation to the national market,
dominated by the Medelln long-standing monopoly power. This forced the local industry to target the
international market from the very start, and to search for competitiveness on quality terms and not on
price terms.
Both cities represent clear cases of urban clusters, they have a strong geographical concentration of
firms, and a clear specialization in textiles and garments. In the following sections we shall test this
hypothesis and investigate the specific features of the two clusters.
3.3 The Case of Medelln

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Medelln with its metropolitan area, named Valle de Aburra , is considered the second city of
Colombia in importance with regard to GDP and population, with almost 2.8 million habitants. It has
traditionally been an industrial city where many productive sectors coexist, but it is acknowledged as
the capital of the fashion sector - textiles and clothing-. This industry represent almost 25 percent of
11
According to DNP, the price/minute that is received by external subcontracting or maquila is close to US$ 0.08 for
wholesale goods, US$ 0.10 for jeans, and US$ 0.12 - 0.15 for more sophisticated garments.
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the citys total employment, with 3,800 registered enterprise, and 3,000 of them are specialized in
clothing. Almost 80 percent of them are independent SMEs. Large enterprises exist, but no subsidiary
of multinational companies operates here. Eight of the thirteen largest garment producers in the
country are located in Medelln.
TABLE 4 Main Manufacturing Sectors (%), Medellin 1995 Table 4 shows that in
Branch Gross Production No. Establishments Employment Avg.Employment 1995 the average firm
321 Textiles 15.6% 12% 19% 147 size in the clothing
322 Clothing 8.2% 17% 16% 87
381 Metalworking 4.5% 9% 7.4% 77 sector was 87 workers,
SOURCE: DANE, Annual Manufacturing Survey, 1995.
and in the textile sector
147 workers. This is consistent with the expectation of a dominating presence of SMEs in garments,
with larger enterprises active in the textile sector.
In general, the export propensity of small garment enterprises is recent and still incipient. The
medium-sized enterprises export some underwear through some larger distribution firms. On the
contrary, on the domestic market both SMEs and larger enterprises from Medelln enjoy a
monopolistic position in both textiles and clothing. Recently, the sector has experienced serious
difficulties, due to the opening of the economy, the lifting of trade barriers, the rising import
penetration mainly from Asia, the growing presence of enterprises from Bogota and Cali, and the
difficult crisis of the textile sector providing for many raw materials. However, the clothing sector in
13
Medelln has been growing at a rate around 3 per cent per year over the past decade.
The organization of industrial activities in Medelln is far more complex than in Bucaramanga due to
its multisectorial activities. Until the late 1980s the core of manufacturing activity in Medelln was
represented by the textile sector, which also enjoyed a good export performance. The more recent
dynamic evolution of the clothing sector has somehow paralleled the developments of the textile
sector, and in some way may be considered a consequence of it. The existence of strong intersectoral
linkages, and the externality originated from the textile industry have been determinant in the
development of the clothing sector. The product specialization in the garment industry supports this
hypothesis, as two of the main products of the city, exterior clothing (pants, T-shirts, pijamas, girl and
14
women dress) and underwear reflect what the textile sector produces.
The structure of horizontal and vertical linkages in the industry also appears rather complex. As far as
forward linkages are concerned, a substantial dependence on large distributors has been detected.
With the exception of a few large enterprises, the majority of SMEs find serious problems in the
distribution and commercialization of their products. The presence of two huge chains of department
stores, Cadenalco and xito, which have their own national distribution network, remarkably
12
Including Itagui, and Bello
13
Figures from DANE, 1998.
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influences the performance of the sector. To some extent, at least in the case of SMEs, the cluster
seems to be directed by the buyers (buyer-driven). Ten of the 21 enterprises interviewed work with an
average of 50 clients, but 11 of them sell to their three principal clients as much as 50 per cent of their
production. The strategy of SMEs is necessarily affected by the decisions made by the retailers; a very
tight match exists between what is produced and what the retailers want to buy. When an enterprise
has its own brand and design, it gives its collection to these large chains of department stores, which
assess the design, quality and prices according to their particular parameters. If the product is accepted
the orders are typically so high to require all the production capacity of the enterprise, producing
exclusively for this chain during the whole year. In the event the orders exceeded the production
capacity, SMEs use other networks of smaller, often family-based enterprises located in the same city.
This ensures a fair degree of flexibility in production in order to face a demand that is highly variable.
Major problems arise when SMEs are not considered by the large distributors. In this case, they would
often target small local, or regional markets through smaller distributors or chains of local stores. As a
last resort, SMEs may turn into informal suppliers of medium or large firms that have been
positively evaluated by the distributors.
This heavy dependence of the distribution and commercial stages remarkably affects the poor export
performance of the clothing sector. In fact, less than 20% of the production of the enterprises
surveyed reaches the international market. Most of these enterprises explained it with the lack of
knowledge of the external market, the fear of currency instability, and the strongly local market-
oriented attitude.
Moreover, the history of the clothing industry in Medelln and the analysis of the policy rgime offer
an additional explanation. For several decades the sector was operating behind solid trade barriers
decided by the central government. Enterprises from Medelln enjoyed a real monopoly in the
protected national market, and the situation was made even more favorable by the sustained growth of
demand for many years. However, once the economy opened, at the end of 1991, the situation started
changing dramatically. At first, the favorable effects prevailed, due to the newly-opened export
markets and to the gradual modernization of technology made possible by importing capital goods.
This process was much slower than the rapidly increasing imports of cheaper products. It became
clear that the market protectionism, and the payment of subsidies, had stimulated inefficiencies and
15
low quality.
The region lost substantial shares of the national market and revealed insufficient competitiveness in
an increasingly competitive market. The invasion of Asian products, the introduction of new fabrics
and innovative accessories, the rising competition from other Colombian regions, were all factors
threatening the leadership of the Medelln industry. The textile sector suffered from a notable
14
There is evidence suggesting that underwear production has been growing faster, followed by jeans and T-shirts, for which
raw material is produced in Medellin.
15
As argued in general by Tendler and Amorin (1995)
Page 13
Industry
technological gap and limited flexibility of products and processes, resulting in a dramatic fall
of competitiveness. The almost complete substitution of the main raw material, the national or locally-
produced fabric, with imported material was a hard blow to a protected sector for so many years.
At the same time however, thanks to the dynamic evolution of the textile sector and the fast growth of
the clothing in the first phases of development, a important process of accumulation of technical
capacity took place. The creation of specialized training centers, the surge of local machinery
providers, and the intense interactions with the local providers of raw materials, fostered a new and
substantial involvement of the local community in the textile and clothing success. An example of this
16
process was the creation of university faculties and training center specialized in these sectors. The
proliferation of enterprises supplying real and financial services, the upgrading of the local human
technical skills, and more generally, the improvements in the environment for this sector were the
result of this process. The evidence from our sample reveals that in 11 of the enterprises surveyed the
founder appears to have a university education, and 15 of them acknowledged the importance of
previous experience in the industry resulting from either working in a family business or in other
firms in the same sector.
At the time of carrying out the survey (late 1998) the sector was still facing a major crisis, and
introducing profound structural reorganizations eased by the long experience and know-how in the
business of many entrepreneurs. Several noteworthy reactions were detected, like: the emergence of
many new SMEs, often start-ups of former employees of large enterprises; the increase in the
specialization of production; the efforts to introduce quality controls to improve competitiveness. Also
the industrial structure appears in transition. On the one hand vertical integration between sectors is
growing, together with the strengthening of groups of enterprises, each deepening its specialization;
on the other hand, subcontracting practices are occurring more frequently, with a strengthening of the
network of services. Let us see these two strategies in sequence.
Vertically integrate and strengthen enterprise groups. The increasing ties and competition between
firms in the fashion sector textiles and clothing- reveal this tendency. Two of the larger textile
firms recently entered the clothing market with a totally subcontracted productive process to the
local networks. Thus, in addition to the textiles, they produce and distribute final products such as
garments. This leads to further vertical integration, that contradicts the international trend of
outsourcing and specialization. However, decentralization occurs in clothing production. This
trend is shared not only by large and medium-sized firms that strengthen their linkages, but also
by SMEs, and some of them are part of enterprise groups. That is SMEs produce the fabric on the
basis of the specifications demanded by other SMEs that produce clothing. Our survey evidence
confirms these growing tight inter-industry linkages. In fact, 12 of the 21 surveyed firms purchase
16
The faculties of Textile Engineering, Fashion and Design were founded in several universities in Medelln.
Page 14
Industry
100 per cent of their raw materials from the local market, and 4 of them purchase almost
70 per cent. This is reinforced but much qualitative evidence gathered during the field interviews.
Increase and strengthen subcontracting networks. A clear trend to shift from being independent
enterprises to offering services to other enterprises has been widely observed. Several
explanations of this trend may be suggested. On the one hand most enterprises, of whatever size,
benefit from externalizing part of their production, by decreasing labor costs. This is especially
important for the clothing industry, where labor costs account for almost 70 per cent of total
production costs, and represents an interesting opportunity for SMEs to turn into intermediate
goods suppliers. The relatively bigger SMEs surveyed, that work with and average of 7
workshops that is small enterprises specialized in the sewing phase emphasized the relevance
of cost reductions and of the increase in flexibility achieved by externalizing part of the
production. On the other hand, given that most of the small enterprises find serious troubles in the
commercialization phase, relying on other firms saves them the costs and the difficulties of
searching for new markets. Eighty-five per cent of the enterprises visited reported they had
introduced innovations in the organization of work, thereby stimulating the division and the
specialization of labor, and increasing quality, productivity, implementing time-saving methods
and processes.
A important and growing feature of Medellns clothing sector, though still representing a small
proportion of the total activity are operations under maquila arrangements. In the city four enterprises
were set up only for exports, and produce the popular Levis jeans. These enterprises together produce
around 500.000 pairs of jeans per month. Several other enterprises work under foreign brands
licensing agreements, and sell to the Colombian and Latin-American market, like for example Estudio
Moda employing more than 400 workers.
3.3.1 Relations between Agents and the Institutional Context
Medelln has long been characterized as one of the areas in Colombia where joint initiatives involving
the business community, the local government, and the civil society have often been successful. A
strong sense of belonging to the region exists, together with a remarkable industry-oriented culture.
Several financial and training centers have been created by private initiatives to help consolidate a
17
strong local productive network. ACTUAR, the Foundation for the Recovery of Antioquia was
created in 1980 and is a private institution founded in response to the credit crunch experienced by
SMEs in those years. Its main thrust is family businesses and SMEs. In association with SENA
Servicio Nacional de Aprendizaje, Learning National Service - it trains and qualifies workers and
offers qualification in all branches of the industrial activity. SENA is a government institution, and is
financed by the enterprises as well as government transfers. This institution was created in 1957 and is
presently providing training services, technical skills certification, quality insurance.
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Industry
The long-standing tradition and reputation of Medelln in the fashion industry permitted an
early consolidation of infrastructures supporting the productive sector. Several institutions operate to
facilitate the transfer of information and offer real service to the sector. Thus, for example,
INEXMODA, the Institute for Colombias fashion exports, supports local enterprises to follow world
trends, to organize exhibitions, and source innovative machinery. In fact it fosters the interaction
between the textile and the clothing sector. This is also private, started its activities in 1988, and it is
currently extending its activities throughout the country. Among other things, it organizes the most
important Latin-American fashion event kwon as Colombiamoda and Americamoda, attended also by
international designers.
Ninety per cent of the enterprises surveyed declared they have good relations with other enterprises.
However, the high market concentration is controlled by closed economic groups, like for example
the Sindicato Antioqueo. This group controls 60 percent of local activity in many sectors including
the textile, with ownership shares in Fabricato and Tejicondor, and xito, the biggest garments
retailer. The only available alternative for SMEs wishing to survive in an environment dominated by
huge economic groups is to improve the quality of their services and enforce strict quality controls.
The urban nature of the Medelln cluster, with the extreme variety of industrial activities taking place
in the city, produces a limited level of intra-industry relationships among the enterprises. Nevertheless
a potential opportunity to increase the degree of agents interaction are the trade clubs and other
associations. This low intensity of relationships among enterprises limits the strengthening of trust
bonds that would permit the consolidation of the network of relationships. The enterprises surveyed
acknowledge to have more frequent relationships with their clients and with the local providers of
machinery, that periodically visit the plants. The interaction with the training institutions in the sector
is rather limited, while linkages with local competitors tend to be disregarded. Similarly, no direct
relation with international agents has been detected.
There is no specialized association in the clothing sector; however, Acopi (the association of SMEs),
and other institutions such as, Ascoltex, Inexmoda, Actuar, the Medelln Chamber of Commerce and
Proexport foster inter-firm linkages through the services they render to their associates, and they
enhance the diffusion of business and technology information. A possible obstacle to the inter-agent
relations is often the concentration or polarization of the industrial structure. The inter-firm
asymmetries recorded in Medelln play a central role in the pattern of interaction. On the one hand the
large enterprises and distributors exploit the local networks of small suppliers, without necessarily
transferring knowledge and technology. On the other hand the growing medium-sized enterprises
entertain distant contacts with local firms, and tend to prefer a higher degree of integration in their
productive process, as they appear to resist to the externalization trend. Some small, very small or
family enterprises, have not grown as they either have been created recently, or exclusively provide
17
Medelln is the capital city of the department (i.e. the region) of Antioquia.
Page 16
Industry
services to third parties, or face major difficulties in the commercialization of their products.
However, they stick firmly to their own brand name and wait for an opportunity to sell it in big stores.
Summarizing, a fair degree of informal association and cooperation has been detected only within the
large group of micro and small enterprises: as enterprises grow, they appear to diminish their
willingness and enthusiasm to cooperate and associate with each other.
3.4 The Case of Bucaramanga
The department (region) of Santander is characterized by its rich natural resources, and its economy is
based on agriculture and cattle. Two main industrial activities have developed fast in the region: the
oil industry in the city of Barrancabermeja, and the clothing industry, in the city of Bucaramanga and
San Gil. According to the last industrial census, 1,600 clothing enterprises operate in Bucaramanga,
mainly of small and medium size (Table 5). The fashion industry accounts for over 20 per cent of all
manufacturing establishments, and 21 per cent of manufacturing employment.
Bucaramanga has a
TABLE 5 Main Manufacturing Sectors (%), Bucaramanga
remarkable tradition in the
BRANCH Gross No. of Employment Average clothing industry, especially
Production Establishments Employment
321 Textiles 1.8% 1.7% 1.8% 37 in the child clothing and
322 Clothing 6% 18% 19% 37
381 Metalworking 3% 6% 5% 29
girls dress branch, that
SOURCE: DANE, Annual manufacturing survey, 1995. traces back to the mid
1970s. Even though the garments industry is only the third source of employment after the oil and
food industry, the greatest part of its production goes to the international market. Also this region
benefited from the surplus profits from coffee production, but to a smaller extent than the Antioquia
region, and this allowed the financing of some industrial activity. Due to the tradition of embroidery
and hand sewing in several neighboring villages, during the mid 1970s the industry could start by
taking advantage of the originality of the materials and designs, and competed in international
markets. This development was based on SMEs. The textile sector was not very active in this region,
with the exception of some specialized embroiders and the combination of particular materials like the
clay and fique.
The industrial structure is very different from the one prevailing in Medelln. No large firm operates
in Bucaramanga, and no medium-sized enterprise is a recognized leader. Moreover, there are no
enterprises groups or consortia. Even though SMEs dominate in the industrial structure, and they are
18
all active in the same sector, thereby inducing to expect a marked firm-level specialization, the
production process of garments is highly integrated. More than 80 per cent of the enterprises visited
declared to carry out all the production process internally (design, cut, clothing, refinement,
18
According to Marshall (1891) the agglomeration of enterprises that realize the same activity stimulates specialization,
product of the division of labour, and gives origin to vertical disintegration of the productive process.
Page 17
Industry
19
packing) . The remaining 20 per cent decentralize the clothing phase in small units outside the plant,
but still located in the same city. This typically occurs when they cannot fulfill a large order. Services
are also contracted out in the event the garments require special details, such as embroideries or
recamado. In almost all the cases this part is carried out outside the city, in small neighboring towns
having old traditions in this type of work, hand-made by small families.
A high labor turnover is allowed by the labor legislation, in order to respond to the remarkable
seasonality of the business. Thus, during the first semester of the year, when orders decrease, the
enterprises reduce their personnel by up to 40 per cent. If in the second semester the orders grow
substantially, new employees are hired. They may be contracted for six or even three months, as they
are easily available, but often not very skilled. This high labor turnover in the local labor market
fosters a continuous information flow within the cluster. This feature is frequently observed in the
Italian IDs, and represents a real external economy, as skilled workers are available in the sector
thanks to the presence of other enterprises in the area, notwithstanding any other purposeful or
unconscious (involuntary) effort to collaborate. On the other hand, the fact that in order to increase
production, employment must be raised in (roughly) the same proportion, would hint that the scale
economies at the enterprise-level are very low.
Although there is no vertical specialization, nor an articulate process of specialization in small units,
the case of Bucaramanga may be defined as a cluster of the market-town type (Pedersen, 1996), that is
a SMEs cluster with active horizontal specialization. Even though the market segmentation is not very
marked, the main competition tool among the enterprises is the product diversification, and especially
girls garments. Additional competition tools are represented by the diversification of the production
inputs, the quick processing and manufacturing of orders (pronto moda, ready-to-order fashion),
and the broad range of products, with different costs and quality.
However, the process of technical skill accumulation is somehow limited by the high labor turnover.
The entrepreneurs interviewed admitted that temporary workers are often less trained and less
productive. Moreover, the garment industry is still rather young in the region, compared with
Medellin, and without the long tradition of industrial culture. Also the local institutions such as SENA
tend to be weaker than elsewhere in the country.
The export performance importantly contributes to explain the development of the cluster. The quasi-
monopoly power on the national market enjoyed by the firms in the area of Medelln, prompted the
SMEs from Bucaramanga to search for new markets. These new outlets could only be found outside
the country, mainly in the US and in Latin-America. Eighteen of the 25 enterprises surveyed export
more than 60 per cent of their production. Furthermore, this high export propensity has implications
for the labor market, as it contributes to define a particular seasonality. As the largest orders of the
19
The refinement phase includes pre-washing and ironing. In most cases, and due to the special machinery required, the pre-
washing phase is carried out outside the plant. A large number of firms realize the ironing phase manually and internally.
Page 18
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foreign clients come in the second semester, the labor market is forced to adjust accordingly. In
fact enterprises produce to order and do not keep substantial inventories.
Nevertheless, this does not imply dependence on one or only few clients. On the contrary, on average
the enterprises surveyed have 120 clients, and the largest client represents less than 15 per cent.
Interestingly, the same client has often contacts with more than one cluster enterprises. A group of
enterprises work for the same client in the same category of products but offering different quality and
designs. Also in Bucaramanga some large enterprises, and even transnational companies work under
maquila arrangements. Considering that the profits accruing to local firms from maquila operations
are minimal, Bucaramanga entrepreneurs ironically referred to maquila as the last stage before
closing the enterprise if things go wrong.
The sectors dependence on the importers of the fabric, that is the main raw material, is remarkably
high. As a consequence of the countrys textile sector crisis, more than 80 per cent of the fabrics are
imported, mainly from the US, and must be purchased through intermediate dealers, that discriminate
the price according to the peak periods of demand. Being an SME implies that each firm buys a small
volume of fabric, compared with larger enterprises, and therefore cannot afford to buy directly from
foreign producers in export markets.
The enterprises in the cluster mainly source their technology from machinery providers and benefit
from participating to trade fairs, and to a minor extent from consulting and advice from institutions
like SENA and Acopi. The machinery providers are generally subsidiaries of large foreign companies,
and they are also located in the city. The enterprises interviewed also often acknowledged the
innovations introduced by the small local workshops specialized in clothing machinery production,
where the machines are modified partially or completely according to the enterprises needs. These
changes are of an incremental kind because the existing machines are adapted to increase the varieties
produced, by processing new fabrics, utilizing new accessories, modifying the sewing pattern, or
introducing new designs. However, in most cases they are essentially imitations and adjustments of
machines that small or medium-sized producers could hardly purchase new.
It is necessary to stress the peculiar pattern of innovation in the sector. From the point of view of the
product, garments require constant innovation in the differentiation and modification of the product
design. Radical innovations are usually minimal, and innovation often derives from employing new
textiles, or from a new combination of accessories, or any special embroidery or original pattern.
From the point of view of the production process, the purchase of machinery appears to be the main
source of innovation. In our sample, for 85 per cent of the cluster firms surveyed, the innovations are
basically related to new designs, the introduction of quality and labor productivity control methods,
and of time and process control methods. The considerable increase in subcontracting practices
represents a prominent organizational innovation.
This decision depends on the size of the orders, as it is of the first ones to be externalised with very large volumes.
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3.4.1 Relation between Agents and the Institutional Context
Bucaramanga is a much smaller city than Medelln, and with a more definite productive
specialization. This allows more frequent interactions between agents belonging to this business
community. Almost all of the 25 enterprises visited attached a remarkable importance not only to the
relationships with their clients, mainly foreign, and with the machinery providers, but also with their
competitors at all levels (local, national, international). While they recognize the existence of a fierce
competition between them, yet some attempts to set up business association have been rather
successful. The collaboration is clearly spurred by mutual interest. A good example is provided by
COTEXCON, a cooperative of textile and clothing producers. It was started in 1995, as an answer to
the problem of poor access to innovative and good quality raw materials, compounded by the fact of
being small. The common objective was the stabilization of raw material orders and the reduction of
the power of the intermediaries. This was achieved by grouping all the fabric orders of the SMEs, and
directly buy from the textile producers overseas. This resulted in the price stabilization of the main
production input, and raised SMEs competitiveness.
The institutional context reflects the young age of the industry, and there are fewer and less effective
sectoral institutions than in Medelln. The presence of the local branches of some national institutions
is also a new phenomenon, like for SENA, the Chamber of Commerce and Acopi. Proexport and
Bancoldex provide some export support. All these institutions facilitate a constant flow of information
to the industry, but the individual problems faced by each enterprise, and a marked individualism so
far hindered the creation of an association of clothing manufacturers. Some degree of cooperation
exists among complementary enterprises of the sector, such as the ones that make accessories. The
extent of collaboration is lower among enterprises producing the same product category and working
for the same client, that imposes them to keep a dynamic attitude in search of new markets. However,
the cohesion between enterprises increase to face common problems such to gain access to innovative
raw materials or to strengthen their competitiveness vis vis external competitors.
Summarizing, in Bucaramanga, differently from Medelln, a strong inter-firm associative attitude has
not developed, but a competitive one with a ingredient of regionalism that occasionally spurs
cooperation. The existing entrepreneurial spirit tends to be limited by a shy and individualistic attitude
of the founders, but at the same time it has ensured dynamism to the industrial activity. The essential
difference from the case of Medelln is that from the very beginning the local clothing enterprises
were forced to target the international market. This induced them to continuously upgrade their
competitiveness and quality, rather than simply relying on cheaper prices. Marked specialization in
one product and strong investments in the commercialization phases have earned them
competitiveness in the international market. Trade fairs organized jointly with Proexport, the
Chamber of Commerce and Acopi, are helping to reach as remote markets as Saudi Arabia and Hong
Kong.
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4. Summary of the Results and Conclusions

The issue of the transferability of the ID model has been often discussed in the literature, in view of
its frequent economic success, and its interdependence with local cultures, social identity at the
community level, local traditions of economic behavior and the relations between commerce,
production and the accumulation of capital. This paper attempts to assess to what extent are these
elements present in the textile and clothing clusters of Medelln and Bucaramanga in Colombia. It was
not the aim of this paper to analyze the possible policies to foster the development of industrial
districts and thereby increase collective efficiency. This will be the objective of future research. The
main results of this study are summarized below (see Table 6).
1. A production based on a strong division of labor, like in the Italian case, necessarily requires a
well-developed network of suppliers. In the Colombian case, this began only very recently, and
the low degree of firm-level specialization and the poorly-developed enterprise networks
characterize both Colombian clusters. This may clearly hinder the extent of external economies
and collective efficiency.
2. The strategy prevailing in most enterprises has been the internalization of many stages of the
productive process, possibly due to idiosyncrasies, instability, and low suppliers quality.
According to the present survey, an idiosyncratic cultural attitude to keep control of the whole
productive process appears to prevail, and it is believed to strengthen enterprise performance. The
idea of establishing dependence ties with other enterprises is not perceived by firms as attractive
insofar as it reduces this control and authority. Additionally, the market instability and the lack of
large suppliers network to raise quality through competition, limits the incentive to externalize
some phases of the productive process. However, the sustained increase in the fiscal and labor
costs, and the difficulty to commercialize their own goods in an increasingly competitive market,
urges enterprises to pursue a determined externalization strategy in the near future
3. The cases analyzed represent examples of urban clusters. This implies advantages and
disadvantages for the local enterprises. On the one hand, the urban economy generates important
advantages, mainly in the form of a larger supply of real services, and of more spillovers and
externalities. However, the case of Medelln shows that a huge urban and multisectorial reality
may limit the creation of inter-firm and inter-institution linkages that would strengthen the
network and its efficient operation, and the timely process of repeated interaction and
collaboration that may generate mutual trust.
4. Some common elements are present in both Colombian cities:

There is an important presence of retailers undertaking the commercial phases in which most
SME are weak.
The enterprise culture is progressive and dynamic, with emerging examples of start-ups.
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There is a satisfactorily developed and specialized local labor market, but

sometimes without the sufficiently advanced technical capacities. The local institutions have
played a very important role in this respect, especially in Medelln. Their role has been much
less effective in enhancing and facilitating technology innovation and acquisition by SMEs.
5. The two clusters differ in two important respects: the economic policy rgime under which they
have developed, and the industrial structure.
6. The Medelln cluster may be classified as a hybrid o mixed cluster (Schimtz,1993), product of
the combination of agents present in the local industrial structure. The presence of large
enterprises - with a fordist style and protected by the government for many years before the
opening of the economy (1991) - combined with the presence of powerful distributors, and with
the existence of a network of SMEs to guarantee flexible specialization, produces a very complex
productive structure that can hardly resemble a Marshallian ID.
7. Moreover, in Medelln both the textile industry and the clothing industry are large and highly
developed, whereas Bucaramanga is mainly a clothing cluster. The inter-industry relations,
especially in Medelln, could offer a competitive tool by giving exclusivity, originality and
creativity to the clothing process. Anyhow, insofar as the Colombian textile sector does not
recover and modernize its technology and industrial organization, its backwardness and lack of
international competitiveness can seriously spread to the garments sector. The entry of large
textile enterprises into the latter industry appears to contradict the specialization trend prevailing
worldwide, following a short-term strategy that does not promise to be successful in the more
distant future.
8. Some elements of the Bucaramanga experience suggest that it may be developing along the lines
of the ID model, and closer to the Marshallian definition. A possible limitation may arise from the
entrepreneurs individualistic culture and their hurry to grow. The cultural model of fordist
mass-production has often represented an ideal for these enterprises. As soon as the enterprises
enjoy a good performance, their strategy is inevitably to increase employment and production,
and to internalize most productive phases to keep control of the whole production process.
However, the size of the city, and the general enterprise culture, make it possible to transfer a
clearer perception of the possible advantages of the division of labor, of the collaboration, and the
scale economies attainable by the cluster as a whole.
9. The two cluster have developed under very different economic policy rgimes, and this may bear
its consequences on the clusters performance and structure. The textile and clothing industry in
Medelln took off several decades ago, and much earlier than in Bucaramanga. During these
years, the economy was heavily protected from foreign competition, large firms were often
subsidized by the State, and the local industry acquired a quasi-monopoly power on the national
market. This ensured success and profits for a long time, and made possible the creation,
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evolution and development of local public as well as private institutions. However,

enterprises found themselves not equipped to face the market liberalization that occurred since
1991, and operate in a new environment of open markets and globalization. The trend towards
strengthening vertical integration may also have been induced by the entrenched habit to compete
in a protected market. In contrast, Bucaramangas garment industry developed much later, and
was forced from its infancy to search for new markets, essentially for exports, given the
established monopoly in the national market. Later this process was undoubtedly helped by
foreign buyers and retailers helping enterprises to upgrade their products and technologies.
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Tendler J. and Amorim M. 1996, "Small firms an their helpers lessons on demand" World Development, Vol.
25, No. 3, March.
UNCTAD and Deutsches Zentrum fr Entwicklungstechnologien. 1994. Technological Dynamism in Industrial
Districts: An Alternative Approach to Industrialization in Developing Countries?
(UNCTAD/ITD/TEC/11). New York and Geneva: United Nations.
Vacc S. 1995, "Impresa locale distrettuale e transnazionale", Economia e politica Industriale. No. 86, Vol.23
No.1.
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Olarte Pietrobelli Industrial Districts in Colombias Textile and Garments Industry
Table 6 Summary of the Clusters Chracteristics: Medelln and Bucaramanga,Colombia

CHARACTERISTICS of Proxy and source of MEDELLIN BUCARAMANGA
MARSHALLIAN ID Information
Predominance of SME in the Local No. of establishments Differently from the textile sector where it is evident the real oligopoly The predominance of SMEs is clear. The market share for each
Industrial Structure According to Italian law power of the three biggest enterprises, in the garments sector a enterprise is relatively low. They employ 37 people on average according
mixed structure prevails. Huge enterprises (more than 500 to the manufacturing survey. The surveyed enterprises employ an
employees) floated on the Stock Exchange and with large exports. average of 35 people. The Camara de Comercio of Bucaramanga
They coexist with SMEs, with less than 70 employees (50 employees confirms the fact that more than 50% of the enterprise placed in the city
for the surveyed enterprises). This is consistent with the definition has less than 200 employees.
employed by the Italian law (less than 200 employees).
Nature of the Firms Survey and secondary Independent from the point of view of ownership. Anyhow, the main Independent
(ownership relations) sources economic groups own the biggest enterprises of the textile sector and
also some important firms in the clothing sector.
Decision making From the enterprise point of Internal to the enterprise. Anyhow, there is evidence of a high Internal to the enterprise. There is evidence of a strong sensitivity to the
view dependence on the two largest department stores in the country, that macroeconomic environment, specially in the exchange rate policy. High
distribute the clothing products of the region. Additionally there is a seasonality. In the months of lower demand there is a strong tendency to
strong growth of maquila processing in enterprises created only with maquila processing.
this objective
Vertical disintegration Division of labor in High Low
independent units. Several enterprises are exclusively dedicated to tertiary services. A The majority of the enterprises show a highly integrated productive
Chaining of the productive strong tendency of the smaller firms to turn to subcontracting of the system. The increase in subcontracting is clear only in cases of big
phases sewing phase, especially in clothing because in textiles the orders or specific jobs.
productive process is highly integrated.
Number of registered There are 5000 registered enterprises in the fashion sector. Almost More than 200 enterprises are registered in the clothing sector only. The
Specialized production in the area enterprises in the sector 48% are part of the clothing sector. Many of them are spread around enterprises are spread around Bucaramangas urban area, essentially
Number of firms Medelln metropolitan area, Itagui and Bello. Floridablanca, Piedecuesta and Giron.
Production Production value, according to The fashion sector represents almost 25% of total manufacturing. The clothing sector represents almost 6% of manufacturing in the region.
Employment the law indicators The textile sector accounts for 17% while clothing 8%. The textile activity is minimal, with less than 2%.
Employment in the The textile and clothing sector employ almost one third of total The clothing industry is the third most important employment generator,
sector/Total Local Employment Medellin population. The textile sector contributes with the 19% of the after the oil and food. Almost 19% of the population is employed in the
population occupied while the clothing with 16%. clothing sector, while in textile is minimal.
Export Performance Export Propensity In the clothing sector the SMEs export propensity is low. According Especially in the clothing sector, SMEs have a high export propensity.
to the survey export propensity is around 25% of production mainly More than 60% of production is exported, as the domestic market is
because of high internal demand and ignorance of international dominated by Medelln. This forced local entrepreneurs to search for
markets, as they manage the commercialization phase through big foreign markets. Mainly USA, Latin America, and to a smaller extent the
distribution network of large dept. stores. Exports mainly to Latin EU.
America and US in the past.
Trade within the district Survey Relatively High Medium
Characterized by the close relationship between the textile and It generally occurs with producers of accessories and final
clothing sectors (user-producer linkages). In many cases, such complementary products to the garments.
intrasectorial information exchanges are determinant for innovative
Page 25
Olarte Pietrobelli Industrial Districts in Colombias Textile and Garments Industry
products
Scale economies of the district as a Consequence of the Medium Low
whole specialization at the firm level Product of the fairly high disintegration of the process that allows Product of a highly integrated production process, that hinders the
and of the division of labor in firms to increase efficiency and productivity. individual agents productivity
the cluster.
Possible economies of scope Consequence of the Medium High
differentiation A high level of imitation and mass production, stimulated by the large This city presents a marked specialization in a specific product girls
retail stores and distributors. Nevertheless, the size of the market dress-. Thus, product differentiation is crucial for enterprise survival. In
defined by the number of competing enterprises, particularly in the addition, competition in the international market makes conditions even
clothing sector, spurs the differentiation as a competition tool harder.
Intradistrict flexibility and Medium High
Labor Market mobility More rigid labor contracts through longer terms. Labor turnover Characterized by very short term contracts (6 months or less). Labor
inferior to 10% turnover exceeding 30% from one semester to another
Ability and technical capacity High Medium-Low
in the sector Due to the long tradition of the sector and of past experience in large Characterized by a slow evolutionary adaptive process of accumulation
firms or family activities. In some cases in the university. of experience in the SMEs (learning by doing). Little past experience in
the sector.
Human skills availability High rate of skilled unemployment, mainly due to the large Due to the contracts high seasonality, there is a low rate of skilled
enterprises crisis in the cluster unemployment in the second semester of the year within the cluster.
This may limit and fragment the continuity of the learning process.
Links outside the district Survey Essential in the tasks of distribution and commercialization. Relation Moderately important in production, in the cases where the firms demand
with two large national distribution chains, that generate a decisive special operations to be realized outside. Weak in the distribution which
dependence for the firms performance. Weak in production, but with is generally carried out by international retailers.
a growing tendency to maquila processing.
Role of the local institutions Survey Important for the information flow and for innovative activities. Less important. Mainly in the organization of fairs and information flow.
Remarkable capabilities and experience in the traditional sector, that Only SENA is highly regarded for labor training and real service
has a long tradition in the area. A great variety of local institutions provision to SMEs.
supporting enterprises, such as INEXMODA, ACTUAR and training
center.
Business Associations Survey Very important. Ascoltex in textiles. ACOPI Medelln importantly No sectoral business association exists; ACOPI is valued for its training
affects the sector development through its influence on the decision activities in management and administration and in information diffusion.
making on policies potentially important for the sector.
Local Government Survey Active participation in the sector dynamism and in the representation Weak, through the Camara de Comercio of Bucaramanga and
at the national level through the Chambers of Commerce and PROEXPORT. Due to the infancy stage of industry, there are still no
organizations of mixed nature like SENA. In past crises in the sector, consolidated institutions that may design and implement policies, provide
direct interventions of the government mainly to support larger support services, and call for subsidies to the sector.
enterprises.
Experiences of collaboration Survey
between enterprises and institutions
Page 26
Industry
Page 27

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Enterprise Clusters and Industrial Districts in Colombias

Tatiana Olarte Barrera and Carlo Pietrobelli

Submitted to LACEA Rio 2000, 12-15 October

2. Networks, Cluster, and Industrial Districts. Theoretical

From an economic perspective, Pyke and Sengenberger (1992) define an ID as a productive

2.1 Peculiarities of the Italian Case

A high social mobility, with workers becoming contractors, relying on experience

3. The Colombian Case

3.2 Background of the Fashion Sector in Colombia

3.3 The Case of Medelln

3.3.1 Relations between Agents and the Institutional Context

3.4 The Case of Bucaramanga

3.4.1 Relation between Agents and the Institutional Context

4. Summary of the Results and Conclusions

4. Some common elements are present in both Colombian cities:

There is a satisfactorily developed and specialized local labor market, but

evolution and development of local public as well as private institutions. However,

Table 6 Summary of the Clusters Chracteristics: Medelln and Bucaramanga,Colombia

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