In the global economic context of today the nation-state is losing much of its ability to promote the economic well-being of its citizens. Simultaneously, regions are gaining importance as the economic space in and for which coordinated efforts to promote wealth-creating economic activities can be meaningfully undertaken. In attempting to position themselves favourably within global markets, regions are induced to mobilize all their assets, including their institutional support structures. This requires concentration on a few areas and strengthens, thus, the trend towards specialization. The formation of sector-specific industrial clusters enhance the competitiveness of regions. Regionally concentrated industrial clusters facilitate the creation and diffusion of economically exploitable knowledge, the key to competitive success. It has turned out that networking is the most efficient way to realize this potential.
Successful networking requires (a) an initial predisposition to exchange information, (b) trust in the reliability of the other participants, (c) a recognition that practice is transferable, (d) the willingness to keep key reciprocal relationships preferential, (e) inclusion and active participation in the flow-processes of the network. Recent changes in the overall economic context have questioned the future viability of hitherto successful SME-based regional economies, such as Baden-Württemberg and Emilia-Romagna. The established business support infrastructure has got out of tune with the new needs. This has led to a move by some enterprises to "re-invent" themselves, i.e. to radically transform their organizational set-up. They have shifted emphasis from static structure to processes which are linked up flexibly with processes outside of the firm (the "Fractal Factory" concept). The "Fractal Factory" is best prepared to survive under turbulent conditions. But its success hinges on constant non-routine interaction with its environment. Only the flow of innovative knowledge which is facilitated by regional networks enables the small "Fractal Factory" to take full advantage of its organizational flexibility and really meet the challenge of thriving on chaos.
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