The focus of this research deals with the influences of prevailing local institutions on cluster performance. By undertaking this research, I would like to argue that the distinct local institutional framework is likely to determine the cluster performance at most, given the assumptions that the access to production factors, markets, and government supports are relatively the same. Certainly, the measure of performance is closely associated with tangible indicators such as total output (Hill, 2001), employment creation (Hill, 2001; McDonald, Huang, Tsagdis, & Tüselmann, 2007), productivity level (Meyer-Stamer, 1998), income generation (Spencer et al., 2010), and environmental impacts (Puppim de Oliveira, 2008a) resulting from clustering activities. The alternative measurement involving intangible indicators such as innovative systems (Simmie, 2006; McCormick & Oyelaran-Oyeyinka, 2007), knowledge creation and spillovers (Steiner, 2006; Cooke, De Laurentis, Tötdling, & Trippl, 2007), social equity (Hill, 2001; Meyer-Stamer, 1998), working condition (Puppim de Oliveira, 2008b), and quality of life have yet to be studied. However, those measurements merely focus on “the end product” instead of “the process” underlying transactional processes and interactions between participating actors in the cluster. Many observers have missed the importance of such an institutional arrangement in order to catalyse clustering activities. In addition, the existing cluster theories either fed by Marshallian or Porterian clustering conceptions have been addressing the locality element critical to theoretical building and practical implementation. In this sense, what and how the local institutional framework was being made to stimulate the emergence and further developments of local clusters are influential to its success (and failure). Arguably, the local institutional framework promotes particular mechanism of incentives and disincentives necessary to guide the participating actors within the cluster to interact each other. Thus, the rigidity vis- à-vis flexibility in nature of the predetermined institutional framework will contribute to the (re-)shaping of common attitude and adaptive behaviour of the cluster’s participating actors to achieve clustering objectives.
Having such conceptual understanding, I attempt to investigate the workings of a local institutional framework in support of the clustering phenomena with the case of local batik clusters. Expectedly, the framework will direct the nurturing of competition and cooperation patterns adequate to increase accumulated outputs of individual firms collectively. In this research I have approached the framework by examining the actualisation of both formal and informal institutions carried out by five interest groups, i.e. batik cluster organisations (e.g. hired private business consultant, cluster management unit, and community based organisation), batik business groups (e.g. individual batik firms, suppliers, traders, and buyers), government agencies, external agencies (e.g. universities, NGOs, and donors), and the adjacent neighbourhood societies attached to batik clusters. Through different (and sometimes overlapping) roles and networks possessed by each interest group, these groups are withstanding preferred combination of formal and informal institutions that mostly meet 26 their own interest. Such circumstances encourage the present batik cluster organisations to accommodate conflicting interests and influences to batik cluster performance. Explicitly, these tensions reflect contending forces of government-driven top-down policies/programs and local batik community-driven bottom-up initiatives in the pursuit for batik clustering objectives. The varying forms of interactions and institutional networks were the focused feature of this research. To illustrate such a complexity of distinct roles and networks carried out by local batik cluster’s participating actors, I have presented them all in a conceptual framework diagram in the following Figure 2.5.