South West-Flanders is a region in Belgium with an almost unique concentration of firms - mainly SMEs - in what could be called the Ahousing and home furnishing@-business cluster. The extreme geographical concentration of these small and medium sized firms does not translate itself into a sustainable competitive advantage as has been illustrated for other industries in different countries. A critical analysis shows that the lack of commercial success is a direct consequence of the non-existence of networking strategies among these SMEs: Strategies are strictly defined within the firms= boundaries, fierce competition erodes profit margins and new ways of competing remain unexplored. The paper demonstrates that the establishment of innovative networking strategies such as a customer oriented SME network could regenerate the regional economy and transform the existing geographical concentration of firms into a growing and profitable SME network. The network concept is not production or technological oriented, as has been illustrated in for other regions by many scolars. The critical role of an explicit regional development policy and the local institutions in the initial phase is also analysed. The usefulness of the combining concepts such as networking strategies among SMEs, business clusters and regional development is illustrated by means of examples from other industries and countries.regional and urban economics ;

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Research Papers in Economics

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