This tendency to bunch in well defined areas has been observed in different environments in both developed and developing countries, and in different historical periods. There are sound economic reasons for this phenomenon. SME clustering is common in a wide range of countries and sectors.
Similar accounts exist from other developed countries such as Germany, the USA, and Japan.
The programme draws lessons from the experience of successful clusters and it implements them through technical cooperation projects in various developing countries. Some of the countries where this approach has been introduced are India, Indonesia, Malaysia, Mexico, Nicaragua, Honduras, Jamaica, Bolivia, Madagascar, Morocco Tunisia. Small size constitutes a significant hindrance to the internalisation of functions such as training, market intelligence, logistics and technology innovation - all of which are at the very core of firm dynamism. Small scale can prevent the achievement of specialised and effective internal division of labour that fosters cumulative improvements in productive capabilities and innovation. Because of the continuous and fierce struggle to preserve their narrow profit margins, small-scale entrepreneurs in developing countries are often locked in their routines and unable to introduce innovative improvements to their products and processes and look beyond the boundaries of their firms to capture new market opportunities.