The cluster approach and SME competitiveness: a review

PurposeThe purpose of this paper is to review the effect of a cluster approach on SMEs' competitiveness. The primary objective is to examine the use of a cluster approach among SMEs as a tool for meeting their challenges related to globalisation and trade liberalisation, as well as investigating its contributing factor in the process of increasing their competitiveness.Design/methodology/approachThe methodology used for this paper is a literature review of published materials. The literature analysis was performed based on research objectivity, coverage and authority.FindingsThere is strong evidence to suggest that a cluster policy brings additional positive effect to existing SME policy in industrialised economies, but such effects have not been extensively researched in developing (transition) countries, particularly from the point of view of the SMEs, which are the main actors in the cluster development process, in relation to whether their performance has been improved as a result of cluster effects.Originality/valueThe findings from this research will assist business managers in making more informed decisions regarding the adoption of a cluster approach and entering into cluster‐based relations, as well as assisting policy makers in designing more efficient cluster policies. The academic value will be added in the context of expanding knowledge in relation to the impact of clusters on economic development in transition countries and as such contribute in filling gaps within the existing body of knowledge.