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8/8/2019 Developing Alternatives Fall 2008 Web
1/56
Network-ceNtric DevelopmeNt
lagng en and
Sa lnags f Gh
DevelopiNG AlterNAtiveSu 12 ssu 1 fa 2008
8/8/2019 Developing Alternatives Fall 2008 Web
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A N o n Dn
by Ulrich F.W. Ernst
A N v f en Dnby Cesar A. Hidalgo and Ricardo Hausmann
vau Ns: mbzng kndg f pgss
by Bryanna Millis
lnng U: A pans ps n h en lnags
ha Sha Dn
by Gary Kilmer
png cn n a N indusy: th Fnana S
by Stijn Claessens
Sa, h Fna Fn? H Gsa Nng can H
tag Dn innns
by Robert Bouvier, Ioana Bouvier, Erin Goodnough, and Andrew Ross
Sa Ns and Da tansns
by Joseph Siegle
N cns n Fghng h Sad f infus Dsas
by Ulrich F.W. Ernst
coNteNtS
DAi washngn, 7600 wsnsn Anu, Su 200, Bhsda, mD 20814 USA
t: +1 301 771 7600 .da.
DAi eu, Su 440, Suhban Hus, Ba pn rad, lndn Se1 7SJ, Und kngdt: +44 (0) 207 420 8600 .da-u.
1
5
11
19
25
33
39
46
Guest Editor: Ulrich F.W. Ernst
Series Editor: Steven OConnor
Copy Editor: Peg Hausman
Designer: Joanne Kent
Cover photo by Dan Rathbun, DAI
Since 1970, DAI has explored
alternative paths to develop-
ment. DAI generates ideas
through research, shares
these ideas with the
development community
through publications, and
tests the ideas in the crucible
o development projects.
Developing Alternatives
provides a orum or DAIs
proessional sta and
collaborators to expose their
ideas to a wider audience.
Articles treat issues otopical interest and aim at
promoting broad discussion.
The opinions and interpre-
tations presented are those
o the individual authors and
do not necessarily refect the
views o any government or
donor agency. Reproduction
o the contents is permitted
with an acknowledgment
o the source. We solicit
and encourage comments
rom DAI sta as well as
rom DAIs clients and
collaborators.
8/8/2019 Developing Alternatives Fall 2008 Web
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1
D
evelop
ingA
lt
er
nA
tives
A n e t W o r K o p t i C o n D e v e l o p M e n tby Ulrich F.W. Ernst
The ubiquity o networks
i xaa ay ha a huma ca
ad cmc ac ac
wk wh h ddua, u,
ad ack a b mh. e
rb Cu had, add h Ma
Fday, h aua uc wk h
ad. i ac, mcu c, -
a aquac d cha, c h
ba, aa ym, cc ca,aca am ac, ad cu h
Wd Wd Wb cu wk. A h
ucu ca b dcbd m c
(d) ad d (ka). Bu h cc
wk my a ay--u mah,
d ay h udad ad ac-
wh wk, acuay maa hm?
t u, h aw ca: c ya ( ay
ju h a dcad ), wk ccha mad mdu . U wk
cc, w ca mak b h -
c ha ha cmc, ca, ad ca
dm, ad a ha kwd
hacd mac. nwk-cc hk a
amac aach ha byd uy
cc aca.
Why ha h b uch a ad dm
wk ach? Bam h . B h
ad h , ac huma acd ca. F xam, wh iwa sa
C Byc rya ad na g dd h
ah-bak udy h ad hybd
c am h wk iwa am h
ay 1940, hy d wha am mm-
bd abu wh hy had h a
ad hw much ck hy u h ma.
th , ca, a cuuy acc-
b am wh yu ca dcy ma-
u hw may d (ka) a acua
ha, ad hw hy a ud. Yu ca udy
h ac a m, ad h.
From random to scale-ree networks
th u cc udad
wk back a cu. p
18h-cuy Kb (w Kaad, rua)
uh a u a u: wa b
a h bd k h wad h cy wh h h h p
r whu c hm wc? th
c mahmaca lhad eu mad
h bm by ad mah
w ad ad h w ha c ad
h bd a d. H ud h cy ad
bd a ah. Wh ha, h hwd ha
ay wud ha a a a wc
h bd. th c Kb
a bu ah bd ad, , ach bdhad b cd y c h ccu.
th udm ah hy duy abhd,
h much had. Bu h 1950 ad
1960, uch a pau ed ad Ad
ry, ad Aa ra, d ah ad
xamd h bha ka am h
d abhd arandom: h md, ach
d ha uhy h am baby b c-
cd ay h d. radm wk ha
ha a hu xam
a- wk, bu a wk d dm-
a adm ka. gahc xmy,
had a ad c, w a-
h ac h baby abh a
cc.
A maj bakhuh wk cc
ccud h a 1990 wh Duca Wa
ad s sa (1998) kchd h ma-
8/8/2019 Developing Alternatives Fall 2008 Web
4/56
wd md. thy hwd ha ka
bw hb dcucud
b ud a w-ccd wk a-
a dac by a w adm k-
a cc m h cu. thk
cmc cu a Mcha p kd
mak a ba au cha, xam.
Wh h ma-wd md, wk cc
k a a acca ac. A udd a, dyamc wk, k h ,
bcam ca ha h wa h adm
abu h ka. vc wh hay ac
d m ua, ad aacd m
dh ch ch, Ab-l
Baab ha. (Yu w c ha may
h am acad wh wk cc
ha a Huaa fa; uc ha h
ah ca h ch chad
h h d aac adua ud mHuay, ad . e , h dac
Huaa am ma a u.)
nwk c ud ha wk a
chaacd by a w c wh k-
ah hubad a hu majy wh y
a w ka. th wk bcam kw
a ca- wk. th . s
h a aa wk m acua
(chdud) fh. Udad h wk
ad h hub (by um ad cay)
ca ud ac , whh
bud m adcacy wk a
ducy ba au cha, whch
bcm au wk.
Wh h ad h wk dd
a abay h aay wk
bha, adac cmu chy a
bd h dm cmuaa c-
mc. A-bad md, wh a
dw ca bhaa u ha
h ac wh h ddua ad
u, duc aca
cmc wk. i ac, mua ha b
a maay h aay x wka w, much h cha mahmaca,
uch a rck Du (2007).
But dont take our word or it
th wk cc w byd a
m aadm h xa a-
u u wd. i h c bk TheGlobal
Brain (2007), sah namba ad Mhab
sawhy x h adma a
a ad ma a wkd wd, uh wk-cc a. thy c a
acca aca h w aach
ha ak adaa dbud ma
fw ad dc mak:
l nwk-cc cmu: a d
a d cmu, u daa cmu-
(cud dk) cmu-
bm by bak hm dw
ma bm ad h a
ccd cmu.l o-uc wa dm: am-
m a a ha dd ad d
lux (a a ym) ad ha c-
ad d hcad aca.l nwk-cc waa: h ay w
dc, dd by h U.s. Dam
D, bad h ha bu
wk ahcay dd may
o h xaa h Mdc wa h amymaa acum. Cd h ah F maa, acua h h ah bw au am (h ha hMdc)h Mdc amy m ha ha uch u.
Adad m Jack (2008)
Figure 1. Florentine Marriage networks andthe rise oF the Medici
pucc
Accau
saa
pa
rd
Babad
Bch
tabu
lambguada
Ab
g
s
pu
Caa
Mdc
8/8/2019 Developing Alternatives Fall 2008 Web
5/56
3
D
evelop
ingA
lt
er
nA
tives
c w aa a ma adaa
waa adaaa h m a a-
m-cc aach.l nwk-cc a: ay ad
h d c ad uy cha ma-
am bu, h m ha a b
acad wh h cc au au wk. i ha w acqud bad
ma, mm ud chaaby
wh wk-cc waa.l nwk-cc : a cc ad
bu cym ad ua a-
a, abh h -
ucu ha cc d a
a cmay bu cym ad u-
h d au ca c
(namba ad sawhy 22). Cc, xam, ha d mauacu a-
wha ca h nwkd vua
oaa.l nwk-cc adcacy: wk-ccy
ca adcacy u a cuca
h m dc am ad a
maam md a aach wh
h ddua aca a a a cd-
ad wk. tycay mwd by Wb
2.0, mmb h wk ady ha
ma m c dy cama u. th wk ab-
y ca u uc ad qucky h
cu ca a fxby uu
u, cduc mu cama
muauy (wh ay w uc),
ad dc ad u
a my ma. A whch, a namba
ad sawhy , b a m
udcaby ha w h aby cu-
uch ca cama cy (23).th mca maa cy m
adcacy u a wu.
This issue oDeveloping Alternatives
sm h m wk ha bd
h maccmc wk wh add
wh mccmc aach cm-
ada cc ad cmaa-
adaaha b d by a u
ach a h Uy n Dam ad
h Kdy sch a Haad Uy. th
ac h u, by Ca Hda ad
rcad Hauma, d a m h
ach ha k a h duc ac ha
, h aam ha d u ddua cu uad h x -
. rah ha my h cc a wh
add, Hda ad Hauma aach c-
a h a h-dma ad-
ca, wh uad u abud
bu wh duc a may xcd h a
aby m h cmy. th d-
uc ac a xc d quy,
acua c add a mca dm
h uad dcu.
Byaa M w u wh a ac ha k
ba au cha ad wk (d mak
aay) h bac cmc cu cc
ha a caacy h duc
d. lk cmc ad ma fw
a bad cx ky h ac
udad ah, cu
h au cha, ad a.
th x ac, by gay Km (a DAi cau
wh am xc a Ch pay aa jc) add a d ay m h
dm ac c. Fcu
h aac jc k
u ma duc ba au cha, h
h u bud ah.
A a muua dy uma duc-
may a b xd by h a d-
bu, ad h a may ha h ma
duc a w b uab m a-
dad quay ad quaya aac j-c ca bd h a ad bud a wk
ah.
th x ac, by sj Ca, da wh h
mca cm cy h aca
c c wh cd h wk
chaac may h c dd.
nwk duaday ccy
aadha b chaacd by hh a
8/8/2019 Developing Alternatives Fall 2008 Web
6/56
m, bu w maa c add
ah cum. Wh a aa c a
au uch wk du, h a-
y cmx. Wh h ac wa w, h
ba aca mdw wa y ca;
h ac mak ad a h
wd cma c aca uaad h mca dd ad d-
cm.
th x ac, by DAi x ahc
ma ym, hhh h a
Wb 2.0 cmb ahc ad ca -
ma ac ad j ac. i a
ua h x aca ahc
ad dm-a ma. th u-
ma ac, by Jh s, da h
ca wk m dmcac d-
m. Fay, a ac by Uch e xamh u wk cc udad h
ad cau da ad h mua-
a ca hm.
reFerences and Further reading
Baab, Ab-l. 2003. Linked: How Everything Is Connected to Everything Else and What It Means orBusiness, Science, and Everyday Lie. nw Yk, n.Y.: pum. (sd duc, w accby.)
Bhd, sa, ad H g schu (d.). 2003. Handbook o Graphs and Networks: From theGenome to the Internet. Whm, gmay: Wy-vCH. (A ad h chca d.)
Du, rck. 2006. Random Graph Dynamics. Cambd s saca ad pbabc Mahmac.Cambd, U.K.: Cambd Uy p. (n h mahmacay a ha.)
Fu, vc K., Wam K. Fu, ad Yam (Jy) Wd. 2007. Competing in a Flat World: Building Enterprisesor a Borderless World. U sadd r, n.J.: Wha sch pubh. (th xc ad h wk cha l & Fu, whch ha bcm h wd maj x u whuw a acy.)
Jack, Mahw o. 2008. Social and Economic Networks. pc, n.J.: pc Uy p.
(txbk wk aay.)
nauy, Aa (d.). 2003. Innovations in Financial and Economic Networks. Chham, U.K./nham,Ma.: edwad ea pubh. (Hay cmuaa cmc ad a-bad md.)
namba, sah, ad Mhab sawhy. 2007. The Global Brain: Your Roadmap or Innovating Faster andSmarter in a Networked World. U sadd r, n.J.: Wha sch pubh. (A ma wk-cc a.)
nwma, Mak, Ab-l Baab, ad Duca J. Wa (d.). 2006. The Structure and Dynamics oNetworks. pc, n.J.: pc Uy p. (r maj cbu wk cc,wh ma da .)
pahaad, C.K., ad M.s. Kha. 2008. The New Age o Innovation: Driving Co-Created Value Through GlobalNetworks. nw Yk, n.Y.: Mcgaw-H. (rfc h d uc bay ad wk wh dduacum ca w au.)
rya, Byc ad na C. g. 1943. th Du Hybd sd C tw iwa Cmmu. RuralSociology8:1524.
thu, tha (d.). 2005. Economics o Interfrm Networks. kmk d Ka n. 4. tb,
gmay: Mh sbck.
Wa, Duca, ad s sa. 1998. Cc Dyamc sma-Wd nwk. Nature 393,440442. (A ma a.)
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5
D
evelop
ingA
lt
er
nA
tives
A n e t W o r K v i e W o F e C o n o M i CD e v e l o p M e n t
by Cesar A. Hidalgo and Ricardo Hausmann
Cloth or wine?
D h y duc a cuy x ma
ubqu cmc mac? t ak
a xam m h 19h-cuy cm
Dad rcad, d ma Ba ca
ch ad pua w h ubqu
dm h cuy? th ma x
dm cmc hd ha d
ma, u ha duaa ca
xa ha ad accad wh(r-rda 1943; Hchma 1958;
Mauyama 1992). Y, ack ma md,
maam cmc hy ha mad
h da. iad, cu dma h
u w aach xa cu a
caa.
th aach cu h a -
whch cu duc ac-
(hyca caa, ab, ad, k humacaa, aucu, ad u) ad h
whch h ac a dd
duc d d ( Fam ad Fad
1991). Hc, cu ca d
ha a ay ab ad ad, wh
ch cu ca d ha u m
huma ad hyca caa ad dmad b
aucu ad u. Accd h
md, h d a whch ach ac (hyca
caa, ay, k) accumuad umay
dm h cha h y duch cuy ch x. Udy h
md h aum ha h away x
m cmba d huh whch h
ac ca b xd. thu, c -
a ac dwm, h acua duc a
cuy duc cay cquc uu
cmc mac.
th cd aach mha chca
dc (rm 1990) ad h d
b cmmd wh a hy wha may
bhd h dc ad hw hy may
m. th w dma hh
a md rm ad h quay add
Ah ad Hw (1992) ad gma ad
Hma (1991)aum a cuum d-
uc m chca ac. Accd
h hk, h away a hy m
adacd duc ha cu ca m a
hy uad h chy. th wd d-
uc abacd away ad d wh hk-
abu ucua ama ad wh.
Bu h au h duc d ay
uma dm h a ad d
dm? th abac m h ac
duc adad cmc hy
a ac a, bu a aua cquc
h ack aaab dcb hm. ia c a, Hauma, Hwa, ad rdk
(2007) cad h duc ac u
cmc dm by duc
a -dma aabh h-
ca h chaaca duc. thy
hw ha, c h cuy a
dm, h a h a hca-
x bak, h a ubqu
wh. Hw, a -dma caa
dc h duc ac may uyaccu h ch ucu ad a d-
uc ada cc cca cmc
dm. H w au a wk w
dcb duc ad ad uma
au ac uch dm (Hda
a. 2007).
8/8/2019 Developing Alternatives Fall 2008 Web
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A network view o economic development
taday, cmc dm ha b
maud huh a h aad aab,
may dmc duc (gDp), adjud
by w ucha ay. Y, a a cc,
dm ha away b acad wh
a ca dy ha ca b caud
by uch aa. A h huma bdy d,
c da u, muc, b,
ad h c y. smay, a a d,
d du ad duc a b.
A h hah a cmy y bad
wah k a h hah a chd
y bad wh. A m uacd w
dm hud cca ud-
ad hw a d d du
ad duc, ah ha y dc hwhy accumua caa. Bu hw d w dcb
uch a cmx c?
A gDp w dm ca b a a
am add. Wh h c uch a
mah, a a dm maud
by k a h h add ccu,
ad h duc ad c ha
awd h. Dm, hw,
may b a -dma a h cuu. A aa mah wud -
a a aa huh a ud ad-
ca ah ha cmb u a add, ach
ay ad c mua ad ca h
ach w duc ad c. W ca
h adca wh a wk.1
i ac, wk a hyca
adca a ubquu; a xam a
h ubway ma h hhway wk. Ad w
ca ua hw a wk w cmc
mh k huh a xam d by h
w h wd d Jad Damd
Guns, Germs, and Steel (1997). Damd u-
a mac a aca w ba
dm, m u a hu ad
ah huh h hy a ad
ama dmca ad byd. W dcu-
md ad ch wh ac ad acd, h
bk dcu h hy may u
cmc ducuch a wha, bay, k,
fax, ad cad hw hw u wd wa
had by a w ca ha had b h h ac a h h m. th ca-
dd am cm ab
hm duc a uu ha awd ddu-
a ca a, ay, d buauca.
Cquy, h b dmad h h-
b, hycay ad/ cuuay, ad amd
u wd m a myad dd amy
u a w a, dma ca.
Bu why dd m h adacd caa h h? t ak m
Damd aum, c cma cha
wh ud bu ay wh aud, dm-
cad a ad ama ca du m ay
hy a a w ha hy a h
uh. sc euaa a a xa ad
u a a-w ax, a a
cud a ay ac h c. Hw,
Aca ad h Amca a d a h-
uh ax, h a w aa wh ma
aud ha cud ady ha w a a ad ama. A a cquc, m
duc w aaab h euaa ha
h Amda ad Aca.
W ca u a wk w dm
dcb Damd xaa uch da-
y. Fu 1 ahcay h duc
adca acd by u ac. Ca
w by dc ducha , dm-
ca a ad ama. th duc uawd hm ca m cmx duc,
uch a am, , ad wa. Y a
ca ad quay d a h
duc ac. euaa ua had acc
a bad u bcau h
a ba whch hy cud xm ad
1 th aach a m w, a wa ud by h 18h-cy sw mahmaca lhad eu abac ad h amu Kb bd bm. i ac, h hwd ha h bm had u.
8/8/2019 Developing Alternatives Fall 2008 Web
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7
D
evelop
ingA
lt
er
nA
tives
h ha a. thy dd w-
du a, xam, uch a wha ad
bay, u ama ha w ay ay
dmca, uch a a, h, ad cw.
euaa uacad a a h
duc ac wh may d w c
ach hw ab xad qucky . o h h had, ca cad h
Amca w cad a much a a
h duc ac, wh duc du wa
md by ahca ca. th md
h cmc dca ay Amca
ca ad, cquy, h aby
jum uh duc h duc ac.
Cu abu h au h k cc
d duc ca b ahd by ka hw duc a dcd ad dc-
d by d ua. sm jum, k
h dmca a, ca qu m-
a chca mm ( h ca,
a)mm ha h d
h dm ( h ca, h dmca-
a ad um). e ac m,
k bw m duc du w
d by chy. i h ca, m
duc du may b
ccd ach h by
u/uu ah, uch
a fax ad ad .
Y a hd way whch duc
may b ccd may
qud aucu, ucha h ud wha
ad bay. A wk w
dm d qu
a uqu d a k:
ah, qu acc a a
aab aum h ac
ha h a k cc
m duc ad h;
k huh whch kwd,
u, ad wk ca fw;k ha may b ad by
da dy.
Exploring the network
i a c a, w hwd ha b
u x daa udy dm a a
du c a wk (Hda a.
2007). t d h, w cad a mau
dac bw a a duc bad h baby ha hy w xd by h
am cu. th m mhd awd u
cuc a wk wh w hwd ha
cu d dy by d d-
uc ha a c h duc ac h
hy aady x. i h wd, h wk
hw mca aca (ac cu)
d x ducma u h
m m au uad. i a
m m duc ah wh h
duc cu ha a m h a duc h cc u. i ha
ubca, w md u dcu by c-
ca ca whch h duc ac
xd ad cu ad , whch a ad
aum h m ca. W hwd ha
by ma cu ac y d
u dca bcau hy a
a y d dac m h duc.
g h ucu h duc ac day,
n: lk a ccay accua.
Figure 1. sketch oF the GUNS, GERMS, AND STEEL product space
Americas
Eurasia
Llama
Potatoes
Maize
Garments
Wool
Flax
Barley
Wheat
Leather
Linen
Cow Pig
Goat
Lamb
Apples
Pears
Grapes
Fur
Grapes
8/8/2019 Developing Alternatives Fall 2008 Web
10/56
m cu ca y ach h
dm jyd by ch cu hy a
ab jum dac ha a qu qu
h hca cd (Fu 2). i h wd,
h away ha m y a
.
Figure 2. network representation oF the 19982000 product space
Fishing
Oil
Vegetables
Garments
Iron/Steel
Machinery
Chemicals
AnimalAgriculture
Electronics
Mining
Vehicles
Forest Products
Vegetable Oils
Fruit
Petroleum
Node Color
Raw Materials
Forest Products
TropicalAgriculture
AnimalAgriculture
Cereals
LaborIntensive
CapitalIntensive
Machinery
Chemicals
Link Color(proximity)
Node Size(millions o dollars)
f >0.65
f >0.55
f >0.4
f
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9
D
evelop
ingA
lt
er
nA
tives
th a may way whch h aay ca
b xdd. i may b udy h
duc ac m a ab c. o
cud a duc bad h may
h ab k qud mak hm. th wud
aw cma xcha kd wk. A
w duc ca m ay b dd u ab k ma h ud mak
x duc. o cud a udy h a-
mby ab bw du a
wk y adju cha h dmad
h k.
th duc ac m, a w
duc ad w way mak d d-
uc a ducd. C h w m
x, b mad ch cu, b ambd cu. C h
c w ubquu. th aw
a xcha ma ha wa hh
umaab. D h dm mak
a had cu am hm-
?
W ca a udy h bu a cmy
bad h duc ac ad
aby m .2
th a ju m h u ha cud b
umad huh udy md by a wk
c. such aay w au
da a cuy bm ad cha a cy
ay. t d h y, w w d d-
y wk chqu ad cc dd
h bach cc ad ada hm
cmc. Adday, w w d d
w chqu ad cay cmc
qu ad ca a cmm aua bdw da ad m ada aach. A
a daa bcm m cmm, w
h ca wk ma, a hy a
uu way u w wa daa.
Our own skepticism
D a cmh dc h
wd cmy a a wk a ak
qu may md ad may ya, ad y
m w jud uu. Bu a
wk dc h cmy bud
ca kcm. Fm a hca c,
u ha cmc dm hud
b a a du c a
wk a udbak a ha
cmc cud b udd u caa uc-
ad da cacuu. W ha
u nwa w cmc, d by
l Waa ad Wam say J ad c-
ud by pau samu ad h, qu
u aum ha h cmy ca b b
dcbd by k umca qua aduca ah bw hm. M u
ha aum bcau w mad ;
w hd a c hm. ou aach
d cm aa ada
mahmaca mhd bu cmm hm,
by ca ha ca b ud udy
dm m a d c.
th a uaa ha h a
aach w b uu, ju a h w uaa h b u cacuu
ad hycay d qubum c
dcb cmc a h b h a
cuy. th h ba udd w
ha b ad by uh ach.
Acknowledgments
W wud k hak Ma Wjcchwk
h d h mauc.
2 Hauma, rdu, ad Wa (2008) hw ha h a cuy h duc ac y ac hd a whch c m cmc c.
8/8/2019 Developing Alternatives Fall 2008 Web
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0
Reerences
Ah, ph, ad p Hw. 1992. A
Md gwh thuh Ca Duc.
Econometrica 60 (2): 323351.
Damd, Jad. 1997. Guns, Germs, and Steel:
The Fates o Human Societies. W.W. n &Cmay.
Fam, H., ad M.J. Fad, d. ad a.
1991. Heckscher-Ohlin Trade Theory. Cambd,
Ma.: Mit p.
gma, g M., ad ehaa Hma.
1991. Quay ladd h thy gwh.
Review o Economic Studies 58 (1): 4361.
Hauma, rcad, Ja Hwa, ad Dardk. 2007. Wha Yu ex Ma.Journal
o Economic Growth 12 (1): 125.
Hauma, rcad, Facc r. rdu,
ad rd Wa. 2008. gwh Ca.
i Cam rha, Ad vac, ad Ca
vh, d. Money, Crises, and Transition: Essays
in Honor o Guillermo Calvo. Cambd, Ma.:
Mit p.
Hda, C.A., B. K, A.-l. Baab, ad r.
Hauma. 2007. th pduc sac ad i
Cquc ecmc gwh. Science
317 (Juy 27): 482487.
Hchma, Ab o. 1958. The Strategy o
Economic Development. nw Ha, C.: YaUy p.
Mauyama, K., 1992. Acuua pducy,
Cmaa Adaa, ad ecmc gwh.
Journal o Economic Theory58 (Dcmb):
317334.
rm, p.M. edu tchca
Cha. 1990.Journal o Political Economy98
(5, ii): 71102.
r-rda, pau. 1943. pbm iduaa ea ad suh ea
eu. Economic Journal 53 (Jusmb):
202211.
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evelop
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tives
v A l U e n e t W o r K s : M o B i l i z i n gK n o W l e D g e F o r p r o g r e s s
by Bryanna Millis
Toward network-centric development
lad cmc hk ha ad
c ha m cm ad c
kwd a h d c bhd cmc
wh. A-rb-Jacqu tu, a cm-
ay Adam smh, bu w w b
h ubca The Wealth o Nations, ad-
cad c h Fch m
a-hd h cmy (ad acd
hm a M). tu d u a h cmc . ru aa
h a wdm h md-18h cuy,
h bd ha au dbu aby quay,
ad h way h aw u ad k a cu-
day ha kwd (chy)
c a xhaub uc: gu
ad am makd k d a m. th
m yu ak u, h m ma yu w .
i k maam cmc a m mbac h cc, bu day dcu
hk ay hca am cmc
wh wh kwd accumua, kw-
d ha, ad a d not ccuy
c a. th am hd bu a-
y bk ha cu m h acca cha-
mak w. thca
wh md mha h (d-
u) ach ad dm a h d
wh. Much h c au da
wh quay add, wh du w by h x u h duc add;
a c cbu, gda ad Cama
(2008) my quay-add wh md
x h cy mca a cmy
wh du ha d h a -
a. Ad cu ach h duc ac
add a hd dm h aay, cu-
hw h xmy duc ca
ac h khd uad ( Hda
ad Hauma ac h u).
Wcm adac h hca
d u udad mac c
bu d udac
m h cm mac -
a aa. t d uch acca
udac, w d udad hw cm-
cay ma kwd ad, hw
had, ad hw ad. th ha b
may da wh h qu a-
cay, m dua cmx ad acuua
ubc aay cu dm ad
h cu mha udad ba
au cha. th ca u dm
way whch cmc ad chca cm-
muca fw am ad -
m ac mua bh bu ad
cy a. th xcha a h
md ma ahc aa, a cmccu, cad u-dw ah
a hachcay ucud ba au cha.
ecmc ad ma ka am
mwhh ma bu ba c-
cm a wk ha ca au by
m dm ad cmc
wh. such ka d a value network, a
cc ha md ay m h d
c ad uy cha maam, ad udy wk-cc a. th au
wk cc daw u udad
cu hy, a du, ad
hw ma fw a ac uc-
u ba au cha. s huh h
h au wk, cmc acy
ju a xcha d ad c, bu
a xcha cmcay auab ma-
m cum, cm, duc,
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2
ad u h c, a w a c
u aa, ach u, ad
m bd.
Cma a cay u wk ma-
am uu a ad bud dyamc
cc bw h , u-, cum, ad h a d
maxmum au a h ccd
(namba ad sawhy 2008, 21). p
h cu ad ba au cha aach,
mawh, a cay ca h
ha ad ca ka ha d h
aa md. Bud h dm,
h au wk a a:
a a bd bw h cu ad ba
au cha cc ad ca a ac-ca c hw a d ad
amd huh hub ad k, uma
hw a ah ac h ac
du, bh wh u ad a ba
bu c. Wh h bu a-
u dc h w wk-cc
aad wk cha a h
ma bud ad-hc au cha ha m
cum dmadau wk aach
dm m ca a m fx-
b amwk m bu ad cya, ad hby u a c
cm.
Innovation lows in clusters and value
chains
th cua a h au wk
cc u d. o h a w cu
cmc hk, chca cha
h dm ad a kwdha m a ha a ca u
udad hw cmc au cad
ad cm md. Y wh h
mac kwd a w wdy
cd, acc h md ad mcha-
m by whch ma fw ca u
cad cm ma udud.
F xam, w kw ha a ay a ca
a ma m d mak
duc a h au cha, bu a
caay h c-au-cha ah
ma u. e bu, h mchac
a ma y udd (ahuh
w a a adac ac hk-
h d) ad h haky udadcay hd cmc dm .
i a, h aby a fw y
fc u a hw bud u
ma cha u ha h h -
ma h h a h h m.
Cluster theory explores links among frms
i 1890, Ad Maha xudd h hy
dua dc h Principles o Economics,
w hw kwd w adby caa, whch u mmd m
cca aua huma uc. H
bd ha h xmy ad du
d au b m ad du.
i add h w c d duc-
ac, h hh ducy cad
u, ad h w c aa,
ad mm machy,
c ad h a aa h
bu ha h m my dcud: ma a a w da, ak u by
h ad cmbd wh u h
w; ad hu bcm h uc uh
w da.
Figure 1. porters diaMond Model For thecoMpetitive advantage oF nations
FactorConditions
Firm Strategy,
Structure, andRivalry
Related andSupportingIndustries
DemandConditions
Government
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D
evelop
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tives
i 1990, Mcha p ucd Maha
dua dc a cmc cu, a
ca ud ad a ummay cha-
The Competitive Advantage o Nations.
A dcbd by p, dua cu a
md by ahc u ccd
cma ad acad u. Cum ducy by cua u-
a, ad a ud
by h ahc xmy cmmay
ad cm m wh aby cmmu-
ca ac--ac h ah
ad, by x, ca u ( M
ad McDad 1992). Cu ycay d
acay m, aud aua, huma,
kwd-bad uc, uch a B
bchy cu sc vay. thm a uccu cu h -cd
xam naa vay w, a cu d by
h a ch ad mak ch-
qu rb Mda, bu a ad by a
u uay m ad abuda
aua uc.
Bu m cu acua
ha m wh mxd ucc. Why?
th U.s. Acy iaa Dm
(UsAiD)-ud udy, Cluster Initiatives in
Developing and Transition Economies (K,
ldq, ad s 2006), hhh -
a a, cud ucy ad
aach aac, ad u h
d m h mau uc-
c. i add, wh cu aca -
ma fw wh ahc ca, h
udamay ua cu cmm h
aby uu ma fw wh h
ud h cu. rc ach hw hah hy -a au h cu-
may acuay c udad da ah
ha dma w . i h ay 2000,
p ackwdd h wak ad ud
ha u ddua cu a wkd wh
h m whch w da mh h
ym, a cud b ymd. Ah
acua h cu md uy-d
au: wh a ach h 1970
ad 1980 (H ad Uback 1979; H,
1988) d h ma u
cum d w cc, h cu
md d accu h cca dback
m buy (acuay aa buy,
h cu dmc mak cu). th
cha ac may m ach bamakm aa mak -
ad ah ad m ba quay
adada adquay addd
cu hy.
Value chain analysis adds the link to global
markets
Accd UsAiD au cha aach, a
acuad by h Mc Dm
oc, au cha cma h u a ac ad c qud b a d-
uc c m cc a a
mak (Camb 2008). vau cha aay
a hw a duy wk a cuy
ubaa , cud h a ad
xa ac h au cha ad h
qum d mak. th ma
ud dy h k
a h cha, duc aac c, ad
a ccha w mak h a d-uc m cm h wd mak.
Source: http://www.microlinks.org/ev_en.php?ID=25439_201&ID2=DO_
TOPIC
Figure 2. gloBal enaBling environMent
Exporters
Buyers
Wholesalers
Input Suppliers
NationalRetailers
Sector-SpecifcProviders
CrosscuttingProviders
Financial(Crosscutting)
End Markets
vca lka
Supporting Markets
Halka
Global Retailers
Producers
Global Enabling Environment National Enabling Environment
Vertical Linkages
National Enabling Environment
Global Enabling Environment
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4
th ba au cha amwk add
m h a h cu md: au
cha aay d by dmad cd
h d makay by buy ba
a a cyd huh a
m cha au cha duc, -
c, ad aa. Fuhm, aucha aay mha h m
c (h bu m) a h -
aa, aa, ad dua , a w a
u c, aac c, ad a-
h a h cha ha fuc ducy.
i h yd a uacd w h
cad h mac u ac-
a h fw d h d mak ad
ma back duc.
i acc, hw, h a au h au
cha amwk m ma. Wh h
ca fw duc ad ma a w
d, h md wak ud-
ad ha fw, cud ac
wh u c ad ka bw d-
d au cha. Fuhm, m ma
h md adquay add h a-
m kwd ad a bw h
au cha ad ad akhd.
Bh h cu ad ba au cha md
ha ma aayc au, ad a hy ha
ud m bh hy ad ac-
c, ach ha bu a m h
h. tak a, hw, h ad-
quay md h mudma ah
ad mudca fw ma dd
d cad ducy. th cd-
a, am h, a buh h h
au wk.
Connecting the dots with value networks
th au wk mad u d kd
by a h ca ad by wak
h wk, cud h a h
ba . vau wk h d a
md huh whch ca h h
h cu ad au cha amwk wh
h h m dm a
du. t mak c u h cc,
hw, ma udad h cm-
h wk, hw ma fw,
ad hw au cad. i h ua ab,
m Ab-l Baab 2002 bk Linked:How Everything is Connected to Everything Else
and What It Means or Business, Science, and
Everyday Lie, Duca Wa ad s sa
dma hw a cc d, h ,
bcm a wk, h h, huh h
add ju a w k. thy hw hw a
ca cu (hbhd, ca
u) ca b ud a wk by h
add a w c ka ha hm
h. th ka duc h umb
bw ach d. each d a cacu h y a w k away m ay
h d h wk. th ca u
ad c-ka accu h ma wd
au ca ad cmc wk.
Nodes and links
smy u, d ca b ju abu ay y
aa, m, ddua a ch
wk, wh k a h ah bw
h d. Abu cc d kmay ac hw, ad hw cy, ma
w fw. F xam, d wh a uuuay
a umb k h d bcm
hub. A hub may b a duy x a
umba bu aca. Wh ma-
ach hub m ky fw ady
huhu h wk.
Figure 3. watts and strogatz Model
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D
evelop
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tives
th kd k a ma. A Mak ga
d u h 1973 ac, th sh
Wak t, ca wk a mad u
ad wak k, fc h a
h ddua ah. ga
ud ha wh cm a w
ma, wak a acuay m m-a ha , bcau by cc
aa cu y kd d, hy
cay da, cac, ad w m d
a h wk. F xam, a
m ky a abu w jb u
m acquaac ha d d. o h
h had, a e r hwd Diusion
o Innovations, k bw ddu-
a u a m c u
ha a a acuay add, du h bd u ad cdc am k
d. r dcu h cha
a am cmmuca hah -
ma ad cmmu, xam:
h x ha a a wd a ud
wh ca cqucwh
mhd may b cay aah
cmmda a ky b add,
h du c bak dw.
More than one kind o value
i h ac rcu h vau nwk,
kwd maam cua va A
d w may y au wh h
wk, wha h ca ab ad a-
b au. th m cmc au
m h d, c, u, ad
ad aac cmmy maud au
cha aay; h a au m
kwd ad b, wh kwd
cma chca u ad a,bu c ad a, ad uy
ad dmad cd, wh b cud
u, ca u, ad h y ca
ad ca adaa. Wh h ma
ha ab au ay a huma ac-
wdy cd, h aby d-
m am mak u h awa
a bhd.
Value networks in action
ecmc dm am k ud-
ad ad m h ca ha hd h
a c aby d bu cy.
such ca may b h u mak a-
u, adqua huma ad aca uc,
wak hyca kwd-bad aucu,
a uu uay m, h
ac. Dm am ay
add a h cahy ha a
mada cu a ca kdbu hy am
d h a mac h uc
xdd. tak a au wk aach
udad ad add duy c-
a y bad h a aa-
ab h ac: by b udad
h wk cad by k dmc cuwh ba au cha, hw ma ad
a a dud huh h wk,
ad h w ab au, ac
ca dy w aach d -
ad cm dm cha.
The champion as a network hub
sku wk cha ca ca ad-hc
au cha d cc d. th
xc l & Fu h am addma h w h aach -
uay (Fu, Fu, ad Wd 2008). Fu 4,
adad m h bk, ua h c:
a cc cum d, h
wk cha ch am h u
u accd aaab caacy ad
th nwk: U su
Fabc Cu sw packa& dy
scccum
d
Figure 4. network orchestration
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6
h chaacc ca a ad-hc au
cha this particular order. th cha
b h um h d, a w
a maa h wk quad u-
.
pahaad ad Kha (2008) ak h a uh, c ca h l & Fu -
wk h c. i h w, h cum
ad h u c-ca au by wk-
h. th u ma h hub
acc uc ad a bay, bu ach
ddua cum d d, ad cum
ac u h uc m h dmad,
hby cbu au ca. pahaad
ad Kha c xam m acadmc u-
(tuva) a chy (Apd) ad --a ym (nCr). Fay,
m h am a ach, namba
ad sawhy (2008) u ha ba uc-
cu a a a ca, -
cay ma , ad hw h h
wk-cc a, xmd by h
uc wa.
i a h ca, h h wk
cha u ha a m
ba mak adad ad d mmd-a cum dmad. Wh h au wk,
h m ddua ahuba d kd
a acuay a umb h dbu a
hub ha acy aca mak h da
cc cay m bu -
c ma fw. i cmc d-
m jc, h jc may ay h ,
ca ka ha may b m, h-
h d ac a hub h cmy,
aca h dm w a-h ha may a bcm -ua. i
cca ha h hub ccuy, cm ccuy,
a u d bud h cay
ah ad k d ha may ha
b a ka h a.
th ab au u ad ca u
udd a ac ah ha ac
way cmc wh am. ruay
m a k a m-mdd
a m, wh ca hhd
cha ad wk w m uca
cau. Y wh a m-mdd adcacy
a a cay cm jc
ucc, by ma uc. W mu
a udad h w ucu ha hw h ddua ab a a ma-
ad da. Ad w mu ak accu ay
d udy ah u ha
h m c uaab c a
u ad am a .
A u ha a du au cha
h am du bw -
m h cha. pduc ad c,
xam, w ah a cm h u b xacd m h
au hy add. M m a ha
ah ha bha a cm a um
am, ac h au cha wud d b
d muuay ma u. F h m
ach h ccu, may ak h
a jy ud ad wh h wk
a aa ddua. i m ca, ha
aa mh b a bu aca.
th uc aca cy a hub, a
ac j d k h au cha,a w a a c m b d
h m. A cmc dm
am k u ad h h
aca m h aby
au cha mmbudad hm a
hub may xad h way whch am
mak u h a.
i um, h au wk a m cm
amwk huh whch udad hwm ac h ba cmy ad wha
ak b cm. By bud x
h dua cu ad ba au
cha, cmc dm am ha
mbac h au wk cc ca h
dy may ay h
wk cha, ad u h bud
ah ad u huh whch wk
k w cm cy am kwd.
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D
evelop
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tives
Reerences and urther reading
A, va. 2000. rcu h vau n-
wk.Journal o Business Strategy21 (4) (Juy
Auu): 2935.
Baab, Ab-l. 2003. Linked: How Every-
thing Is Connected to Everything Else and What It
Means or Business, Science, and Everyday Lie.
Cambd, Ma.: pu.
Camb, ruh. 2008. th vau Cha Fam-
wk. UsAiD B pa. Wah, D.C.:
ACDi/voCA. h://yu.cm/43ubu
Fu, vc, Wam Fu, ad Yam (Jy)
Wd. 2008. Competing in a Flat World: Building
Enterprises or a Borderless World. U sadd
r, n.J.: Wha sch pubh.
gda, pa e., ad luca zama. 2008.
th imac idua pcy Quay-
ladd gwh Md. B.E. Journal o Macro-
economics 8 (1), Ac 1.
ga, Mak. 1974. Getting a Job: A Study
o Contacts and Careers. Cambd, Ma.: Ha-
ad Uy p.
ga, Mak. 1973. th sh Wak
t.American Journal o Sociology78 (6):
13601380.
gma, g M., ad ehaa Hma. 1991.
Quay ladd h thy gwh. nBer
Wk pa n. W3099, Auu.
H, Chh t., ad Jam M. Uback, d.
1979. Technological Innovation or a Dynamic
Economy. nw Yk: pam p.
K, Cha, ga ldq, ad jas. 2006. Cluster Initiatives in Developing
and Transition Economies . sckhm: C
say ad Cm. h://yu.
cm/3m24jj
Maha, Ad. 1890. Principles o Economics.
F d. ld: Macma ad C.
MacKwh, ty. 2007. Social Networks: Evolu-
tion o the Marketing Paradigm. AMaC lmd.
h://yu.cm/3md2m7
M, edw s., ad Jh F. McDad, d. 1992.
Sources o Metropolitan Growth. nw Buwck,
n.J.: ru Uy C Uba pcyrach.
Mu-D im Cma Ady s-
c h Wd Bak gu (FiAs). 2007.
Moving Toward Competitiveness: A Value Chain
Approach. Wah, D.C., Auu. h://
yu.cm/6ku8
namba, sah, ad Mhab sawhy. 2008.
TheGlobal Brain: Your Roadmap or Innovating
Faster and Smarter in a Networked World. U
sadd r, n.J.: Wha sch pubh.
pad, J, ad Aa ryad. 2006. Fm
vau Cha vau nwk: ih Mb
oa. European Management Journal 24
(23): 128141. h://yu.cm/4229
p, Mcha p. 1990. The Competitive Advan-
tage o Nations. nw Yk: Bac Bk.
p, Mcha p. 2000. lca, Cm,
ad ecmc Dm: lca Cu agba ecmy. Economic Development Quar-
terly14 (1) (Fbuay): 1534.
pahaad, C.K., ad M.s. Kha. 2008. The
New Age o Innovation: Driving Co-Created Value
Through Global Networks. nw Yk: Mcgaw-
H.
r, e. 2003. Diusion o Innovations.
5h ed. nw Yk: F p.
H, ec. 1988. The Sources o Innovation.
nw Yk ad oxd: oxd Uy p.
h://wb.m.du/h/www/uc.hm
Wa, Amy Ca. 2008. th Cu Aach
ecmc gwh. Bu gwh ia
tchca B n. 7. Wah, D.C.: Wd-
ma Aca, ic., smb. h://yu.
cm/3jkqj
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Wd ecmc Fum. 2006. Global Competi-
tiveness Report 20062007. nw Yk: paa
Macma. h://yu.cm/ywb
Wdwad, Dua. 2005. p Cu
say vu idua ta. Uy
suh Caa, Juy 1.
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D
evelop
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nA
tives
l i n K i n g U p : A p r A C t i t i o n e r sp e r s p e C t i v e o n t H e e C o n o M i C l i n K A g e s
t H A t s H A p e D e v e l o p M e n tby Gary Kilmer
A a cmy w, bcm ca-
y ccd, bh ay ad ac
bd. i cu, uch ka d
b a. A d h cmc cum,
ma am ad u a
h ma c, ycay cd ca,
aa mak. thy a uab c h
acc dd u, h a mak.
th aby acc au-add ch-
ad aa makcmudd
by wak ca aach hm h
w u h cmmca add. Abu
mak w, ad ac ( c-
u) m u mak ad aca
ua mak -m a dcu
mb. sma duc mu a wh
cd a hy d hm day--day.
i ca, h mwha a aca
a duy ha h b d bu
h a aa aa cmy, wha cm ca ad adqua caa
a. thy ha b acc h ma
bak ym ad ca, a a ccy,
k fuc h maa -
m ha m ac hm. thy ac ma
a w, hw. ohad c may b hh
c mak h amu maa
hy ca duc hm, h x
a -hu dbu ym may b m
ha hy ca cy ua.
F ac cmmca k bw h
a ad ma aca a duy ca
h b adaau bh a. F
h ma-ca a, h k ca u
md ducy ad m ady acc
dd duc u. thy b m a
m ab mak h duc, ad hy
jy ducd c h x bu
k h mak. th a m b-
m a m ab uy qud aw
maa, m-hd duc, h u
c hy d whu cmm h
w aca ad huma caa h duc-
. each d ca ak adaa h a
h h h a wh
m w wak.
i h d abu, wh i ha b
m d, careully orged and closely tended
ac j ma-ca am ad -
u wh h a cua ha b-
d bh d. th am c ca ay
h am bu, hadca duc,
ad h aa.
Conceptual models and practical
demands
Md h cmc ad hka am cmc ac abud, a-
cua h ha k cc ma ad a
c ad dbu. n a,
cu dm wa h fa h mh
h wd dm. Cd
by acadmc ad cakd ay ja,
u, ad cha, h cc wa add by
may ach a ady aw u d-
m wh. subc dm wa a
dc, bu h d acuua cm-
c cc uy cha aay a a way
udad hw ay a duy ac
add au a duc ad b mak.
vau cha aay w h , d-
a uu amwk ah, , ad
aay h am ma.
th aach a auab h x ha
hy xa cmmca ac ad dy
ky h u wh
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0
mbac h m a a a
ab dm . Bu hy a add ay
cmxy ha a udd by h
m, ma ad a ak, ha mu mak a
wk acc. th cmx ca d
m h a, bm-u, bck-
ad-ma aach ha a qud b abu a cha. Wha h ccua
md m h m ma ac
bu ucc: u aby m-
m h da wh h c h x
ma m whch hy
ha c.
ec ka bud qu a accua
ad cmh udad ca
dm ad cmmca a ad mub cad u wh h m md by h
a. Wha h c mh b -
ca, cmc, ad uay cd w
mhw h m mau h a
wd ha h hy c cm
abh duc c.
Upstream and downstream linkages
exam c ka abud h
wd ac. i wha i hk a huam md, a umb ma-ca
uw d duc a c-
a x. Whu h ka, h
ma duc wud ack acc c
ac x mak. ouw duc
ca d a u h ad m duc
c (mk ch, xam, hk
cch) aum h fw duc
huh h a m abhd x cha-
. th ka w mak u- h ma am/uw ad ab h
a m x cm ca.
i h dwam md, a a may
y mcu dbu
duc. nwa ubh dk
b c cam mauacu w
y a umb d u
h wd b dbu h duc.
th dach a dd cac-
, h by chc ack m dab
y h c maad by h
a m d a ady fw duc.
th aam, cu, b bh d.
th ma m whm i ucha my wa
ach m acay hu wh h uy wa a a. th ubh w b
hamd my u ad ay ca umb
h cau a h cd u bu
d m wad ma a h
day c ad ba.
i h md h ay cay k-
d a ca d u a ba
ua hb. idd, ka
aam h a m ky uc-cd wh ach ay a k a w
. pam wh k ha b bu
a h bh m ha b aby
uccu. ida Baak-Aka (
ah) am h 1980, xam,
wa my xc ack ha cca m
cd -, a y a
m-md aa ba h
Baak (ad m) ju a, ad
by way a b h.
Eective linkages demand trust
eu u a dcu
(ad mm dwh h) m
ca ay ad h h m h
ca k ha a d abh-
ma ka h ay. Wh d-
m ac d u ha hy
j h aca uu cy
cha h ay umb c, haach uaccab wh
am wa dd h bu ad
wh du ud ud h
am bu jud.
i may ca (cay bu xcuy
h cu h m s U), h
a ad a a ca h
y ka bh d. each ay
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ycay uca u a h had
h h, a a h cacua mcha-
m ha ca duc h d bd u
h da ad u acc ha uch a da
ca b a w-w. o quy cu
h aum ha a w, h h
mu cay .
thu, ma ad mdum-d bu a-
a uca aca mak
cha wh qu quh m
c. gam mak ad wa duc-
Ama, xam, abh
h w h y h duc, h
adama b ha y h mak
h wa wud ad h dwa. i kw
Ama bk wh abhd hw hy buqu ah ha dbu h
duc huh Ya umab mak
bcau h bd hy wud adua h
duc wh hy m h . H cud
y a h ay cd h d-
uc m bh cum. tha a uh
way w a bu.
The conditions or successul linkages
ey da uqu, ju a y cmay,y duc, ad y ca ad cmc
m d. s w hud b ca-
u abu cb h cd uc-
cu ka bud. Ay aac h
c hud cu h h aca
a h ka ah b m h
ddua d ad h cc qum
a mak. r ddua bu
a ad uw am a hh y,
cmmd by aac aca c duc, -ha had, acka-
, c c, ad h dca ad
dm cmmca ah wh
aa aa buy. A fxb ad
cx-d aach a.
tha caa uad, my xc wh may
d y ka dm wk
u h a ac cay h
dm uccu cmmca ka:
l shad cmmca bjc;l pcd muua b ad a;l shad cmmm mak h ka uc-
cu;l Cay dd h, b, ad
h macac; adl taa maam.
Shared commercial objectives
Bh a mu b d wad h mak.
i h ca a x m ghaa,
xam, h ackhu a/x
ad h ma-ca uw mu a ha
h bjc maxm -m u bh. tha am m d a
buy wh h quay ad quay u hy
wa, accd h ad chdu. i y
ay cmmd h bjc, wh h
h m d cd-ad
duc ha ca b d wh, u-
cha m ma duc y wh w
duc a h, h h ah ca
uccd. sadada, cmmuca,
ad dcaby a cca h ca. Aa mu u h am duc ym,
cda h a ad ha chd-
u u a ady fw duc, a
aym ad cd ym ha aca h
wk ach, ad ay uy awa h ba-
ad h.
th had cmmca bjc ca b m
dcu ach h d mak ha
aa a aca. i h h -
a xam, aca am ay hm b x. th duc
ach h d mak dcy. i h ca
ma c xab a, hw-
, m ky ha y h c
ha h d mak md. th
am a my w ma a
h c. i b m dcu
cc h am h d
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quay adada, ha chdu, ad
h -ha had qum ha
u a mh duc c. sc h
d mak dc, am ay
a h duc quay adad.
tha ad, Bh Amca tbacc Cmay
(BAt) aa ha d h bm h bacc am aa, by c ad ca
cmmuca wh cacd bacc am,
cud wh h cad u
ad cah aym a ha m.
Perceived mutual beneit and airness
each aca mu ha h h w
a m m b h am ha u
(whch aa b h ky h ucc
h BAt am). equay ma, h
ay ca b ha h h mhw b
ak adaa by h h. e i am
ad wh my u m h da, i may b
uhay i hk ha ah ay b
a m.
Wh h a may ca xa
ma duc by h a ad m h-
cad a, h a a may ac
wh cm udad maka ad uudd uc. i kw
Ama bk wh ha had ha hy
Amca umak Us$10 $12
kam, xam, ad wh a h
dd a b d ha h wd mak c
buk hy a uc c $2. i hy
cud ju cu u h mddm wh a cha-
hm, hy , hy cud a 80 90
c ha a c hm. educa
qud cay aca ud-ad h wh au cha.
Shared commitment to making the linkage
successul
A a mu b quay cmmd h uc-
c h ka, ad ha ucc mu b
udd ad m. i abu, h
a uccu ka ha b h u a
a m a h u ma hb
by hm a uw, huh
h duc h uw wa
a maay ma h a m -
aby. i a uccu uw ka, ma
am b by a a mak a
caab d hm wh duc u
hy qu duc m aby; h aa b m xadd acc h
acuu duc dd m ma-
k cha c caacy.
s ah ca ad u h
ac aau m cwby (wh y u
uw d h c xcha
h uy ad ay duc
cd h ba). th ky wd h
ah. n y d h w d dach h maxm h w b, bu
hy kw ha hy d ach h ad acy
wk h ah. A m
had k mu b bu h ah.
smm c a c dw du
ac byd h ay c. A a
mu h da wh a cmm udad-
hw h w b b. ohw,
h had cmmm h ka w
u h u ch h ym.
Wh h a m uw a
a ca aw maa bcau
ma-ca duc m c ha
a-ca duc, h chac uc-
c a b, a h BAt uw chm.
tbacc a ab- c b cuad
by ma am. sma-am ca a b m
c h duc ma ad c
uch a a, aa, aka, u h
a a w ad ab xd -ca aca caa mcha a.
Clearly deined rights, responsibilities, and
sanctions
A cmm bm ghaa, ida,
Ama, ad h cu wh i ha
wkd ha h da ka ah
a dcumd a way ha ca, cm-
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evelop
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h, ad udadab a a. A
a x may a d cd
am wh duc u a cd ba
wh h uw d h c
h x wh mau. Bu h abc
a dad am, am d kw
xacy wha u w b ud, a whac hy w b dd, ad wha cd
m. thy may uy udad wh h
x wa h c b had,
wh w d h ha ad a h
c a ackhu. i may b uca
wha ad a a dmadd, wha
c w b ad hm, wha bcm
u ha d m x quay adad.
A m - w-a am ca dah ma m ad a h ba
cu h ah. th y ac
may uch a am ma
wh h da. th wh may b
m ca hca ha a, bu ma
h, ad d a ba h w
a wk h. Accdy, cuca
ha ca ac b ad ay ay ha
d cm h d am. oc
h ka abhd ad aud by a a-
, h m ac ca b xcum uu aca.
F may c, h dm a uw
duc ba w aac h buy, -
cay x c uch a a, wh
umu x h ma-am
duc a m wh dmad u h
uy hy c. smay, h ca BAt
bacc duc ida, uch chm
aac a wh y c ma amcmmd BAt hm a b
h-m a. i Ama, day c
cma ad ma c cm
h aw maa hy d ay h mak
ba. i h ca, h a m mu
u ha h uw wk a
ud away by h buy.
i m hhy ucud ada cuu,
may b dcu h a m ad h u-
w a a qua ad h u
a. vy , hw, my d a
w xam h muua b ha accu
m ca dcuma uh umu
h bac.
Transparent management
taacy a h ka ah. i
ay d h h baac bw ha-
ad c cda bu ma-
ac wh ka a. e
c cca ma may b cud
a c, a uc. th m-
a c h bh a mak
h da h bu hy ha cmm
ady aaab h a. th x
mu k uw cd cu ad aa-
ab c. ouw mu a ha
acc da uch a x c, a
c, u c, ad a. i
quay ma ha uw b h
da wh h ad m m h u
duc u, bm cud du
duc, h da hy mh b d.
Development assistance as a linkage
catalyst
th au ab, aa ah
bw ma duc ad c
x cay uay cd.
i 2002, wh i ad ak Ama
ac abu h d d
ad cmh uw cac wh
h ma am hy d aw ma-
a, i wa d, th cay Ama.
i kw my u ad hy w d wha i
hm. A h m, ma am w k
mak h duc. nw h ua
d: c caacy ha xadd ad
h c a cm ay
ma am duc. A ay a 2004, w ba
h dm m udmay,
ab adqua, uw uy cac.
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nw, m h cma w wkd wh
Ama ha akd aac d-
a ab uw uy wk, cud-
aam d h am wh
duc u. i h d, h cmc
h ua ha u h a h. ou
a dm a wa - h da h a bw h
w ca. i d u cdby h
c, w h h a ak h
wad ca a da ha cmab bh
d.
May dm jc a dd
ca mak u ma am
u. lka a a c
d h ma d h d ay,acaby, mauacu, ad mak y-
m qud b a uccu aca h
ma ch mak. th a-
h cay a c h h ch
ch. lk u h h ma, w-
u, am m h ducy by a-
b acc aa cd ad h
qud duc u. th am am
ca, wh hy a ady (ad wh aa
aac), ca a aca caab
h j c adh h duy.
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Dimensions o competition in inancial
networks
A h c, cm xcd
d a aca c, a bh
h quay aca duc ad h ccy
h duc. Cm a fuc
acc aca c ad xa ac
m ad huhd, hby adac c-
mc wh. i ac, mak aca ym
m ad cab huh w ba y ad x ha ay d a d-
uc da, m c-c aca
mda, m accb aca c,
ad hacd aby.
Y xc cm ca udm a-
ca aby, uh h aa uda
c wad bak. Byd h uda
aum, h ca a cm cy
aca c a udd h wmac network properties h -
duc, dbu, ad cum uch
c. i duc, a xam h ca
ad u ma wk; dbu,
h u aumac mach (AtM); ad
cum, h a xa ck
xcha ad h ama c
qudy (a acc caa m qud-
y a).
t m cm aca makqu a udad h ca -
h mak, acua h xc
may wk ac. Cm cy
h aca c a bhd ha may
h c, ad may cu y
m m aca c dm a-
, ad a a ahuh. th a
x h dua cha maa ab-
y ad cua cm a c ha
p r o M o t i n g C o M p e t i t i o n i n A n e t W o r Ki n D U s t r Y: t H e F i n A n C i A l s e C t o r
by Stijn Claessens
Network Industries
nwk c cmmay d adk. nwk du a ycay chaac-d by a xd c (bud h wk)ad w maa c (add mcum).tha cmba m ca- u ca duc: wh a m, h aa c cum (duc) dc a m cum j h
wk.
Hw, wha ay ma a cau ca cum: h m cu-m (d) j h wk, h a hau ach u (u yu ach c,wh au umm). By j h wk,ach cum ca wk xah b m h xa hwk whu ha cma h wu.
tada wk du cud aad,
a, h c, ccy, badca. th w adad , cu,h . Ad h ua wkcc cmab d ha haa cmm chca am, a nchaecmd d hm, uch a vHs ay, a cmu u Wdw w-. Cmm adad a cay ma wk du.
owh h hyca wk, c h adad, ca ma xc ad c dcma. th cy
ha h away b ua ad cua cm, wh h am hchcay b. sj Ca ack a h mca wk au h aca c duy ha w a cha ua wdwd, buacuay ua a cmad d cu.
F a d ummay h u, ec-md (2006) www...
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xhb bh h hyca au a wk
(d, k, ad hub) ad h cmc -
wk du.
Wha ca abu cm h aca
c? Ad hw d cm ma? i
add h qu, uu c-d h dm:
l Financial sector development: i h ym
m dd, d d b a-
ca duc c? i m c,
wh w-c aca mda? Ad
c m cm bchmak?l Financial sector access: D a cm-
m acc ac, acuay
ma m ad ddua?l Financial sector stability: D a cm-
yd a m ab, c-,
m bu aca ym ha maa
aca y?
New challenges or competition policy in
inancial networks
The evolving fnancial services industry
Faca c du a cha ady.
D by h ma ba, baa,a bak aca u,
chca , ad h cad m-
ac wk, w cm ay a
ky h cha. Bh h Ud sa
ad h eua U (eU) ha achd
a ad ad cm a h a-
ca c a a u dua, wh
hacd cm ha md aca
mda. ta cm ad d-
cu ha d u h acac Ca ad ea eu ad la
Amcaa d a. M h
cm cy a d may
ada ma hac cm, uch
a m y ba ba duc
c.
Hw, ha b u. i 2007, h
eU wd cm a bak ad
ud a aa mcha ad -
cha aym cad wk, ba
y h mak aym ym ad
cd , bac cum mb-
y, ad duc y. o h a dcad,
may m ha qud au a
aym wk ay dd by bakwh a a b ad ad aaab
a cum. sma mau may b dd
day m h ba. gm
ua mada a ay d ca b
quay cay caa mak u
a ad ad c ma a w a a
.
Cm a cha, a w
cm cy cha makmuch a wha ad caa
makwh cm ha b
ad b m acc ad c ha
b a. th cda aca c
du, h mc ba ay, h
ca m ma chy
ad bad am cay a cy
ad a ca, ad h c a uk
c mak dcu u u cm.
i u, ud cm whu
ua ad u may ad mu h mak, ad cy mau m
c cm a ay.
i ac, h m dc ha h
ca cm may ha wd dw
c h ay 2000 (Bkk ad sdjk 2007).
Cau cud cay hh xd c ad
a uk c h duc wha
aca c, my by ca
m ad ca adaa. exa,ay -ac h ad aym
u mb h, ca mak h ad
w ch xhb cca ma .
i cum ac, wch c may ha
cad: aumac aym a cay
kd cc bak accu umb,
xam, cum ca ad d ay
cha d.
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D
evelop
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nA
tives
Addressing access barriers
icad cm ca ha ad mac
acc ac m ca b-
w, cay d cu ad
m mak. i h cu, ua
wak ad hh d quay may
my hh ba acc huhd
ad ma ad mdum-d (sMe).
Bucad mak a: a (a-
a) bak cca a ca
h had, cum h h. th
m mdd m ha mak ucu
cm may sMe. th qu a a
whh b ma ym ad a m
fxb cac m ca bd h
a bw h w mak m ad
acc sMe.
May cu ha mad m cm
a y. Bu d a y cum
aca c ha ay. e
h m dd cu, wh ud a-
ca u ad aucu, h d
c cm cum ad a
c a ha h aca c
m. Wh mak u m
cy cm ha ma a, m d ha a .
Cm cy h aca c a
kd h bjc ma d-
m ac:
l mak mak wk b a a c-
um (mm cad u
bu cduc);l c ddua cum; ad
l h cum ba h a bm aca c ( xam,
huh ma ad duca),
whch bad h cc cum
c.
Network barriers to competition
Faca c h u a
a umb wk, aym,
dbu, ad ma ym. nwk
chaacc my ba y ad hby
cmca h aca cm cy:
l lm acc h aym ym
bak ca wk ba h a-
ca u.l
AtM ym ad h dbu wkd b md bak y aaab
bak aca u a hh c.l Acc cd daa ad h ma
bw ad h c md
(a ub ) cumb bak.l nwk xa, uch a h ama-
c qudy, may ccu, cay
caa mak.l owh ad ac ucu a a
u. i may ck xcha, da
mak, ad h ma ad aa, xam, wh ad ac uc-
u a cha m muua -
wh (wh w w), ca -
b ba.l td cud ca a (cay
caa mak, wh w h a
ad ym wh ca ad -
m) ad a muau ha cda-
h ac h aca c
c.
each h au h c may a
acm bha.
Cm cy a cd wh h
ac ha mak ad duc d ha
bcm m dcu. th cay ba
au aca mak may udm h
c a cm cy dd
aa mak y. o h duc d,
ak ju xam, dc bw h
mak c (uch a cmay-
dd a) ad a maa-
m c (uch a 401[k] a h Ud
sa) a dwd. May ca a
bh way ad, dd ax u a ham-
d bw h w, w d . Ad wh may
aca u d (a) bak-
ad h aca c, h buday
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bw bak ad bak aca u
ha bud.
oh wk u ca a ac h cm-
m aca c .
F xam, h cm ucu h
cmmuca mak may ac h mak -ac, a h ca mb h ay-
m.
Implications or competition policy in the
inancial sector
Three approaches
th d aby ha away d cha-
cy mak cha cm
cy h aca c duy, ad adcha h duy y xacba h
cha. th a ay u, bu c-
cm cy ay h
ay cmmay aach u ha:
l y ad x u aw cab ma-
k m aca u;l h ay d ac aca c -
d ad duc , hby ab
c aca cm; ad
l h ua m ( xam, ay-m ym ad cd buau) c-
ab.
th aach ha c ad w
ma h c cm cy
aca a w a h c. Bu
uc m w cha.
Leveling the playing feld
th cd aach ma hamaam aca c d (bak, u-
ac cma, ud, a maa-
m, ad ), mak (aa, a,
ad ba), ad ucay qua y
duc d by bak, uac, caa
mak d. Hama k qua
uay am duc ha d h
am ucay. Ham ax, ca-
a adquacy qum, aacy ad
dcu u, ad h ac c ad
duc m cm, ua-
y aba, ad ca duc dc h
a uay bud b by duc.
th mc cmx aca duc ha
add au mak ad u mak
h d a cmm uay aach ah m .
Wh uay dc ac aca
d ha dmhd, hy x,
m ub m. sm hm may b du
ah ddc; xam, m duc
md a uac duc bu aduay
bcam a duc. sm duc a
kd aym ym, whch may m
acc am d. Dc may a bcau ka wh h cmc
c, uch a c d-
uc qua a duc. Fay,
may aca duc a budda chck-
accu may cud a, aym, ad
cd, xammak had u
qua uay bud.
A h am m, dc uay
am may w b jud uda
cum c ud. e ach acy ay d h a cc-
uay ad accay dcu. th a cu-
aach, whch ay ac, hu may
ha m m. A duc ad cum
a acd wh uay dc, u
hama w.
Hw, h ac aach a a
k: ca a ac h bm, a h
a uad am bcm h m,ad h d bby aab
am. th k a a m ac
aach by auh ad cm a-
c, bu w ha d . e , ac
cud qu b daa c ad c a
h ddua duc ad mak h
aaab ab u aca c
mak h ca.
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evelop
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tives
Ensuring contestability o the institutional
environment
A ua m cab ay
d d ha u acc a u
a cc aca c duc ad
dbu cha, cud wk c
uch a aym ad chck ym, cd
buau. th u hud a b ay ad
umy cd, ad cy ud. such
qum a cdd bac m h
wk du wh m a duc ad
d ccmmuca, y,
wau cmm wk.
Ach caby qu h mua
ad aca adad, acua
wk cmaby. sadad a ad c-da bm m chy chc
ad h cum ca whh h cc
chy w b wdad. rducd uc-
ay w h k cum ck- ad
d u ad. i aca c, a d
xam h c ha b h scy
Wdwd ibak Faca tcmmuca
(sWiFt) c aac aa ay-
m, add 1977.
Hw, adad may a c u mak
a chc, acua c cac u
u j m ha wk. such -
ca ad h dmac a a
wk, wh m dad wk
a cum chc cud -
a. Acm bha ca h ay
w. pcy mak hu ac ad bw
m cca ma mak dm
by u mua adad,
h had, ad h h had mua- cm ad ma h c
cumb.
Regulation o networks
Fay hcad cm c ha
b add h wk du. F
xam, m a cm, h w-
h maam h wk ha
b aad m h c.
Acc c ad h c wk -
c a quy ubjc m ua-
y w. pcy mak, my dd
cu, ha b ab uaa acc
huh mcham uch ua c b-
a, um c u a u duc c ky uu, ubd,
ad h c. th aach may
a ay h aca c wh a
wk . F xam, aym
c, adad um c u cud
aca bad acc.
Institutional arrangements
ec cm cy w qu w
ua aam. gay, h bdyb cm cy hud
b b uda h. i may
cu, hw, by cm
cy wh h uda auhy, ca-
a cfc (Ca ad Hama
2002). B cda, ad aby c-
da, cm cy uc
bak ad bak aca u,
xam a adab. D uc-
hd h budu k cay cm cy aay.
lkd ha u h qu
u mu uy ac. sm
cu ha md wad u-
y auh, whch umaby cud duc
ucay dc a m mu
uay m. oh ha chad a
acy wh u h ymc aby ad
uda h a aca u
(bak, uac, ad ud), bu y ah acy u mak c-
duc. i m ac, h by
ymc aby wh h ca bak, ad
w aa ac a u uda
ad mak cduc. Y h cu, uch a
h Ud sa, ha mad cha ad
maa aa ad mm mu
uda bak, cu mak, ad
uac u.
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A ay h ua aam
u m c aca c
? rach ack, ad h aw
w ha ma uca ay ca, h d-
cuy abu. e wh h a
uy auhy, h d uay ha-
ma ac c duc may -. Cm u m bh duc
ad u ad h bby h w b m
ky d hama. A m amd
ucu ua ad u may w
ma a , c h aca -
c du a a au
uay cha, ad ac cm
wh ach h fuc.1
Harmonization across bordersFaca wk xd byd bd.
iua chc cuy may ha
ac h d ba ham-
a. th cha hama ac
mak, aady a cmx udak wh
cu, w cu b cmudd ac
bd. th eU xc ud h ac-
y dd ca a mak aca
c. rqu umy ua
huh au dc uc.icc wh ad bw a
a, ad adju h cy aa ak much
m ad . t ju yca xam:
may dd cu, bak a
ac bd whu ba, bu qudy
u ad d--a- ac a
ad aay. th a aa ca
ad cc c da wh
aca cy2cc wh cm-
mca. Bak m m cu
1 obuy, h ba hhy cx- ad cuy-dd, ad may h dm h u. Fxam, wh aca u ad wak ua, a a fuc a cud ad mcu ax ad w-c adad, wh ha a cm bu m k aca aby. i hm, cau h ua may ad -k by (cd) aca u, bu wh md k.
2 Ahuh qudy maam may b d cay by h bak hm cuy, bach baka ycay b c qudy u m h ca h ca bak. shud h had bak bcm ,hw, h hm cuy auh a b, whch ca hm m uc h wh baka.
3 th Hdah dx a dca h amu cm am m a duy. ra m 0 10,000, y ad h cm.
may ha m u acc h ca
ay ha bak m h cu.
iaa adad ha bu ha
hama ac bd. pmuad
by aa uch a h Ba Cmm
Bak su, h iaaoaa scu Cmm,
h iaa Aca iuac
su, ad h Cmm paym
ad sm sym, h adad m
h uda a a bdy aw.
sm h adad a m ha
u ach a mmum cmm
dma am x aa qu-
m, wh h acuay byd x
aa qum (Ba ii). Ahuh hadad a uay ad mma
h cu hm, m hm
ca b u. Ada bad-bad, ba
c ddua cuy ccumac
wh a cmm amwk ha dcu.
s, h c w ac h cm
adca.
Assessing the level o competition
Mau ycay ud a h (ack) cmuch a h Hdah
dx,3 cca dx bak
bach wh a ahc aaw
md uy a w dcad a, ad a
w m cha h aca
c. Hw, h m hcad aay-
ca ad mca dd mau
cm h du a had ay
aca c. th uca duc
uc aca c, h dcy
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3
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evelop
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tives
4 pdyck (2007) dcu h au u buh by h U.s. Dam Juc aa va ad MaCad 1998.
duc ad bud c, h wak-
ad ay daa h duy, ad h
c wk ay cmca
h ak.
e bak, h m ada aca
c whch uab daa a aaab, m h ada dua aa
au, uch a a-huh cc,
ha uwdy. th dcuy ay
h md umb ba, c m
qu a a 50 bak-ya ba.
sc h umb bak wh d aca
ma ma may mak, cay
d cu, cma h d
cm m cky. U daa m
a a am cu, uch a h eU 15,ca h dcu, uch a daa cmaa-
by.
nwk au a ca cm-
cy u. i a aym cad mak,
xam, w-dd wk c x,
c a --c wk a m
auab bh cadhd ad mcha. th
ad cmx maum u, whch
h cd cad du d a
xam.
Cd cad ca b ud by d a-
ca u ud a cmm bad am
(va ad MaCad mak u 85 c
h mak). o hy ca b cd, ay
ym, uch a Amca ex. paym
cad aca a -ua aa-
, d h cay aucu
aac ad cc ad cmm
a u. va ad MaCad, whch aha m had ac huh cmm
mmbh, ud qu xcuy; ha ,
mmb cud j a wk. th ba-
cm wa dcad a h eU,
ad h Ud sa h cu ha cd
h maj cd cma aw bak
cm cd cad.4 th acd c
hw m d cu h cd
cad du, hw, hhh h mcaad ccua bm mau cm-
wk-y c.
Wh h bm d a cm-
ad d cy ma
dau, hy a umuab. Fcu
c cc duc aca
ucwha a h chad c-
um a duc c ddua
mum aym?ca dh h cm ucu. th cm-
ucu a fcd h c
ad aaaby u cay duc
aca c. D a y aca u-
ha acc h am ba h a
aym ym? Aa, h y ma
hud b b dcd uch ha u ca
ac .
ConclusionsCm cy h aca c
acy, ay du h ack adqua
maum ad aay cm. Much
h cu au a mac
a aca ym ucu ad ua-
y m, bu d ma mau
h cm. Ad ada mau
may b mad. F xam, bak ym
cca may ac cm.
sym wh a bak y ad whw y ad acy c d b
m cm, cm ha contestability
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2
dm c cm. th cab-
y w cm , hw, h
ycay ad.
Byd dcum h d cm-
, h a may h cha ad
qu h aa. Fm a h adbw aca ym mac, acc
ac, aby, ad wh. th ad
bh hca u ad mca cha-
. Y a m u aca cm-
c aca c du
dd. Wh adaa a cay, much
ca ad m c aady adad
may h du, cay wk du-
. Auh ca a ay hac h
aaaby daa ha u w ha hma dd a h c d-
aca c. Fay, h ad ac
cha aca c du m a
d ma a ad adju cm -
c ad cdu m.
Reerences and urther reading
Bah, Jam r., gad Ca J., ad r
l. 2001. th rua ad su
Bak Aud h Wd: A nw Daaba. iIntegrating Emerging Market Countries into the
Global Financial System, dd by rb e. la
ad rchad H, 183241. Bk-Wha-
pa Faca sc. Wah,
D.C.: Bk iu p.
Baum, Wam J., Jh C. paa, ad rb D.
W. 1982. Contestable Markets and the Theory
o Industry Structure. sa D, Ca.: Hacu
Bac Jach.
Bck, th, A Dm-Ku, ad r
l. 2006. Bak Cca, Cm,
ad C: F ru.Journal o Banking and
Finance 30: 15811603.
Bkk, Jacb A., ad laua sdjk. 2008. How
Banking Competition Changed over Time. DnB
Wk pa n. 167. Amdam: D nd-
adch Bak. h://yu.cm/54ab
Ca, ea, ad ph Hama. 2002.
Competition and Stability: Whats Special About
Banking? eCB Wk pa n. 146, May.
h://yu.cm/4w
Ca, sj, A Dm-Ku, ad Hay
Hua. 2001. Hw D F ey AcDmc Bak Mak?Journal o Banking
and Finance 25: 891911.
Ca, sj, gy Db, Daa K-
b, ad luc la. 2003. th gw
imac nwk Fac ad i ec
Cm. i Innovations in Financial and
Economic Networks, dd by Aa nauy.
nham, Ma.: edwad ea pubh,
110135.
Cuckhak, D. 2000. Competition in UK Bank-
ing: A Report to the Chancellor o the Exche-
quer. rw Bak sc h UK.
Ca, nwch, UK: th say oc.
h://62.164.176.164/6298.hm
Daach, eca, pam gua, ad thy
t. 2008. F Bak p Cu:
thy ad edc. Journal o Finance 63 (5):
21232160. A iMF Wk pa n. 06/18.
Wah, D.C.: iMF. h://yu.cm/4dywecmd, ncha. 2006. pubc pcy
nwk idu. nwk, ecc
Cmmc, ad tcmmuca iu.
h://yu.cm/4kd
pdyck, rb s. 2007. gac, iu-
ac rc, ad Cm paym
Cad nwk. Mit sa rach pa n.
4651-07. Aaab a ssrn: h://.cm/
abac=996722sua, rajd. 2007. F ey ad
Bak Cm.Journal o Financial Econom-
ics 84 (2): 502528.
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3
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evelop
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tives
s p A C e , t H e F i n A l F r o n t i e r ? H o Wg e o s o C i A l n e t W o r K i n g C A n H e l p
t A r g e t D e v e l o p M e n t i n t e r v e n t i o n sby Robert Bouvier, Ioana Bouvier, Erin Goodnough, and Andrew Ross
Space in development thinking
th ma hk cmc w uy
awa ha wh mh abac,
bu a hm d a ac. i h 1890,
Ad Maha xd h mca ca-
mua chca . (th
aac Maha dua dc
a Mcha p cmc cu 1990
k ju abu a cuy.) Y h ay w
cmc dm h 1960, 1970,ad 1980 mda a u dway
aa dm. F xam, h dx W.W.
rw 1990 hy, Theories o Economic
Growth rom David Hume to the Present, ha
y ac ca. i wa ma-
y cmc ah, uch a Jha
Hch th h ay 19h cuy
Ad Wb h ay 20 h, wy abu h
aa dbu cmc acy. tday,
much h a hca ad mca
wk ma h dma cmc ahy.
Y c h ay 1990, cm ha bu
cach u. i a 1998 a h Wd Bak,
pau Kuma wd h wk ha cm
had d h 1990 h ahy
dm. rac a cu
quay h ac ca baa,
h ad cm uch a Jy sach
ad h cau a 2001 ac Scientifc
Americanamd ha ahy ma-. th h ha ud h way
ma cmc. A a xam a bad
hhca w, Jad Damd 2005 u
Guns, Germs, and Steel, dcud by Hda
ad Hauma h um, hay
h aa dm aay -m
dm a. Wh m b-
ha camd h dah dac
(Cac 1997), ahc xmy ma
a ma ac cmc dm
ad w b cd by h w
Wb 2.0, a h ac x.
A h am m a ac mak a cm-
back dm hk, wb-wk
bcm a xu h dm cm-
muy. Cc h ac a ah-
cay dd dm cmmuy aud a
c ha bca m
ca cmc wh, m mcy
ad ad , ad adac
ach dm a. eay wk
aca, y m ada ma
cmmuca, cudd h kd ay wa-
ym ha ca d ha
m caa a am. Ac,
ddua ad cc akhd, ma
bu, aca u, ad
ca a cbu ad a m ca adh wk wh a acua m-
, whh a bu a, acc
ca c, cy a. Adac
cmmuca ad wb ch a
ab cc wh uch ca wk
ad ca w u a h c
bu ad dm bjc. t ak
ju hyhca xam, ma a cmmu-
y a abh a cd, k
a a , ad bu a a ca wk u cud cum.
A cay wk am
d b a ca -
wk adac dm a. th
ac w add a cad m ca
wk ha cc by duc a
w dm, ac. Udad wh h
au ac a cad h bhyca ad
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4
h m aa. Ad xad -
cmmuca k h ma ha
ca-cc ma wdy ad qucky.
th a Da eahh ha w
ca u a a ay da
ua ayad ac h 1990 (
xbx). sc h, h uaa ccha bcm a bu cmmac, ma-
d w-dma aca uch a
MaQu, Yah! Ma, g MatM,
ad h-dma b a-
ca uch a g eahtM, Mcvua
eahtM, ad nAsA Wd Wd. A h
ccmc adca cca a-
aaab uc, maa c, ad
cda . th aach a
w ad m ca huma ka
cad ca wk.
Digital Earth: rom vision to (virtual) reality
th dm ahcay bad -
wk aca ha muauy cu-
ad ad b cuad by h xad
aaaby ma ad ahc ma.
rmy d daa, cud hh-u
a ma, d a a amwk
DAi ahc daa a ad aayca a ha b cy dcbd by h U.s. Acy iaa D-m (UsAiD) Adma oc a a ca, cm, ad cc way b h d h dk.
Figure 1. Mapping usaids gloBal developMent alliances
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3
D
evelop
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er
nA
tives
ha xc a a ua cdu
k cmmu ac h b.1
Hw, h aaaby ca-cc
ma a ay. W may b ab
hu h m c h wd, bu
w ay ha d ma wh h wha hy d, a daa , ay, h
acc ca c. i m cmc
dm, xam, w wud wa
kw whh adqua cu c (a-
a, u, caa, ad h duc
u) a ady aaab a cm c.
Wha a h uud uc ada
c, uch a mb duc,
aac cum? F may h aa
wh a ycmc ad ca
a m uy dd, h kd ma-
y ack. Bu w aach ad
ch a cm h cu by ca
wk ha a, u, ad ha ma-
. imay, h ad bcm a h da.
The rise o geosocial networking
rad adac hadwa ad wa ha
ud h a uy ac um
xcha ma ad a
ac. th h ca wbWb 2.0 a
k hm. i a cmba
ha ca u cc wh ach
h, abh ah, ad acc ac-
ca ma abu h cmmuy, a ach
c, a , a bu a, wha
ak h acy. th udy h ca
ima, xam, a yu chd aDa eah xhb a a ca muum. A d- a had-mud day, h eah a aa m ac. U a daa , h m, u hh ad hh u, c, h , cu, c, ad
ay ddua hu, , ad h auaad ma-mad bjc. Ha ud a aa h a h d x, h akh qua a mac ca d huh a3-D uaa h a. o cu, a y h may kd daa wh whch hca ac. U h ym c ccaab, h ab qu ma ad c, dbu a ad ama c,a-m wah, ad, ca buda, adua. sh ca a ua h ma
ma ha h ad h ud a hwd ha ccd a a h gloBe jc.th ma ca b amy ud wh hda ma a daa. sh ca m -ma may h bjc h by u hdaa cck a hyk. t a hamy aca Yw naa pak, xam, h a h c hk h y,b, ad bh h ha h ha ju adabu. i ac, h ca w h a uay ma h b h a h muum h hmw.
Vice President Al Gore, in a speech at the
Caliornia Science Center, Los Angeles, Caliornia,
January 31, 1998
1 rc h maa ay cc cmmca duc, c, c, h u ay ad, m,
ca am ma u y ad hud b cud a a dm, cmmda, h uch am bw DAi ad ah ay.
Figure 2. the gloBal connection project
National Geographic hah dayd g eahtM aa h gba Cc pjc, a j am bwnAsA, Ca M Uy, National Geographic, adg.
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6
wb a cay w ad cud b,
dca, wk, rss d, ad ma a-
ca. th ca wb mm xcd
w a a makab d h x w ya.
th wd aaaby da ma, cmbd
wh h xad uch ma ay c-um ccu, muy u
wha w a h ca ca wk,
wh a mha . smy u, Wb 2.0
aca a cay awa ha a-
hy ay a ma ca wk.
Wh md cmmuca by
bd ahc dac, aa awa
add a w dm ca wk by c-
c ad uc a ua wd. A
w w wal, H, gyps, adh waw ubcb d h
d a h-dayd da ma ad
ay wk wh hm. thy ca xcha
ma h, aua, ad
ac by ac. Ad hy ha b c by,
hy ca aa m.
th ca ad (u) ma
huh ca wk a w c-
c. Caba ma ha b aud
c h ad ma hm. Wha w h ama aay ma h
-wb ca ca ad mak aaab
ad ad achab m. th m
h dm way byd d a
d ad aa a uch, h aby ack
a cum ad ca-bad
c. th acay au ca
wk h u, a ba ca, h
fw da.
id a ca wk, ma ad acad
ma, cum c, h, d,
w, ad k uc ca d c-
um wh xaday h a
ccu a a ca. e da
ma am aw u cbu h
kwd abu a cc hm-
, h abh a cmmuy ca
ad aa ac wh ca yh aa-
ab ma abh cc,
ah, my mak b md
dc. lca-bad ca wkaady aw hbhd ach, c-
c c ad h . th
ima Cmm m Maya/rha lab,
xam, ud wh a ucc dy
ca huma c (Ahy Cuy, pA,
h://www.humac.). sm ca
wk aca u my d daa
ack hma a aa ba,
u ma ud by u. A m
xam a da dc aca ha a u wk ba -
cd daa mc acy huh grss.2
Tools or development: practical examples
or the geo-web
thuh mau, h -wb d-
m aady h. th U.s. Acy
iaa Dm (UsAiD) oc
gba Dm Aac (gDA)wh
m mb m, bu,ad c cy dm by
ubc-a aac u aa
dy cu ubc-a ah
ahcay (Fu 1). Dd by DAi,
h w ab UsAiD m a, gDA/
Wah a, ad a a aud
h wd acc ah ma by
c ahca . i h ac,
ca wk d a am
UsAiD m a ad a aac a- cc wh h gDA ad a h
wha cma, ac, ad c a
acad wh cc bu a a
ca. Da ma aw h -
a hmac daa ay, wh uch daa
a aaab. Dd h aaaby ad
2 s www.. ad h wb h o gaa Cum (www.www.aa.) addah h adac mad cc ad c dm-a ma huh ca wk.
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3
D
evelop
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nA
tives
i suh Aca, ach, d, adaua uc maam ac a ua aa am ha xc ad h cha adca Maaw. UsAiD/MaawCmmuy pah suaab ruc
Maam, mmd by DAi, xamcha h dbu mmb wdad b a ca ad ad maama. s h://.daba./a.
accuacy h daa dd by h ca
wk, m cud aua a bu-
u a hy a h x
hyca aucuad, ch, ad
ha h huma ad ma
uc a cd ca.
i ida, UsAiD Cmmuy-Bad Aa
ifua C pjc my ca
wk a d cx: aa fua
uac ad ad ubak . DAi
ha dd a y am ha
cca, m- ma wh h ca
aa fua cmmuy acc. A uqu
ac h am aby a
abua ma m au a daa
uc ha ycay u d daa maa-m adad. Daa daa uc ca b
kd ad uay dayd bad xmy
a cc -cad , uch a a ama
huma aa fua ubak. th m
ca wk aw a
ac u a ua b, cda-
am ca d ad ab h
xcha w ad adc m h -
a m ca.
The uture o geosocial networking
gca wk ha h a d
mucad cmc dm ad -
ma ca b. i ky,
xam, ha hahcay d cawk w u ca cu u ad
cmmu, a u ac a ad
m a bad ba ca u
a ba chy am. i uch ca,
a-m ma dy ym kd
ca cmmu acc y buy -
cu mhy a dyamc ad
ac ma mdum ha w ha h m-
a ad h mm dm.
A ca wk cad ech mypac, d-d by h Cab pjc, wh m u-
m h naa scc Fuda, a
m m h uu ca
wk. ech mypac dcbd a a ,
a-m ca wk aca ha cm-
b w- ad h-dma ma (h
Mc vua eah b ma) wh a -
-- ( --) wk d.
i w aw u ca ua hbhd,
ha ma d acua ca, ach cum, whu huh a ca
. th Cab pjc ha wkd wh h
ova Fuda auch a jc cad
iCt4D uaaby du
a aa wk ca ac-
Figure 3. avian inFluenza preparedness
A xam hw aaab huma uc (a d c da x) cad wh 5 m aubak (d d).
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8
bad da a bu aud ca
kwd ba (Fu 4).
i a m acu ma a Da eah
cma ca wk ad a-
cad ma uc, ad mad aaab mb h, whch a cuca h d-
wd, h a ack ad
aucu. nwk mmb u may
cbu a c uch a m-
ma, cxua daa, ad/ aa daa
ay. A dm ac, w ha
y bu cach h uac wha ca b
d wh h caaby.
Reerences
Cac, Fac. 1997. The Death o Distance:
How the Communications Revolution Is Changing
Our Lives. Cambd: Haad Bu sch
p.
M.F. gdchd, th U Ca Da eah,
International Journal o Digital Earth 1 (1): 3142.
h://yu.cm/4d7w
g, K., ad K. Cak.
2007. i g eah, D-
a eah? D a v.
i pcd h Fh
iaa symum
Da eah, Bky, Ca.,
Ju 58.
vc H. 2008. Why
g-sca nwk Ma-
: th Uca vua
ad ra Wd ra-
h. Numinous Nonsense
wb, May 13. h://
yu.cm/5k
2006. Ahy Cuy
Ma Daa a Aay sc: MAYA D H
lba ram Daa
Ca Cmmu Aud
shad ima. Ino-
world 46 (nmb 13): 20.
h://yu.cm/35du7
Kuma, pau. 1998. th r gahy
Dm. pa ad h Aua
Wd Bak Cc Dm ec-
mc, Wah, D.C., A 2021. h://yu.cm/4mkb
rw, W.W., ad Mcha Kdy. Theorists o
Economic Growth rom David Hume to the Pres-
ent: With a Perspective on the Next Century. nw
Yk: oxd Uy p, 1990. h://yu.
cm/46y
sach, Jy D., Jh l. gau, ad Adw D.
M. 2001. th gahy py ad
Wah, Scientifc American (Mach): 7075.
Figure 4. echo Myplace, a geosocial networking application
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evelop
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tives
s o C i A l n e t W o r K s A n DD e M o C r A t i C t r A n s i t i o n s
by Joseph Siegle
Transitions without social networks
Bau ay cm md wh hk
h ba dmcacy mm. Y
a h s U dd wad du,
Bau wa d m a ea
eu dmcac a. o -
ca a had md h a 1980 ud
glasnost ad had bu cha h u
Baua Cmmu pay. A Cmmu
pay ad w dcdd ad cd u h ad putsch Mcw
Auu 1991, ad saa
shuhkch wa cd d h a-
am ad had a smb. H
cdd ad Bau a ah ca
, c c b, ad mak-
d cmc m.
A wh h -ca a, Bau
dud a ha cmc cac,
fa, ad bchd aa. th m
Cmmu pay caad ua -
ac cha h shuhkch m
wh cu ad aa c
Mcw. lack a ud dmcac ca-
ad ch c cy wk ha
cud cu h auad ac, shuhkch
wa cay ad ad cd m c
Jauay 1994. sx mh a, Axad
lukahk wa cd d. H -
ud c c, aad ky -m h cmy, hud dd
wa, ad d aa w
abhd h aam ad Ca Bak.
Dmc c ac w cud
ad c b d. tw bady fawd
da c a, ca wk ma
amd ad lukahkwdy add
a eu a dcaa w h
day.
Colored revolutions: the promise and
shortcomings o nascent social networks
i h a 1990 ad ay 2000, dmcacy
adca ga, sba, Uka, ad
a x Kyya d cd-
ab dnetworks ca
m, daw h xc ad u
abhd dmcac. Bud a
h h uccu ac h
Cmmu m ea gmaywhchcumad h ca h B Wa
h wk d c ad ch-
qu uad by h
Cauw waa, g sha.
oaaay, h mm fcd a
wk-cc aach ha chwd ca-
d ucu ad d a acca fxby ad
mauaby ha hd c wh am
ac.
th y h wk wa
o, whch ayd a ky h Bud
ru ha buh abu h dwa
sbda M m sba ocb
5, 2000. o, a u m-mdd yu
, camd 100,000 d mmb.
W u ad m h ac (-
a aa ad cmmuca ucu)
h muda (ca ay a). Wh sba
2000 u wa cd ( camd h
mk h Bud ru a h m mmab d m a day-
whch bud a ljuba
k, ckamd J, d u h ad
chad h bud sba a ),
d a w, c aach a
dmcac ac. i h ya ha wd,
ma ca ayd u ga (Kmaa,
h r ru), Uka (pa, h oa
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0
ru) ad Kyya (KK, h tu
ru).
th dmcac ad quy a cky ,
huh, cay ac wh dmcac
m ad c cy wk a m-
. th amah h cd uha b xc. th aaa
pm M za Mach 2003
by a ua uma wh h
M m da a u back h
m c sba. i ga, Mkha
saakah, a w 96 c h
da 2004 w h r
ru, mbakd u m. Bu
h ac ackd. By nmb 2007,
huad had ahd ca tb dmad h a. H
dd wh a a, a a mcy,
ad a mda backu. i Uka, h w m
m ad ad m a h oa
ru ha b ckd a cay
acmu ba w ha ha hd u
a u Cmmu pay. Kyya tu
ru d c Ca Aa ad
ha cha wa h a, bu ay huam
a way ca h.
Solidarno: the power o a resilient social
network
pad xc fc ah c
m h cum dmcac a. i
h cuh wk k
1976, Cmmu pay u ab-
hd h Wk D Cmm h
h d by h m.1 t adac
h , a udud wa cad,h ca u h dd ubc
ac h md ph a. th cd
d h ma h dd
aa, wh hhy dad ada
ad ahc ca. C aca
ad am w adyu a
aay ca ad cmc wk ha
hd a h ua ad u h
m m. i wa m h backd
ha h sday mm md ad wa
cay cd 1980.
i h w dd c,
ga Wjcch Jauk, ad h may
m, dcad maa aw Dcmb
1981. thuad w ad ad a mad
100 w kd. A cuw wa ud,
dd aa w bad, ad
mda ad ducaa u w cd
cd. o h ac , Jauk amb
had ad : sday wa bad ad cud ay a ca .
Y pad ad c cy wk
dd w. iad, hy cud h u-
ddc by maa a bad
udud mm. Wh h -
m cd h ca h, sday
mad h ma c m p. th
ama cud u 1988, wh d-
a cmc cdcud wh h
d byglasnostd h -m cmm wh sday ad ad
wd wk ca u. A a h da,
sday ad h dd mm
w ad, a w ab
c m a ucm aamay
c, ad c cy wa awd a
y. th dc umh dd cad-
da Ju 1989 d a sday-d ca
m ad h abhm aam-
ay dmcacy. Fu da c a,pad ha dubd caa cm ad a
mmb d ad h eua U
ad nAto.
1 F a m dad backud pad a, Mcha Bhad (1993).
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2
Social networks build trust
Dmcac y u a a x ha
d h ym m. C mu
ha uc cdc h y ad
uay a ca c, xam,
hy a wa u h ad m h c-
a cada ac u c-
ad huh h ba bx. Wh h
cd d hd, c w aad
ad dud wh h dmcac c.
smay, a ha hy mu b cd a
ma hy a , dmcac ad-
y c u hm wh hy
uu c ad wh h h
majy ad aca h cc u
whch dmcacy dd. A c, h,
dmcacy a cmac, bad u, bw c ad h ad.
paca wk h bud u.
i d muuay wad ah
bw dduabd ha ca c-
dc ad cmmm a cy. Ha
wk aw c m d ahc
aa, hc u, cm ca, -
ca ua cm h aud had
. th c-u ka cad h c a muy ma bud-
a had aa dy. i h way, ca
wk a h ha bd a cy h.
imay, a aca bud u: hy
may uu acha cma ad
b ad ay dmcac .
exam cud h Ku Kux Ka, h maa,
xaa aamay aca, aca
yamd chm.
Ca ca wk -dmcac c qu m a
c a aca ad ak a.
suac ad m ma ha
auh c b way wha hy ha. A
h w rb puam ad h ha
hw, hw, ()bud h ca -
wk cca -m ca hah ad
y. na wh ca ch
d b m ab, b cmcay,
ucb cm ad c, ad ub-
jc w cu (puam 1993).
Networks ensure accountability
nwk a dmad by a
u bu qu buy- m may ddu-
a ad aa. pw ycay dudad adh ubjc chck ad baac.
Bcau ad mu cu h aa ad
u h cuc, hy ha c-
uu h cc ah ha
a aw a ada. Accuaby,
u, ha a mda c h a
ca mm, ma dc wad
adcam.
Acc ma a dab au accuaby. ima ad aacy
ad aw ddua a hw w ad
a d h jb. Mmb a wk a
m ky b w-md ad ab c-
a ady dm h
dc makad ada accdy. th
u ad h a aumy ach
ddua u a wk mak wk
da aaa ucu du m
a.
sca wk y u ma
fw wh a cy bu a aw mmb
b m ady m h a kw-
d, xc, ad uc m ud h
cuy. B acc ma h
h adaa h chd w uc-
u. lka h ud wd a a
awa duc ah
ay wu cha. exa
a, m, ca h abu haa aucac m mh wa x
hd w h ac a cay aa-
d . Cy, ac abu
wha ha a da cuy
bu ccd aa u. tha
why dcah zmbabw ad Buma ha
bad m aa , cay h
mda.
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4
D
evelop
ingA
lt
er
nA
tives
Some lessons learned
exam h ah bw h xc
wk ad dmcacy dcu bcau
h aucy cmaab c-aa daa
aca. D aca ad accu-
dc am hm x
cha. o cmm xy h ch
acaa a cy d u.
C c wh hh u a
m ky aca ad j aca
au y. lauchd 1981, h Wd
vau suy w c 80 cu ad m
80,000 cau ma -
a au, aud, aca aca-
, ad u a m 200 qu. th
daa aw a aay h ah
bw u ad dmcacy, h a bdd by h Fdm Hu dmcacy dx.
th ah bw dh ca
u ad ubqu uccu dmcaa-
aa aaby ( Fu 1).3
C cm, dmca c-
ha had hh u 1990 ha
aad cay dmcacy c,
aa, 2005. F xam, Buaa,
Mxc, pad, ad suh Ka a cd h qua h ak u 1990. thy
ach ubquy cd h 10 c
h Fdm Hu dx 2005. Cy,
dmca uch a Ba, rmaa, ad
tuky cd bw h mda h u
ca 1990, ad ak a w dmcacy
15 ya a.
th a cd h c kbw h ch acaa ad h
quay ad duaby dmcacy ac -
ca m iay amuy dcumd by
rb puam. C cm, c
h iay ha dd aca -
uay mmbh aa a much hh
a ha c uh iay. th a-
a w ycay caa ad cuua
u, uch a cc cub, cha c,
hk cub, ay cc, ad l Cub.Cmmu wh hh aca aca
a had hh a wa adh
ah dca ma acc ad
am cmmuy aa. th u-
a mac a m
c wh a ch acaa wa a
ua dd by a aby am
cab m, m my aa aua
bud, ad m x ad
c dy day ca c, hah cc,
acuua a. Acaa dy wa aa b dc ua mac
ha h cmmy cd xaa d
ac uch a ca aby, duca,
ubaa, aby, ca ay.
C h c w a a m
ad wh h ca m; hy had
m dc cac wh h ca m
a ad h dcu dd
cu u ubc ah ha
qu a h ( c, jb, ad ).
Cac bw ca ad c
uh iay, ca, dd b m
yca c-a ah. pdcaby,
c acaay ch cmmu-
3 Dmcacy maud u h Fdm HuAnnual Survey o Political Rights and Civil Liberties. th Fdm Hu
dx a a aua a bw 2 ad 14 y cuy h wd.
suc: Wd vau suy; Fdm