Hubs and Nodes
Encyclopedia
Hubs and Nodes is a geographic model, explaining how linked regions can cooperate to fulfill elements of an industry's value chain
, and collectively gain sufficient mass to drive innovation
growth. The model of hubs and nodes builds on Porter's cluster model which served well in the past, but as businesses and regions around the world have adjusted to the realities of globalization
, the concept of clusters is becoming outdated.
and logistics
, such as the growth of the Internet
and overnight package services
, it has become increasingly possible to relocate operations such as research
, product development
, and manufacturing
to countries and regions with relevant expertise and lower costs. It is common among consumer goods, for example, for concept generation to be centered in one locale, product testing and refinement in another, and manufacturing and distribution
in yet other locations. Increasingly, elements of development, production and distribution are being completed beyond the borders of historical clusters.
As more companies progress beyond the cluster model, they increasingly expand and diversify their operations to locations where their investments will be most profitable. For companies adequately prepared for this rapid globalization process, their R & D, manufacturing and distribution stages fare better as these businesses are able to reduce their costs, while potentially realizing new efficiencies and increased speeds of product development. The spirit of the cluster model may remain intact — the various stages of production will still be shared by a number of different entities — but geographical proximity need no longer bind these entities together
Value chain
The value chain, is a concept from business management that was first described and popularized by Michael Porter in his 1985 best-seller, Competitive Advantage: Creating and Sustaining Superior Performance.-Firm Level:...
, and collectively gain sufficient mass to drive innovation
Innovation
Innovation is the creation of better or more effective products, processes, technologies, or ideas that are accepted by markets, governments, and society...
growth. The model of hubs and nodes builds on Porter's cluster model which served well in the past, but as businesses and regions around the world have adjusted to the realities of globalization
Globalization
Globalization refers to the increasingly global relationships of culture, people and economic activity. Most often, it refers to economics: the global distribution of the production of goods and services, through reduction of barriers to international trade such as tariffs, export fees, and import...
, the concept of clusters is becoming outdated.
Disaggregation of clusters
Companies are realizing that they may not require a particular stage of production to be in close geographic proximity. As barriers to long-distance national and global transactions have fallen through advances in technologyTechnology
Technology is the making, usage, and knowledge of tools, machines, techniques, crafts, systems or methods of organization in order to solve a problem or perform a specific function. It can also refer to the collection of such tools, machinery, and procedures. The word technology comes ;...
and logistics
Logistics
Logistics is the management of the flow of goods between the point of origin and the point of destination in order to meet the requirements of customers or corporations. Logistics involves the integration of information, transportation, inventory, warehousing, material handling, and packaging, and...
, such as the growth of the Internet
Internet
The Internet is a global system of interconnected computer networks that use the standard Internet protocol suite to serve billions of users worldwide...
and overnight package services
Courier
A courier is a person or a company who delivers messages, packages, and mail. Couriers are distinguished from ordinary mail services by features such as speed, security, tracking, signature, specialization and individualization of express services, and swift delivery times, which are optional for...
, it has become increasingly possible to relocate operations such as research
Research
Research can be defined as the scientific search for knowledge, or as any systematic investigation, to establish novel facts, solve new or existing problems, prove new ideas, or develop new theories, usually using a scientific method...
, product development
New product development
In business and engineering, new product development is the term used to describe the complete process of bringing a new product to market. A product is a set of benefits offered for exchange and can be tangible or intangible...
, and manufacturing
Manufacturing
Manufacturing is the use of machines, tools and labor to produce goods for use or sale. The term may refer to a range of human activity, from handicraft to high tech, but is most commonly applied to industrial production, in which raw materials are transformed into finished goods on a large scale...
to countries and regions with relevant expertise and lower costs. It is common among consumer goods, for example, for concept generation to be centered in one locale, product testing and refinement in another, and manufacturing and distribution
Distribution (business)
Product distribution is one of the four elements of the marketing mix. An organization or set of organizations involved in the process of making a product or service available for use or consumption by a consumer or business user.The other three parts of the marketing mix are product, pricing,...
in yet other locations. Increasingly, elements of development, production and distribution are being completed beyond the borders of historical clusters.
As more companies progress beyond the cluster model, they increasingly expand and diversify their operations to locations where their investments will be most profitable. For companies adequately prepared for this rapid globalization process, their R & D, manufacturing and distribution stages fare better as these businesses are able to reduce their costs, while potentially realizing new efficiencies and increased speeds of product development. The spirit of the cluster model may remain intact — the various stages of production will still be shared by a number of different entities — but geographical proximity need no longer bind these entities together