Institute of Development Studies
University of Sussex, United Kingdom

What does it take to respond successfully to the challenges posed by globalisation? What kind of local governance is required to enhance competitiveness and earning opportunities? These are central questions for this conference. These are also questions which Rodrik (1999) addresses in a recent book concerned with Making Openness Work. He concludes that societies with weak institutions of conflict management find it more difficult to cope with the turbulence caused by globalisation. This is precisely what I found to be the key problem in a Brazilian industrial cluster which was attempting to fend off intensifying global competition. The lack of conflict management led to the collapse of a promising cluster-wide upgrading strategy. This paper shows the challenges the cluster was up against, where it succeeded and where it failed. The progress that was made was achieved through inter-firm co-operation. And the failure came with conflict amongst enterprise groups and associations. Due to centrifugal forces of globalisation, conflicts among such private actors are inevitable. Without mediation by public agencies, such conflicts pull local economies apart and upgrading strategies fail. This is the central message of this paper.