Do Enabling Determinants of Industrial Clusters Enhance Industrial Sector Performance in Algeria? Evidence from an ARDL–ECM Framework

Abstract

This paper investigates the influence of driving factors of the growth of industrial clusters on the performance of industrial production in Algeria in the period of 1990–2023, based on the use of the Auto Regressive Distributed Lag (ARDL) technique and Error Correction Model (ECM). The study uses manufacturing value added (MANF) for measuring industrial performance indicators as well as explanatory variables that include the amount of expenditures related to research and development (RSDV), amount of foreign direct investments (FDI), amount of industrial credit (CRD_IND), trade openness (TRD_OP), as well as interaction variable (ZINT_POST2011) which reflects the changes in the institutional environment after 2011. The results indicate that there exists a stable long-term cointegration relationship between the above variables while research and development expenses and foreign investments positively influence industrial performance indicators. At the same time, the amount of industrial credit influences the industrial performance indicators negatively, which contradicts the assumption, while trade openness and interaction variable do not have sufficient statistical significance in the long-term context, despite the fact that these variables are statistically significant in the short-term. The results of the study show that the effectiveness of industrial clusters depends on the efficiency of the institutional and financial system rather than simply on the geographical concentration of industries.