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This paper takes a clustering approach as it attempts to investigate localised learning within a rice cluster in Malaysia and to examine the role of institutions, social capital and geographical proximity in helping promote localised learning. The paper argues that the development of social capital within a cluster needs to take place in its institutional context, and that development policies must address the ‘soft’ elements of the cluster in fostering cooperative relationships and ‘social contracts’ among the cluster actors. Evidence shows that learning processes and gains from learning in a cluster occur mainly in the form of informal learning – in which the effects of social cohesiveness, trust and connectedness are particularly important. Geographic proximity also plays an important role when it comes to the regional embedding of knowledge and learning processes. This paper shows supporting evidence that social proximity is the main dimension that should be embedded within the geographical and institutional proximity for agricultural cluster development. Geographical proximity improves social capital: a top-down policy approach in cluster development can therefore often be unsuccessful, given the failure to understand the dynamics of the cluster–actor interactions.
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