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Introduction

Economic development, according to Harvard Professor Michael E. Porter is the "long-term process of building a number of  interdependent microeconomic capabilities and incentives to support more advanced forms of competition." These capabilities and incentives, which were originally identified in Porter's The Competitive Advantage of Nations, 1990, include the nature and extent of the inputs required by firms to produce goods or services; the rules, incentives and norms governing the type and intensity of local rivalry; the quality of demand for local services; and the extent and quality of local suppliers and related industries.  Porter states that mid-level and advanced development depends on the formation of industry clusters, which support faster improvement and innovation of products.  (Porter, Michael E.  2000. Attitudes, Values, Beliefs, and the Microeconomics of Prosperity.  In Culture Matters: How Values Shape Human Progress, ed. Lawrence E. Harrison and Samuel P. Huntington. New York: Basic Books).

Industry clusters are geographic concentrations of competing, complementary, or interdependent firms and industries that do business with each other and/or have common needs for talent, technology, and infrastructure. The firms included in the cluster may be both competitive and cooperative. They may compete directly with some members of the cluster, purchase inputs from other cluster members, and rely on the services of other cluster firms in the operation of their business. 

Examples of Industry Clusters:  North Carolina's Research Triangle; Hartford, Connecticut's insurance and finance markets; Hollywood's film industry; carpets in Dalton, Georgia: tourism in south Florida; technology along Route 128 in Massachusetts and in Silicon Valley, California.

James Gollub states that "industry cluster competitiveness derives not only from the concentration of related industries, suppliers, and services in the same place, but also from access to highly specialized economic inputs that are not usually provided solely by the business sector.  These resources, often referred to as "economic infrastructure" or "foundations," include institutions that provide: adaptable skills; accessible technology; adequate financing; available infrastructure; advanced communications; acceptable regulatory climate; and achievable quality of life."  Gollub emphasizes the importance of collaboration among organizations, sectors, and communities in accessing these resources and nurturing industry clusters.  Gollub believes the cluster framework, which involves mobilizing stakeholders, assessing existing industry clusters, fostering collaboration by bringing together participants from key industries and institutions in the region; and implementing the actions identified as a result of the collaborative process, is a  valuable tool for improving economic conditions because it is: market-driven, inclusive, collaborative, strategic, and value-creating. (Information Design Associates. 1997.  Cluster-Based Economic Development: A Key to Regional Competitiveness. San Francisco, CA: Author.  A report prepared for the Economic Development Administration.)

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Resources

General Cluster Information