Clusters are geographic concentrations of interconnected companies, specialized suppliers, service providers, and associated institutions in a particular field that are present in a nation or region. Clusters arise because they increase the productivity with which companies can compete. The development and upgrading of clusters is an important agenda for governments, companies, and other institutions. Cluster development initiatives are an important new direction in economic policy, building on earlier efforts in macroeconomic stabilization, privatization, market opening, and reducing the costs of doing business.
Two cluster-related projects are currently underway at the Institute: the Cluster Mapping Project and the
International Cluster
Competitiveness Project. The Cluster Mapping Project has assembled a detailed picture of the location and performance of industries in the United States, with a special focus on the linkages or externalities across industries that give rise to clusters. Extensive data from the project is now available. The
International Cluster Competitiveness Projectextends this approach internationally, examining the patterns
of international trade through the lens of clusters.
Framework Publications
Clusters, Convergence, and
Economic Performance
Mercedes Delgado, Michael E. Porter, Scott Stern
Submitted for publication March 11, 2011 This paper evaluates the role of regional cluster composition in
the economic performance of industries, clusters and regions. On the one hand,
diminishing returns to specialization in a location can result in a convergence
effect: the growth rate of an industry within a region may be declining in the
level of activity of that industry. At the same time, positive spillovers across
complementary economic activities provide an impetus for agglomeration: the
growth rate of an industry within a region may be increasing in the size and
“strength” (i.e., relative presence) of related economic sectors. Building on
Porter (1998, 2003), we develop a systematic empirical framework to identify the
role of regional clusters – groups of closely related and complementary
industries operating within a particular region – in regional economic
performance. We exploit newly available data from the US Cluster Mapping Project
to disentangle the impact of convergence at the region-industry level from
agglomeration within clusters. We find that, after controlling for the impact of
convergence at the narrowest unit of analysis, there is significant evidence for
cluster-driven agglomeration. Industries participating in a strong cluster
register higher employment growth as well as higher growth of wages, number of
establishments, and patenting. Industry and cluster level growth also increases
with the strength of related clusters in the region and with the strength of
similar clusters in adjacent regions. Importantly, we find evidence that new
industries emerge where there is a strong cluster environment. Our analysis also
suggests that the presence of strong clusters in a region enhances growth
opportunities in other industries and clusters. Overall, these findings
highlight the important role of cluster-based agglomeration in regional economic
performance.
Clusters and entrepreneurship
Mercedes Delgado, Michael E. Porter, Scott Stern Journal of Economic Geography
May 2010
US Census Bureau Center for Economic Studies Paper No. CES-WP-10-31
This article examines the role of regional clusters in
regional entrepreneurship. We focus on the distinct influences of convergence
and agglomeration on growth in the number of start-up firms as well as in
employment in these new firms in a given region-industry. While reversion to the
mean and diminishing returns to entrepreneurship at the region-industry level
can result in a convergence effect, the presence of complementary economic
activity creates externalities that enhance incentives and reduce barriers for
new business creation. Clusters are a particularly important way through which
location-based complementarities are realized. The empirical analysis uses a
novel panel dataset from the Longitudinal Business Database of the Census Bureau
and the US Cluster Mapping Project. Using this dataset, there is significant
evidence of the positive impact of clusters on entrepreneurship. After
controlling for convergence in start-up activity at the region-industry level,
industries located in regions with strong clusters (i.e. a large presence of
other related industries) experience higher growth in new business formation and
start-up employment. Strong clusters are also associated with the formation of
new establishments of existing firms, thus influencing the location decision of
multi-establishment firms. Finally, strong clusters contribute to start-up firm
survival.
The Economic
Performance of Regions Michael E. Porter Regional Studies Volume 37, Numbers 6-7 / August-October 2003
This paper examines the basic facts about the regional economic performance, the
composition of regional economies and the role of clusters in the US economy
over period of 1990 to 2000. The performance of regional economies varies
markedly in terms of wage, wage growth,
employment growth and patenting rate. Based on the distribution of economic
activity across geography, we classify US industries into traded, local and
resource-dependent. Traded industries account for only about one-third of
employment but register much higher wages, far higher rates of innovation and
influence local wages. We delineate clusters of traded industries using
co-location patterns across US regions. The mix of clusters differs markedly
across regions. The performance of regional economies is strongly influenced by
the strength of local clusters and the vitality and plurality of innovation.
Regional wage differences are dominated by the relative performance of the
region in the clusters in which it has positions, with the particular mix of
clusters secondary. A series of regional policy implications emerge from the
findings.
"Clusters and the New Economics of
Competition" Michael E. Porter Harvard Business Review November-December 1998
This article explains how clusters foster high levels of productivity and innovation and lays out the implications for competitive
strategy and economic policy. Economic geography in an era of global competition poses a paradox. In theory, location should no longer be a source of competitive advantage. Open global markets, rapid transportation, and high-speed communications should allow any company to source any thing from any place at any time. But in practice, location remains central to competition. Today’s economic map of the world is characterized by what Porter calls clusters: critical masses in one place of linked industries and institutions--from suppliers to universities to government agencies--that enjoy unusual competitive success in a particular field. The most famous examples are found in Silicon Valley and Hollywood, but clusters dot the world’s landscape. Porter explains how clusters affect competition in three broad ways: first, by increasing the productivity of companies based in the area; second, by driving the direction and pace of innovation; and third, by stimulating the formation of new businesses within the cluster. Geographic, cultural, and institutional proximity provides companies with special access, closer relationships, better information, powerful incentives, and other advantages that are difficult to tap from a distance. The more complex, knowledge-based, and dynamic the world economy
becomes, the more this is true. Competitive advantage lies increasingly in local
things--knowledge, relationships, and motivation--that distant rivals cannot replicate.
Order
article at Harvard Business Online
“Location, Clusters, and Company Strategy”
Michael E. Porter Oxford Handbook of Economic Geography G. Clark, M. Gertler, and M. Feldman, eds
Oxford: Oxford University Press
2000
“Location, Competition and Economic Development: Local Clusters in a Global Economy”
Michael E. Porter Economic Development Quarterly 14, no. 1,
February 2000: 15-34.
Economic geography during an era of global competition involves a paradox. It is
widely recognized that changes in technology and competition have diminished
many of the traditional roles of location. Yet clusters, or geographic
concentrations of interconnected companies, are a striking feature of virtually
every national, regional, state, and even metropolitan economy, especially in
more advanced nations. The prevalence of clusters reveals important insights
about the microeconomics of competition and the role of location in competitive
advantage. Even as old reasons for clustering have diminished in importance with
globalization, new influences of clusters on competition have taken on growing
importance in an increasingly complex, knowledge-based, and dynamic economy.
Clusters represent a new way of thinking about national, state, and local
economies, and they necessitate new roles for companies, government, and other
institutions in enhancing competitiveness.
Other Publications
and Presentations
Michael Porter at the TCI Conference 2012
(via video link)
October 18, 2012
This Greenbook on cluster initiatives is the first of its kind, presenting data
from over 250 CIs around the world, based on the Global Cluster Initiative
Survey 2003 and a series of case studies. The book describes and analyses CIs in
great detail: In what settings do they evolve? What objectives do they pursue?
What does the CI process look like? And what are the drivers of good
performance?
Benchmarks
current practices for the operation and organizational structure of cluster
initiatives. This report is based on a survey of 1,400 cluster
initiatives, including comprehensive data from 450 CIs that completed the Global
Cluster Initiative Survey (GCIS) 2005. An earlier study based on GCIS 2003 was
reported in “The Cluster Initiative Greenbook.”
The paper
addresses how clusters can be leveraged for economic policy and what the role of
different stakeholders in this process is. This paper summarises the cluster
concept, focusing on the main theoretical framework and on recent empirical
findings, and discusses key pillars of a cluster-based economic policy approach.
The paper concludes with an application of the concept to resource-rich,
oil-dependent economies.
Foreign direct investment flows target existing or emerging cluster locations, not avoid them.
Companies clearly see the cluster benefits such as the ready access to
specialized suppliers and employees as sufficient to outweigh the often-higher
costs at cluster locations.
European
Clusters
Christian Ketels Structural Change in Europe 3 – Innovative City and Business
Regions, Hagbarth Publications January 2004
Discusses
new evidence on clusters in Europe and recent efforts to integrate the cluster
perspective into European economic policy thinking. The article concludes with
thoughts on how the current efforts can be made more effective in increasing
competitiveness.
Cluster
Profiles The Cluster Profiles are a set of
standardized descriptions and bibliographical references for
more than 800 industry clusters in 52 countries.
Kraft der
Vielfalt(in German) Die Ziet, May 2005
("The Powerof Differences")
Harvard Business School
Cases
Available through Harvard Business Online:
The
California Wine Cluster Describes the California wine cluster, or the group of interconnected
wineries, grape growers, suppliers, service providers, and wine-related
institutions located in California. Also describes the wine cluster in France,
Italy, Australia, and Chile, the four other major international competitors.
Teaching Purpose: Designed to explore the role of location in competition and
the implications for firms and public policy.
Building a Cluster: Electronics and Information Technology in Costa Rica Describes the actions of President Figueres and his cabinet in
attracting an Intel assembly and testing plant into Costa Rica. The effort was
part of a government strategy that sought to develop further the Costa Rican
electronics and information technology cluster. Teaching Purpose: Describes a
relatively successful cluster development strategy.
Overview
to Institutions for Collaboration Provides an overview of the wide variety of organizations other than
firms, government ministries and regulatory agencies, and universities that may
have significant effects on competitiveness. These intermediary entities,
referred to as institutions for collaboration (IFCs), include, for example,
chambers of commerce, industry associations, professional associations, trade
unions, technology transfer organizations, quality centers, think tanks,
university alumni associations, and others. Teaching Purpose: Provides basic
background information to support case study analysis of the impact of IFCs on
competitiveness through the intermediary functions they perform in local,
regional, national, and even international markets.
Asociacion Colombiana de Industrias Plasticas (Acoplasticos) Acoplasticos was established in 1961 as a lobbying group for Colombia's
major plastics manufacturing companies. In the early 1980s, the
organization shifted its focus toward improving the productivity of the
Colombian plastics and rubber cluster, which also included certain
petrochemical, man-made fiber, paint, and ink industries. Over time, the
organization's activities expanded to include cluster technology upgrading,
training, trade fair production, joint procurement, and information collection
and dissemination. Despite significant improvement in the performance of the
Colombian plastics and rubber cluster during the 1990s, however, Executive
Director Carlos Garay was concerned about the challenging economic and political
environment in 2002. Teaching Purpose: Designed to help students explore the
potential roles and impact of an industry association--an "institution for
collaboration"--on productivity and competitiveness in a developing country
context.
Centre
Suisse d'Electronique et de Microtechnique (CSEM) Le Centre Suisse d'Electronique et de Microtechnique S.A. (CSEM)--the Swiss
Center for Electronics and Microtechnology--was a major nonprofit research
institution located in Neuchatel, Switzerland with roots in the Swiss watch
industry. CSEM maintained close links to several Swiss universities and, over
time, the center's activities expanded to include basic and applied research,
contract production, and technology consulting. By the late 1990s, CSEM began
spinning off promising commercial ventures and incorporating them as for-profit
companies. In 2001, CEO Thomas Hinderling wondered whether any adjustments in
CSEM's strategy were necessary or desirable going forward. Teaching Purpose:
Designed to help students explore the potential roles and impact of a nonprofit
research center--an "institution for collaboration"--on productivity
and competitiveness in an advanced economy context.
Reference Chapters in On
Competition
"Clusters and Competition: New Agendas for Companies, Governments, and
Institutions" On
Competition, Chapter 7
Michael E. Porter
Explores one of the most important ideas in Michael Porter's overall
competitiveness theory - the concept of clusters.
From the introduction, "This new article pulls together what I have learned
about clusters both from research and in practice, in terms of cluster theory,
the role of clusters in competition, and their implications for government
policy, company and institutional behavior. Clusters are a prominent
feature on the landscape of every advanced economy, and cluster formation is an
essential ingredient of economic development. Clusters offer a new way to
think about economies and economic development; new roles for business,
government and institutions; and new ways to structure the business-government
or business-institution relationship. Dozens of cluster initiatives have
sprung up in many parts of the world, and this article summarizes some of the
learning gleaned from both advanced and developing economies."
European
Cluster Policy Group In 2008 the European Commission establishedthe European Cluster Policy Group with a mandate
to advise the EC and Member States on how to better
support the development of more world-class clusters in the EU.
March 2006
This discussion paper reviews the academic literature on industry clusters. It
explains what clusters are, why they matter for regional economic development
policy, and how to use cluster analysis as a guide to policy and practice.
Visanu Swedish national program for development of innovation
systems and clusters
"Towards
world-class clusters in the European Union: Implementing the broad-based
innovation strategy" A European Commission Communication
October 17, 2008
Outlines a policy framework to facilitate the development of more world-class
clusters in the EU. The communication is accompanied by a Staff Working Document
which provides available evidence for the economic impact that clusters have on
competitiveness and innovation, an overview of the different Community
initiatives in support of clusters, and a more detailed description of the
challenges addressed by the Communication.
Bridging
Community and Economic Development A Study for Using Industry Clusters to Link Neighborhoods to the Regional
Economy
Paul Christensen, Nan McIntyre, Lynn Pikholz
Shorebank Enterprise Group
June 2002
The objectives of the project are to view clusters from a practitioner's view,
to identify and understand the determinants of cluster competitiveness, and to
learn how economic development intermediaries in our selected case studies are
adding unique value, particularly to small firms.
日本の産業クラスター戦略 Strategy for Cluster Initiatives in Japan (in Japanese only)
Y. Ishikura, M. Fujita, N. Maeda, K. Kanai, A. Yamasaki Yuhikaku
Publishing, December 2003 Foreword by Michael E. Porter
Wettbewerbsfähigkeit von Wirtschaftsstandorten
unter besonderer Berücksichtigung industrieller Cluster Competitiveness of Locations with a Special Focus on Industrial Clusters(in
German only) Horst Gersmeyer Peter
Lang Publishing, 2004
Intervene to
Industrialise "A holistic approach to enabling business environment,
entrepreneurship and cluster value chain development."
