Cluster
A cluster is a geographically proximate group of interconnected companies and associated institutions in a particular field, including product producers, service providers, suppliers, universities, and trade associations. Clusters arise out of the linkages or externalities that span across industries in a particular location.

Local Cluster
Local clusters are made up of local industries. Local industries provide goods and services almost exclusively for the area in which they are located, which explains why they must spread all across the country. Indeed, local industries show employment in every region, regardless of the natural or competitive advantages of a particular location. As a result, their regional employment should be roughly proportional to regional population, so that the most highly populated states like California, New York, Texas, and Florida will figure as the top local employment states.

Traded Cluster
Traded clusters are made up of traded industries. Traded industries sell products and services across economic areas, so they are concentrated in the specific regions where they choose to locate production, due to the competitive advantages afforded by these locations. Employment levels in traded industries thus vary greatly by region, and have no clear link to regional population levels.

Narrow Cluster Definition
Narrow cluster definition relates only to traded clusters. Narrow cluster definition defines industries that are unique only to the cluster. For example, Telephone and Telegraph Apparatus, Radio and TV Communications Equipment are unique to only to the Communications Equipment Cluster. Every U.S. industry is uniquely allocated in a cluster.

Broad Cluster Definition
Broad Cluster Definition relates only to traded clusters. Broad cluster definition defines industries not unique to the cluster. These industries may fall into and overlap with other traded clusters. For example, Electronic Computers, Computer Storage Devices, and Computer Peripheral Equipment fit the Broad Cluster Definition of the Communications Equipment Cluster. But, these industries fit the Narrow Cluster Definition of the Information Technology Cluster only.

State
States are politically defined geographic unit of analysis. There are 50 states in the union and one District of Columbia.

Economic Area
Economically defined geographic unit of analysis. Defined by the Bureau of Economic Analysis, Economic Areas are made up of counties and encompass all (rural and urban) U.S. counties. There are a total of 172 economic areas and many cross state borders. See www.bea.doc.gov for more detailed information.

Metropolitan Area
Metropolitan areas are defined by the U.S. Bureau of the Census and reflect population characteristics at the county level. Metropolitan areas are made up of consolidated metropolitan statistical areas (CMSA), primary metropolitan statistical areas (PMSA) and New England county metropolitan areas (NECMA). Some metropolitan areas cross state borders and encompass primarily urban counties. There are a total of 318 Metropolitan Areas. See www.census.gov for more detailed information.

Clustering Methodology
 

Employment
Paid employment consists of full- and part-time employees, including salaried officers and executives of corporations, who are on the payroll. Included are employees on paid sick leave, holidays, and vacations; not included are proprietors and partners of unincorporated businesses.

Establishment
An establishment is a single physical location at which business is conducted or services or industrial operations are performed. It is not necessarily identical with a company or enterprise, which may consist of one or more establishments. When two or more activities are carried on at a single location under a single ownership, all activities generally are grouped together as a single establishment. The entire establishment is classified on the basis of its major activity, and all data are included in that classification.

Payroll
Total payroll includes all forms of compensation, such as salaries, wages, reported tips, commissions, bonuses, vacation allowances, sick-leave pay, employee contributions to qualified pension plans, and the value of taxable fringe benefits. For corporations, it includes amounts paid to officers and executives; for unincorporated businesses, it does not include profit or other compensation of proprietors or partners. Payroll is reported before deductions for social security, income tax, insurance, union dues, etc.

Average Wages
Average wages are payroll divided by total employment for a particular cluster/industry-region combination. Average wages are a measure of standard of living.

Location Quotient
The Location Quotient is a ratio measure of the concentration of a cluster in a particular location relative to the national average. So, The LQ is a measure of an industry's level of concentration within a location, with an LQ > 1 indicating higher than average concentration in that location. Thus, the formula for the location quotient in a state (can be uniformly applied to economic area or metropolitan area) is as follows:

The industry's location quotient (LQ) for state i, which is the ratio of the industry's share of total state employment relative to its share of total national employment:

Share of National Employment
The share of national employment is a measure of the relative cluster presence in a particular location to the nation. For example, the State of California has over ten percent of the employment in the Information Technology Cluster. Thus, the formula for share of national employment is as follow:

Patents
A patent for an invention is the grant of a property right to the inventor, issued by the United States Patent and Trademark Office. Generally, the term of a new patent is 20 years from the date on which the application for the patent was filed in the United States or, in special cases, from the date an earlier related application was filed, subject to the payment of maintenance fees. U.S. patent grants are effective only within the United States, U.S. territories, and U.S. possessions. Under certain circumstances, patent term extensions or adjustments may be available. The patent data provided in this web site are for utility patents only. Utility patents may be granted to anyone who invents or discovers any new and useful process, machine, article of manufacture, or compositions of matters, or any new useful improvement thereof.