The Cluster Concept

"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." - Michael Porter, Harvard Business School

Simply put, clusters are groupings of organizations within a region identified by commonalities and inter-region relationships. These companies group in close proximity to leverage their combined strengths. Local governments support clusters because they contribute to stronger local economies, and offer a template for increasing a region's competitiveness through focused structural economic change.

Regional Technology Strategies, Inc. defines clusters narrowly as related businesses that, when measured, have a relatively high level of economic impact within a defined geographic region, and broadly as all systemically related organizations within a geographic region sharing interests in similar goods and knowledge.

"Clusters by their nature are demand driven, with companies acting in their own best interests," writes Rosenfeld in "Just Clusters."

Included in a company's best interest is access to knowledge and workforce skills, proximity and well-developed relationships with research labs, workforce training and educational institutions, suppliers, competitors, and customers. Coordinated activity between these types of institutions often results in increased competitiveness for engaged businesses and the region as a whole, as well as improved overall economic health within the cluster region.

Harvard Business School's Institute for Strategy and Competitiveness says about clusters, that local access to specialized suppliers, employees, institutions, and other inputs increase the productivity and efficiency of engaged businesses. The proximity of specialized organizations also eases transactions and management of coordinated efforts, while allowing industry best practices to diffuse quickly. Innovation opportunities increase as numerous suppliers, manufacturers, and researchers contribute to the cluster's collective knowledge. From this knowledge arises an increased ability for the region in general to facilitate entrepreneurship and attract outside investment, as the rate of new product development and market penetration will increase as the cluster achieves sufficient mass to be somewhat self-sustaining.

All in all, clusters present the economic picture of a region in a new light. Highlighting cross-industry relationships, the importance of targeted cooperative efforts in increasing a region's competitiveness, and the necessity of regions and businesses to redefine their role in the constant flux of the global economy, clusters offer a central point of organization and understanding to guide regions through these changes.