Clusters and Cluster-Based Development Policy

Clusters and cluster policy have become a dominant paradigm in the world of both economic development theory and practice. Cluster theory suggests that firms that are part of a geographically defined cluster benefit from being part of that cluster and that these benefits result in growth in economic activity and output for the region. From here it is only a short step to argue that economic development practitioners can devise policies that can facilitate cluster development through various forms of intervention. Yet despite the large amount of writing on clusters, there is substantial vagueness and ambiguity about the concept itself as well as how clusters work to bring about economic growth and whether policies put in place to build or strengthen clusters actually achieve the desired result. In this article, the authors conduct a review of literature related to clusters to try to set forth what we know and do not know about clusters, what remains uncertain, and what the implications are for economic development practitioners.