Clusters as an Economic Development Tool: Beyond the Pitfalls

Abstract

While many states have used a cluster approach to improve economic development policy, such an approach can easily yield inaccurate or incomplete results. The specific approach to cluster analysis presented here provides a definition of industry clusters that encompasses the classic, vertically integrated cluster, as well as horizontal clusters, where common resource needs rather than buyer-supplier relationships more closely link the component industries and firms, and emerging clusters. Further, this approach integrates quantitative analysis with qualitative approaches and examines the cluster as an entity in itself rather than a collection of industries to be studied individually. Case studies of two clusters in the Hudson Valley of New York State illustrate how this approach develops a deep understanding of the cluster and encourages the formation of policy interventions as an outgrowth of the study process.