Why Clusters Count

A recent study finds that regions with clusters of firms in any industry will see noted economic growth, in areas such as job creation, patents, and even the creation of new industries.
Why Clusters Count

Using data from the U.S. Cluster Mapping Project from 1990 to 2005, researchers studied 41 industrial clusters, as well as 589 industry subfields, in 177 U.S. regions. Examples of clusters include the automotive industry in Detroit and the concentration of high-tech activity in Silicon Valley. They defined a cluster as having 15 distinct types of industries within it.

For instance, the researchers discovered that industry specialization activity that’s one standard deviation above the mean can equate to 1.3 percent annual employment growth, and in some scenarios, 1.2 percent annual growth in patents. Regions should not necessarily strive to become the next hotspot for tech startups or finance, the authors say. Instead, regions should build clusters based on their existing strengths.

“Clusters, Convergence, and Economic Performance” is by Mercedes Delgado of Temple University’s Fox School of Business in Philadelphia, Pennsylvania; Michael Porter of Harvard Business School in Boston, Massachusetts; and Scott Stern of the MIT Sloan School of Management in Cambridge. It appears in the December 2014 issue of Research Policy.