The Relevance of Innovation Clusters
Innovation clusters are regional concentrations of large and small companies that develop creative products and services, along with specialized suppliers, service providers, universities, and associated institutions. Ideally, they bring together a critical mass of skills and talent and are characterized by a high level of interaction among these entrepreneurs, researchers, and innovators.a
Prior to the second half of the 20th century, the limitations of communication and transportation technologies meant that industries most always developed in clusters. Consistent with this, U.S. manufacturing industries organically developed in clusters—for example, textiles in New England, cars in Detroit, and steel in Pittsburgh. Indeed, economists have studied industrial concentrations for over a century.b
Open global markets, rapid transportation, and high-speed communications of the 21st century should allow any company to “source anything from any place at any time.” Nonetheless, economic growth and employment continue to be strongly associated with successful clusters.c Recognizing this, regional and national governments have sought to pursue policies that actively create and nurture technology clusters within their borders.d
Muro and Katz distinguish the phenomenon of innovation or industry clusters in general from specific Regional Innovation Cluster (RIC) initiatives, which they call “formally organized efforts to promote cluster growth and competitiveness through collaborative activities among cluster participants.” Led in many cases by regional or national governments in partnership with universities and industry, these cluster initiatives often “sponsor education and training activities, encourage relationship building, or facilitate market development through joint market assessment and marketing, among many others.”e Muro and Katz note that since RIC initiatives are a relatively new phenomenon, they do not yet have a sufficient empirical record, leaving the effectiveness of these cluster building strategies to be established.
bSee Alfred Marshall, Principles of Economics, London: Macmillan, 1920. The first edition of Marshall’s classic textbook appeared in 1890. Marshall characterized clusters as a “concentration of specialised industries in particular localities” that he termed industrial districts.
cMichael Porter, “Clusters and the New Economics of Competition,” Harvard Business Review, November-December 1998.
dJoseph Cortright, Making Sense of Clusters: Regional Competitiveness and Economic Development, Washington, DC: The Brookings Institution, 2006. Cortright notes that “the foundation of a regional economy is a group of clusters, not a collection of unrelated firms. Firms cluster together within a region because each firm benefits from being located near other similar or related firms.” This means that economic development policy and practice can be effectively oriented toward groups of firms in a specialized region.
eSee Mark Muro and Bruce Katz, The New ‘Cluster Moment’: How Regional Innovation Clusters can Foster the Next Economy, Washington, DC: The Brookings Institution Metropolitan Policy Program, September 2010.