By: Larry Gigerich

Increasing numbers of economic development organizations throughout the world are using cluster-based economic development strategies to determine the best ways to invest resources for economic growth. Regions, states and nations that target and invest in specific industry clusters tend to have greater focus, utilize resources more effectively and deliver better results.

Traditionally, clusters are defined as entities located in a geographic area which compete and/or collaborate with one another. As a result of the competition and collaboration dynamic, a new word, “coopetition,” was spawned to define this relationship. It is important to recognize that industry clusters can also include suppliers and end users of products and services generated by companies in the targeted industry sector.

How do area leaders determine the industry clusters that their area should target? Area leaders need to understand their geographic region’s positioning for success with certain types of industry clusters. In other words, any community may state that it is targeting the life sciences industry sector, but it may or may not be well positioned to leverage positive results. Consequently, leaders must identify the key drivers for the different industry sectors they are considering targeting. Key issues to consider include: tax structure, regulatory environment, cost and quality of labor force, transportation systems, supplier networks, economic development incentive programs, quality of life amenities and education.

This form of cluster analysis allows elected and economic development officials to better understand how to support existing companies and position their area to attract new companies. With this understanding, officials can address common needs that serve as the key underpinnings of the industry cluster. It is important to recognize that clusters exist on their own and cannot be created by government. However, community and state leaders can help these clusters thrive by creating the best environment for the companies’ operation and growth. By supporting specific industry clusters, areas boost their companies’ competitive advantages.