11.2.1 What is a cluster?

Defining a cluster is a complex task. The name is used for different business structures such as national-regional-cross-border clusters, clusters of competence, industrial or production systems and innovation systems. It is also used for different reasons: to increase the competitiveness of SMEs, support collective research, change a whole industry, implement environment management system... Even though there are a huge number of definitions most of them share the idea of proximity, networking and specialisation.

One of the most used definitions of a cluster is the one of Michael Porter1:
Clusters are geographically close groups of interconnected companies and associated institutions in a particular field, linked by common technologies and skills. They normally exist within a geographic area where ease of communication, logistics and personal interaction is possible. Clusters are normally concentrated in regions and sometimes in a single town2.

Some experts on clusters and networks add some components to the definition:
Clusters are groups of individual companies and linked institutions that are3:

  • Working together and/or competing
  • Geographically assembled in one or several regions, even though the cluster may have a cross border extension
  • Focused on a particular field, linked by common technologies and skills
  • Either science-based or traditional
  • Clusters can be either institutionalised (they have a proper cluster manager) or non-institutionalised.

Stages in the evolution of clusters

There are different stages involved in the emergence and evolution of clusters.
These stages are:4

    The birth of a cluster can often be linked to historical situations, such as:
    • Availability of raw materials
    • Specific knowledge in R&D or traditional know-how
    • Specific needs of a group of (geographically concentrated) customers or firms
    • Location of companies or entrepreneurs carrying out some new technological innovations that motivate the expansion of many others.

The first stage of a cluster often involves co-operation between sub-contractors or a geographical concentration of companies at the same stage of production.

    When this concentration of firms is established it begins a snowballing process in which more external economies are created. The first external economies often include the creation of specialised providers and service organisations, frequently originated from vertical dissolution of other firms, and the creation of a skilled labour market. The main aim of these new organisations (e.g. knowledge organisations, business associations, etc) is to help several firms in the growing cluster.
    The growth of external economies and the emergence of new local organisations enlarge the visibility, reputation, and attractiveness of a cluster. This may result in more firms and skilled employees joining it, therefore boosting the attractiveness even more, as well as resulting in a seed for the development of new local companies.
    Although a cluster can reinvent its success for decades or become part of a new cluster, many regional clusters sooner or later enter a period of decay. Cluster decay is often seen as a situation of technological, institutional, social and/or cultural “lock-in” business behaviour. It must adapt to the new situation.

The following figure shows the stages of evolution of clusters

Figure 1: Stages in the evolution of clusters5

This chapter has been written on the basis of „Design of Cluster Initiatives“ http://www.innovating-regions.org/download/

1 Michael Porter is recognised as the father of the modern strategy field.
   He is a leading authority on competitive strategy, the competitiveness and
   economic development of nations, states and regions.
2 http://ec.europa.eu/enterprise/entrepreneurship/
3 lbid
4 Information about the stages in the evolution of clusters has been adapted from http://ec.europa.eu/regional_policy/innovation/pdf/library/

5 Based on the presentation „Introduction to clusters“ by The Competitiveness Institute, Ottawa, 28th September 2004