Clusters and Competitive Advantage

Promoting economic cluster formation based on technological innovation has become an important new strategy for global competitive advantage and entrepreneurial growth. In The Competitive Advantage of Nations, Michael Porter hypothesizes that nations gain significant competitive and economic advantage where concentrations of firms (clusters) exist in home markets of similar or related industries. Cluster location relationships help produce beneficial advantages such as knowledge spillover, ease of access to skilled labor, better acquisition and assembly of the inputs of production, and competitive pressures to innovate and increase productivity.

Clusters are found in all 50 U.S. states and around the globe. Some well known U.S. clusters are those in microelectronics found in the Silicon Valley of California; household furniture in North Carolina; entertainment in Hollywood; and gambling casinos in Las Vegas. Regardless of location, a relatively small number of clusters usually account for a major share of the economic activity within a geographic region and the vast share of exports sent out of the region.

Vincent J. Pascal
Ph.D., Eastern Washington University

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