Business Strategy and Cross-Industry Clusters

TLDR

Although industry clusters are increasingly central to state economic development, most states define them ad hoc, focusing only on single‑industry clusters and risking wasted resources by ignoring cross‑industry linkages, and effective clustering requires understanding firm‑level strategic decisions. The study aims to identify external economies—such as collaboration, knowledge transfer, specialized labor pools, and nonbusiness relationships—that facilitate cross‑industry clustering. It does so by drawing on prior field research to uncover these economies. The article concludes by suggesting specific development policies that can identify and use these external economies to attract industry clusters.

Abstract

Although industry clusters are becoming the focus of state economic development policies, most states continue to define clusters in ad hoc ways, often focusing only on clusters of firms in single industries. Such policies run the risk of wasting development resources by neglecting important linkages among firms that cut across industries. Exploiting the dynamic nature of the competitive advantages associated with the clustering process requires an understanding of strategic business decisions made at the firm level. This article draws on previous field research to identify several external economies that contribute to the clustering of firms across industries-collaboration economies, transfers of knowledge, local specialized labor pools, and relationships with nonbusiness institutions. The article concludes by suggesting specific development policies that can identify and use these external economies to attract industry clusters.