Business Strategy and Cross-Industry Clusters

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.