Cluster Development Strategies

Clusters are groups of related, geographically proximate companies that derive competitive advantages through their close proximity to one another. There are three primary advantages traditionally associated with location in a cluster:

Shared Workforce The cluster provides a pool of skilled workers to meet hiring needs

Supplier Networks – Companies can access needed supplies quickly and cheaply

Information Exchange – Sharing of information allows for higher rate of innovation

Due to these advantages, companies located within clusters often enjoy higher rates of growth and job creation than their peers. Clusters are also associated with high rates of innovation and startup formation, often serving as catalysts for small business growth. Moreover, because of the many purchasing relationships that exist among companies in a cluster, clusters provide a high ‘multiplier effect’ for regional economies. The multiplier effect refers to the additional spin-off and secondary jobs and investment that are created by companies located in a cluster versus companies not in an established cluster.

Because of this, the cluster-based approach to economic development has become an established method for communities to create positive economic growth. It has been a central tenet for many of the world’s most successful economies and continues to be at the root of many economic powerhouse regions.
The reasons are two-fold. First, industry focused growth allows a community to develop clusters of interrelated businesses. Clusters form among businesses with similar end consumers, supply chains, workforce needs, operations, and technology.  It is only through focused effort and attention that clusters of similar economic activity begin to develop.

Second, the resources that a community is able to commit to economic development are scarce. Those that make the most efficient use of these limited resources will have the most success. It takes time, financial commitment and manpower to understand the needs of specific industry sectors, identify decision makers in those sectors, develop a compelling case for your region as an ideal location and finally, to effectively sell your community to companies actively looking to expand.

Greyhill works with communities to identify the core elements of emerging and established clusters and understands how to create strategies to foster cluster growth. While it is impossible for the economic development community to “create a cluster” Greyhill can assist with tools to identify and cultivate cluster development: