In recent years, “cluster strategies” have become a popular economic development approach among state and local policymakers and economic development practitioners. Cluster analysis can help diagnose a region’s economic strengths and challenges and identify realistic ways to shape the region’s economic future. Yet many policymakers and practitioners have only a limited understanding of what clusters are and how to build economic development strategies around them. This discussion paper reviews the academic literature on industry clusters. It explains what clusters are, why they matter for regional economic development policy, and how to use cluster analysis as a guide to policy and practice.

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