As representatives of place, economic development professions are challenged by a“New Economy” that is global, knowledge based, and networked. Does place offer a competitive advantage? This is a question asked by Michael Porter in his article “Clusters and the New Economics of Competition.”
In many industries competitive advantage requires innovation. Economic clusters accelerate the pace of innovation by offering a competitive advantage through access to specialized information, support services, and technology. In addition, clusters stimulate productivity and the formation of new businesses.
A business location selected on the basis of low cost inputs may turn out to be a competitive disadvantage when the benefits of economic clusters are factored into the location decision.
What can the economic development practitioner due to stimulate the formation and development of economic clusters in their area? Working collectively to building and maintain vibrant economic clusters is a beginning. Understanding the economic forces impacting local clusters and collaborating with local institution including government and education will be key to their formation and success.