Economics of Clusters

Network Dynamics of Business


Clusters are well-known geographic features that often drive and determine a region's economic trajectory.  While we know where clusters are, political and business leaders alike are left without a clear understanding of why they exist or how to use them.  

Political leaders want to know how they can develop clusters or keep them growing.  Business leaders need to know how best to leverage clusters in competition. For both parties, clusters represent unique opportunities, if they can only identify and understand what dynamics are at play.  

For Policy

From tax credits to infrastructure investments, to community relations, and upcoming elections - the composition of an economy and its growth prospects impact what good policy is.  The challenge for any political administration is knowing what levers are and what implications their choices will have.  

Analyses that help decide what to do next by identifying key elements of composition, trends, and impact on the economy are paramount for any political leader.  With scarce resources, choosing between two investments can make or break a jurisdiction's future.  Without the appropriate tools, how can leaders be expected to make the best decisions? 

Those decisions have major impacts.  Take the example of tax-breaks.  Effective tax breaks can demonstrate a jurisdictions's commitments to a sector that catalyze growth and bring new jobs for decades to come.  Less effective tax breaks can sink community resources into long-term commitments that never produce benefits.  

For Business

Clusters shape the competition for businesses.  From the availability and cost of human capital to the effective local tax burdens and legal implications - clusters can shape the competitive dynamics of an industry.  The critical issue is competition.  The presence of clusters impacts your firms competitive dynamics and profitability potential relative to your competitors. 

The key is understanding how clusters impact competition and what that means for your industry and your firm.  With the right insights your firm better use economic clusters to your advantage and avoid the pitfalls of running with the herd. 

The decisions where and how you choose to compete, can shape your business trajectory for the future.  Where you compete impacts the value creation of your human capital recruiting, capital-intensive operations, tax-burden, and overall productivity.  Where you compete then shapes how you will need to compete.