Clusters that Improve American Economic Development

The American economic system is struggling and it is the time to find new methods of improving the economy and ensuring that American values stand strong in the face of global adversity. The economic system is fundamental to the reach of our commerce, health of our people, and impacts our budgets like education and the military. Clusters offer an opportunity to create greater understanding of how the economic system works and they ways to create a better platform for growth.

Professor Michael Porter from the Business School at the University of California-Berkely put forward an idea that firms succeed when they are in close proximity to each other (Engel, 2014). They exist within a competitive cluster and when these clusters exert the right pressures they lead to higher states of development.

Clustered firms innovated quickly and nurtured highly skilled workers. Core competencies and interactions with other firms lead to stronger innovative environments. Firms begin to seed the growth of other firms within the cluster. It is possible these clusters start to support other clusters and their needs for growth.

Within these clusters firms had stronger ties to government and were able to attract additional investment capital. Government could formalize an idea of what the clustered looked like and how it operates. This made policy making easier and lead to better cluster management. 

Likewise, investors are drawn to the activities of these firms because they could invest in leading sectors through multiple companies that produced higher rates of investment return. Increased investment fueled growth and new product/service development.

Clusters are made of a number of components that include: Entrepreneurs, mature corporations, universities, research centers, venture capitalists, service providers, management specialists, and government. They are tightly woven environments where transactions among these members are quicker, cheaper, and more lucrative than outside the cluster.

When the components as well as the political and governmental atmosphere are correct these clusters will grow. Such growth leads to new jobs, development and general prosperity for the region which encourages greater investment. On a national scale multiple clusters can lead to a rejuvenating economy.

Engel, J. S. (Ed.). (2014). Global clusters of innovation: Entrepreneurial engines of economic growth around the world. Cheltenham, England: Edward Elgar. ISBN 978-1-78347-083-9.