1 Introduction

Clusters have been defined in many ways reflecting multidisciplinary interest and their
varied form ranging from the weak which do not confer significant advantages to
incumbent companies to the strong which enable high and sustained productivity
(Markusen, 1996; Gordon and McCann, 2000; McCann et al., 2002). A general definition
that captures the essence of the strong sustainable cluster is provided by the UK
Department of Trade and Industry (White Paper, 1998):

A geographic concentration of competing, collaborating and interdependent companies
and institutions which are connected by a system of market and non-market links.

What are the strengths of this definition? Firstly, it does not relate to a single industry;
rather it merely requires that companies in a cluster are interdependent in some way. This
makes sense. For example, we know from the early work on the Silicon Valley cluster that
it includes not only microelectronics firms but also venture capitalists (Saxenian, 1994).
Secondly, a cluster is defined not just in terms of companies but also supporting
institutions. These institutions can play an important coordinating role in strong clusters
(Best, 1990; Piore and Sabel, 1984). Thirdly, in addition to competition, non-market
linkages are emphasized. Cooperation, borne out of a common culture and trust, is known
to be particularly important with respect to innovation (Camagni, 1991; Capello, 1999).
Finally, the definition encourages us to think of clusters as complex systems of industrial
organization. It is this very complexity that makes them difficult to copy and therefore
sustainable (Maskell and Malmberg, 1999).

Recent empirical studies show that companies in strong clusters grow faster than
average and that strong clusters attract a disproportionate amount of new entrants (Cook et
al. 2001; Cook and Pandit, 2002; Pandit et al. 2001, 2002). Also, that productivity
(Henderson, 1986) and innovation (Audretsch and Feldman, 1996; Baptista and Swann,
1998) is higher within strong clusters . In short, clusters can lead to superior economic
performance. What is more, cluster benefits are found to accrue in many different types of
manufacturing and service industries from aerospace, biotechnology and computing to
broadcasting and financial services (Agnes, 2000; Beaudry et al., 1998; Pandit and Cook,
2003; Wrigley et al., 2003).

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