A PRACTICAL GUIDE TO 
CLUSTER DEVELOPMENT 

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A Practical Guide to
Cluster Development


A Report to the Department of Trade and Industry 
and the English RDAs by Ecotec Research & Consulting 


A Practical Guide to Cluster Development 

Contents 

Contents 
Foreword 3 
1. Introduction 4 

Section A: A Cluster Strategy 
2. Developing cluster-based strategies 10 
3. Measuring cluster development 15 
Section B: ‘What Works’: Policy Action to Support Clusters 
4. Critical Success Factors 22 
5. Contributory factors and policies for success 39 
6. Complementary measures and the policy environment 49 
Annexes 
A: End notes 53 
B: Bibliography 56 
C: Glossary 64 
D: Consultees 74 
E: Quick reference guide to cluster development 76 


A Practical Guide to Cluster Development 

Foreword 


Lord Sainsbury 
In a globalised and technologically advanced 
world, businesses are increasingly gathering 
together to generate competitive advantage. 
This phenomenon – clustering – can been 
seen around the world. 
Everyone will be aware of the IT cluster in Silicon Valley or 
the financial services cluster in the City of London. These are 
the famous examples, but clustering occurs throughout the 
UK. DTI’s cluster map, produced in 2001, showed that there 
were clusters throughout the UK: aerospace in the North West, 
textiles in the East Midlands, and IT around the M4 to name 
but three. Clustering is happening in the UK, and the aim of 
this guide is to help make our clusters even more successful. 
Much has been written on the benefits of clustering, and 
a great deal of effort has gone into mapping clusters, but 
there has been surprisingly little work that bringing together 
the material on the critical success factors for cluster 
development. This document aims to fill that gap. 
It draws on analysis and evaluation material to set out 
how local policymakers can help clusters to flourish. The 
approaches in the document cannot guarantee success but 
the policy actions set out in this document constitute best 
practice, and should provide a firm evidence-based platform 
for local cluster strategies. 
I am especially pleased that in developing this document, 
DTI has worked closely with the Regional Development 
Agencies and with colleagues at the Mersey Partnership. 
This is because effective cluster policies have to be 
delivered regionally and locally. I hope that the RDAs will 
find this document a valuable addition to their cluster 
agendas, and that they will share it with their partners in 
business and local government in order to design policies 
that will help UK clusters flourish. 
Foreword 

4 A Practical Guide to Cluster Development 
1. Introduction 
Section A: 1. Introduction 
A Practical Guide to Cluster Development is an evidence-based 
guide targeted at those engaged in the delivery of cluster policy 
at the local level. It is intended to provide a valuable information 
source on ‘what works’ and ‘what doesn’t’. 
It is based on a thorough analysis of the 
effectiveness of cluster interventions, and the 
evidence paper that sets out this assessment 
is available at www.dti.gov.uk/economics. 

The report is split into two sections: 

• 
Section A provides advice on how to 
design and measure a cluster strategy. 
• 
Section B sets out examples of 
the type of interventions that can 
encourage the successful 
development of clusters. 
“The key issue is to know when 
to intervene and when to let go. 
Sometimes there can be too 
much administration in cluster 
development – technology is rapidly 
changing and not always conducive 
to committee structures.” 

(Practitioner Observation, 2002) 

This guide starts from the perspective 
that policy intervention cannot create 
cluster from scratch but that it can help 
existing clusters to develop. It also starts 
from the proposition that the cluster 
being considered by practitioners have 
already been identified. Consequently it 
does not dwell on the question of ‘what 
is a cluster’. This guide therefore focuses 
on what makes for an effective cluster 

and how practitioners can influence this. 
Interventions can at best facilitate and 
animate the successful operation of 
clusters, and have to be based on rationales 
that seek to overcome market failures 
and constraints. 

What are clusters? 

Clusters are groups of inter-related 
industries. They have two key elements. 
Firstly, firms in the cluster must be linked. 
Secondly, groups of inter-linked companies 
locate in close proximity to one other. 
Put another way clusters are: 

“Geographic concentrations of 
interconnected companies, specialised 
suppliers, service providers, firms in 
related industries, and associated 
institutions (for example universities, 
standards agencies, and trade 
associations) in particular fields that 
compete but also co-operate.” 

(Porter, 1998) 

The links between firms are both vertical, 
through buying and selling chains for 
example, and horizontal, through 
complementary products and services, 
the use of similar specialised inputs, 
technologies or institutions, and other 
linkages for example. Most of these linkages 


A Practical Guide to Cluster Development 

Section A: 1. Introduction 

involve social relationships or networks that 
produce benefits for the firms involved. 

Co-location encourages the formation of 
contacts between firms and can enhance 
the value creating benefits arising from 
networks. The geographic area covered by 
clusters can vary dramatically. There may 
even be multiple operating scales, with 
regional, national and even international 
dimensions to some clusters. 

Why focus on clusters? 

Clustering can bring a wide range of 
benefits to both business and the wider 
economy. These include: 

• 
Increased levels of expertise. This 
provides sourcing companies with a 
greater depth to their supply chain and 
allows for the potential of inter-firm 
learning and co-operation. 
• 
The ability of firms to draw together 
complementary skills in order to bid 
for large pieces of work that as 
individual units they would be unable 
to compete for. 
• 
The potential for economies of scale to be 
realised by further specialising production 
within each firm, by joint purchasing of 
common raw materials to attract bulk 
discounts or by joint marketing. 
• 
Strengthening social and other informal 
links, leading to the creation of new 
ideas and new businesses. 
• 
Improved information flows within a 
cluster, for example, enabling finance 
providers to judge who the good 
entrepreneurs are and business people to 
find who provides good support services. 
• 
Enabling the development of an 
infrastructure of professional, legal, 

financial and other specialist services. 

Clustering is one of the key drivers of 
economic growth in localities, cities and 
regions. However, adopting a cluster 
approach is not the only way of encouraging 
regional economic growth. Informal 
networking, developing supply chains and 
improving workforce skills all have a part to 
play in improving competitiveness and 
creating growth. 

What factors underpin 
a successful cluster? 

All clusters are different but a number of 
common features stand out as underpinning 
the development of successful clusters 
throughout the world1. Common factors 
range from ‘softer’ elements of cluster 
working such as networks and institutional 
development, through ‘harder’ aspects, 
such as physical infrastructure or the 
presence of large firms, to more intangible 
elements, such as the presence of 
leadership or an entrepreneurial culture. 
A number of other factors that have 
contributed to the development of 
successful clusters can also be identified, 
such as access to markets, to finance or 
to specialist services. 

Figure 1 [below] illustrates the relative 
importance of common success factors 
across a wide range of different clusters 
in different locations and over different 
time periods. 

From the evidence base three factors 
can be identified that are critical for the 
development of successful clusters: 


A Practical Guide to Cluster Development 

Section A: 1. Introduction 

• 
Critical success factors; 
• 
Contributing success factors; and 
• 
Complementary success factors. 
The three ‘critical success factors’ are: 

• 
The presence of functioning networks 
and partnerships; 
• 
A strong innovation base, with supporting 
R&D activities where appropriate; and 
• 
The existence of a strong skills base. 
Four other factors also are seen to contribute 
to successful cluster development, but do 
not figure as prominently in the evidence: 

• 
An adequate physical infrastructure; 
• 
The presence of large firms; 
• 
A strong entrepreneurial culture; and 
• 
Access to sources of finance. 
Finally, a range of other factors have 
complemented the development of 
successful clusters in different 

circumstances. These complementary 
factors – such as advice may help individual 
businesses, but are not explicitly cluster 
focussed. 

It is important to stress at this early stage 
that the evidence did not identify causality 
between any of these factors and the 
development of successful clusters, merely 
that these factors were present to a greater 
or lesser extent in successful clusters. All of 
the cases studied had, though, benefited to 
a greater or lesser extent from interventions 
designed to overcome issues of market 
failure or development constraints. 

Who should be involved? 

The main players in cluster development 
must be the firms that are involved. Only 
through their active involvement will a 
cluster strengthen and develop. Business 
leaders thus play a crucial role. However, 
they are not the only players. Educational 

Figure 1: Critical success factors in cluster development 

Critical success factor identified within global literature search 

Success Criteria 

Networking partnership 
Innovative Technology 
Human capital 
Physical infrastructure 
Presence of large firms 
Enterprise entrepreneurialism 
Access to finance 
Specialist services 
Access to markets 
Access to business support services 
Competition 
Access to information 
Communications 
Leadership 
Virtual aspects/ICT 
External economic impacts 


0 
10203040506070 

(Source: Ecotec) 
% of Articles mentioning success criteria 


A Practical Guide to Cluster Development 

Section A: 1. Introduction 

institutions also have a role to play and have 
proved to be important catalysts in cluster 
development in some cases. Universities 
may play an educational role but can also be 
key players in promoting R&D and 
innovation within the cluster. 

Other players include financial 
intermediaries, such as venture capital 
firms, and business service organisations 
with expertise relevant to the cluster. All 
these bodies can help to strengthen the 
development of a cluster and can play a 
legitimate role in its development. Finally 
local authorities, Regional Development 
Agencies (RDAs) and other economic 
development bodies may all have an interest 
in facilitating the development of clusters 
through supportive policy interventions. 


8 

9 
Section A: 
Cluster Strategy 

Section A sets out approaches to developing a cluster strategy. 

Chapter 2 illustrates the type of factors that need to be 
considered when developing cluster strategies. 

Chapter 3 addresses measurement issues. 


10 
Section A: 2. Developing cluster-based strategies 
A Practical Guide to Cluster Development 
This section briefly introduces the touchstones of cluster 
strategy formulation. It explores the principle components 
for a strategy promoting cluster development. 
2. Developing 
cluster-based strategies 
10
Key aspects to cluster strategies 

The key aspects of cluster-based 
strategies are illustrated in the diagram 
below and consist of: 

1. 
Mobilisation: Building interest 
and participation. 
2. 
Diagnosis: Identifying and defining the 
cluster then identifying the strengths 
and weaknesses of the cluster. 
3. 
Collaborative Strategy: Identifying 
the actions required to promote 
the development of the cluster, 
in association with the main 

stakeholders in the cluster. 

4. 
Implementation: Implementing 
those actions. 
Once a cluster strategy has begun to be 
implemented a fifth aspect comes into play: 

Assessment: Monitoring and evaluating 
the results and reviewing the content of 
the strategy. 

It is important to remember that these 
steps do not have to be sequential – the 

Figure 2: Developing a strategy for cluster development


Key elements 
Build interest and 
participation 
Identify and 
define cluster(s) 
Build commitment 
and mechanisms 
to implement policies 
Identify and 
prioritise challenges 
and actions with 
stakeholders 
Cluster 
policy 
Diagnosis 
Collaborativestrategy 
Mobilisation 
Implementation 

A Practical Guide to Cluster Development 

Section A: 2. Developing cluster-based strategies 

Figure 3:The stages of the cluster lifecycle


EmbryonicEstablishedDecliningMature
first two aspects, of mobilisation and 
diagnosis, might easily be reversed for 
instance. The different steps are also often 
highly iterative in nature. The crucial element 
is to develop an integrated approach in 
collaboration with the firms and institutions 
involved in the cluster. Through discussions 
and joint working with those involved, 
internal strengths and weaknesses can 
be identified and external threats and 
opportunities highlighted. The cluster 
strategy can then identify where 
interventions are appropriate and how 
these will be targeted. 

“All interventions are inter-linked. 
There is a need for a cohesive package 
of support, the nature of which needs 
to be governed by demand. There also 
needs to be an emphasis on coherent 
policy intervention” 

(Practitioner Observation, 2002) 

Clusters have a 
recognisable lifecycle 

Clusters are dynamic and have a 
recognisable life cycle. The interventions 
that are appropriate at an early stage in 
the lifecycle of a cluster are likely to differ 
from those appropriate at later stages. 
The lifecycle is often described in different 
ways but can be represented simply as a 
cyclical process containing four stages: 

• 
Embryonic clusters – those at the early 
stages of growth. 
• 
Established clusters – those perceived 
as having room for further growth. 
• 
Mature clusters – those that are stable 
or will find further growth difficult. 
• 
Declining clusters – those have 
reached their peak and are failing or 
declining –clusters at this stage are 
sometime able to reinvent themselves 
and enter the cycle again. 

A Practical Guide to Cluster Development 

Section A: 2. Developing cluster-based strategies 

Moving between different stages may be 
simply a function of the industry life cycle 
reflecting the product cycle for a particular 
cluster. As the technology and product 
base of the cluster matures so innovation 
is required to maintain successful 
performance. In some cases a shift may 
occur, to a new form of working or into 
new market areas, to prevent a cluster’s 
decline and so establish the cycle again. 
In practice clusters are likely to develop, 
to bud and to mutate in more complex 
ways than the simplistic representation 
presented here. 

“Industrial regions need some kind 

of boost or intervention, they are 

like organisms that have living and 

dead parts and go through an 

evolutionary process.” 

(Practitioner Observation, 2002) 

Recent research suggests that different 
interventions are likely to be appropriate 
at different stages of the cluster lifecycle. 
Throughout the guide we have drawn 
attention to particular actions that may be 
appropriate at different stages of the 
cluster lifecycle. In embryonic clusters 
government and intermediary brokers 
can be important in encouraging 
collaboration and acting as information 
brokers, a role that may not be needed 
at a later stage. Encouraging openness 
and innovation in mature or declining 
clusters is essential to avoid the danger 
of regional lock-in. Not only does this 
help to maintain the competitiveness of 
traditional clusters but is also the starting 
point for promoting the development of 
new industries. 

“Put simply, our argument is that the 
processes of starting and sustaining a 
cluster have different economics. 
Starting a cluster involves first, 
building the economic fundamentals 
for an industry or technology, and 
second, finding the spark of 
entrepreneurship to get it going. The 
forces underlying the emergence of a 
cluster differ from those needed to 
insure its continued growth. While 
increasing returns and external effects 
can keep a cluster going, the initial 
spark is more difficult to obtain and 
more risky to pursue. 

(Bresnahan et al, 2002) 

Other evidence suggests that certain 
types of intervention remain appropriate 
throughout the life cycle of a cluster but the 
intensity required will change as will the 
manner in which it is delivered, taking into 
account the context of the cluster and the 
range of institutions present. 

Developing cluster strategy 

Cluster practitioners will need to take into 
account the nature of the cluster, its stage of 
development and the context in which it is 
set. This is achieved through good diagnosis 
and working with cluster firms and 
institutions. It is essential that in developing 
cluster strategies practitioners take into 
account of the location specific characteristics 
of the clusters that they are working with. 

In developing cluster strategies and actions 
practitioners should be creative and be 
wary of simply transplanting lessons from 
other contexts without regard for their own 
circumstances. Facilitating cluster based 


A Practical Guide to Cluster Development 

Section A: 2. Developing cluster-based strategies 

firms and organisations to instigate their 
own actions may also prove to be as 
effective as direct intervention. Although 
the tools are familiar the precise shape and 
weight attached to each will vary. 

“Practitioners should not pursue 
‘one size fits all’ policies.” 

(D’Oetreppe, 2003) 

“Firms form a critical link with each 
other, to the extent that for a 
successful cluster to exist, these 
players will have to be in some form 
of working partnership.” 

(Practitioner Observation, 2002) 

Cluster strategies should also distinguish 
between interventions that are cluster-specific 
and those that are not, but which would 
contribute to the development of the cluster. 
For example, infrastructure improvements 
are rarely cluster specific. In contrast, 
interventions supporting access to finance 
might be highly specific to a particular cluster. 

Cluster development can be facilitated 
through integrated strategies. A good 
example is that of Baden-Württenburg, set 
out below. Overall, the evidence suggests 
that policy interventions that are well-
designed can be an effective support to 
the development of successful clusters. 

Profile 12: Integrated approaches 
to cluster development 

Since the ‘Innovation offensive’ (or 

innovation push) in 1992 Baden-

Württenburg has sought to create the 

infrastructure to encourage clusters in 
new technology industries (especially in 
the fields of biotechnology, telemedia 
and health). This has involved a number 
of policies implemented by the Landë 
in an attempt to create the necessary 
institutional thickness for cluster 
development. This has included: 

• 
The promotion of new 
technology areas. 
• 
The setting up of biotechnology parks 
and agencies, software centres, 
traffic infrastructure technologies, 
data highways, and science cities 
(Wissenshaftsstädte). 
• 
The establishment of technology 
transfer centres (in partnership with 
local authorities). 
• 
Technology centres’ support of 
business start-ups. 
• 
The establishment of ‘New Business 
Associations’ aimed at young 
entrepreneurs. 
• 
Technology aid schemes to support 
small firms (less than 20 employees). 
• 
Joint research projects between 
SMEs, technology transfer centres 
and other firms. 
The success of the Baden-Württenburg 
clusters has been ascribed to, among 
other things: 

• 
Vertical linkages along the value chain. 
• 
High levels of regional sourcing. 
• 
Strong supplier linkages between 
local SMEs and large companies. 
• 
Flexible, high-quality production, 
which allowed firms to avoid price-
based competition. 
• 
A political culture of pragmatism and 
consensus. 

A Practical Guide to Cluster Development 

Section A: 2. Developing cluster-based strategies 

• 
Widespread vocational training. 
• 
The existence of technological aid
schemes to subsidise product
development.
• 
Publicly provided low-interest loans
to SMEs and start-ups.
• 
The existence of technology centres, 
and usually situated next to a 
Fachhochschule. 
• 
Wide distribution of innovation
consultancy offices run by the
Chambers of Commerce.
• 
Baden-Württemberg’s positive image 
as a region for reliability, quality and 
innovation. 
Summary 

The range of potential interventions is 
extensive, as this guide will demonstrate, 
but not all will be appropriate to any single 
cluster, nor to any single region. Appropriate 
interventions will also change over time. 
Strategies, and so interventions, must be 
dynamic and focused on need. On balance, 
cluster managers should also be cautious 
about intervening too heavily, the market 
should lead and interventions should be 
designed to facilitate the operation of 
market forces. 

“Policy intervention should be 

minimal and only to protect the 

growth of the cluster, the market 

should be the driving force.” 

(Practitioner Observation, 2002) 


A Practical Guide to Cluster Development 

Section A: 3. Measuring Cluster Development 


The previous section outlined the importance of developing 
responsive cluster strategies. This section stresses the 
importance of measuring cluster development. 
3. Measuring Cluster Development 
Having good quantitative feedback is a vital 
part of the strategy review process, as 
well as informing the development of the 
strategy itself. However, from the work 
undertaken, and reported in the 
accompanying Evidence Paper, there is little 
evidence of the use of consistent indicators 
by which to measure the development of 
clusters. This section sets out an approach 
to indicator selection. It begins by looking 
at the use of indicators as a decision 
support tool and then considers a 
potential monitoring framework. 

Why do we measure clusters? 

It is clear that establishing a set of metrics that 
are capable of tracking the performance of a 
cluster over time and space is important for: 

• 
Assessing the impact of cluster 
measures; and 
• 
Benchmarking performance. 
Understanding the different elements of 
clusters and their respective performance 
is an important step in identifying where 
clusters might be strong or weak and 
where subsequent intervention might be 
appropriate. This involves quantitative and 
qualitative analysis. Quantitative analysis 
might include statistical or numerical 
analysis on variables such as employment 
or output. Qualitative analysis might 
include discussion with businesses in the 

cluster over the innovative content of 
projects, or an assessment of the ‘softer’ 
dimensions of the cluster. 

Measuring the success 
of interventions 

Policy makers will want to know whether 
interventions adopted to improve cluster 
performance have achieved their intended 
goals. They will also want to know why 
interventions have not been successful. 
This can help to identify whether a particular 
policy approach is effective, whether it is 
efficient and whether it is appropriate. 
Measuring success can be undertaken in 
an absolute sense, i.e. has the intervention 
achieved the aims it has set itself, but 
might also be considered relative to other 
possible actions, or similar approaches 
adopted in other locations. Regular 
monitoring will also help to ensure that 
the intervention is being implemented 
as planned and having the intended 
effects, acting as an early warning of any 
potential difficulties. 

Measuring the success of different 
interventions contributes to the monitoring 
and evaluation of cluster development 
policies as a whole. It is important to 
understand whether success or failure is 
due to the interventions adopted or to 
outside factors beyond the control of 
policy makers. 


A Practical Guide to Cluster Development 

Section A: 3. Measuring Cluster Development 

Box 1: Measurement aims: 

Cluster measurement may seek to 
identify three key things: 

The appropriateness of interventions: 

assessing whether the policy or 
intervention is relevant with regard to 
the technical, social or economic 
problems it is meant to solve. 

The effectiveness of interventions: the 
fact that expected effects have been 
obtained and that objectives have been 
achieved. Calculated by relating an 
output, result or impact indicator to a 
quantified objective. 

The efficiency of interventions: the 
fact that the effects were obtained at 
reasonable cost. An efficiency indicator is 
usually obtained by dividing the budgetary 
inputs by the quantity of effects obtained. 

What should be measured? 

Ideally a measurement programme should 
capture both the effects of the interventions 
being undertaken and the development of 
the cluster overall. For the latter it should take 
into consideration the different aspects of 
cluster development and seek to understand 
how each element is developing over time. 

Clusters are multi-faceted and 
measurement should recognise this. 
There is little point in measuring one or 
two dimensions of a cluster, as this will 
miss important aspects of performance. In 
practice those aspects that are cited as the 
most important in cluster development, 
such as networks and the development of 

social capital, are currently not being 
measured on a regular or consistent basis. 
Most measures focus on the economic 
performance of the cluster. This captures 
the outcomes but can not provide 
information on what is happening to the 
drivers of cluster success. 

The different dimensions of clusters can be 
broadly classified under one of four headings 
which broadly encapsulate the following 
three ‘drivers’: 

• 
Networks and partnerships – the extent 
of social capital. 
• 
Innovation and R&D – the extent of 
innovation and R&D capacity. 
• 
Skills – the availability and quality of the 
workforce within the cluster. 
• 
Economy and enterprise – the level of 
employment, number of firms and their 
performance and the outcomes. 
As a principle the success of a particular 
intervention should be assessed on the 
basis of what it is intended to achieve, 
and assess how this contributes to the 
overall performance of the cluster itself. 
Measuring the performance of clusters 
is based upon improvements in the 
performance of the constituent parts of 
the cluster, and establishing the effect 
that cluster policies have had upon this. 
It is common practice to seek to: 

• 
identify the outcomes of any intervention; 
• 
the results achieved by this; and 
potentially, 
• 
the impact that this has had on the 
development of the cluster as a whole. 
When deciding which indicators to use 
ensuring their relevance to the action in 


A Practical Guide to Cluster Development 

Section A: 3. Measuring Cluster Development 

hand is not the only consideration. We 
should also consider whether they have a 
wider relevance. Indicators that are unique 
to a particular cluster or context will not 
always be useful in trying to measure 
relative performance compared to similar 
clusters elsewhere in the UK or abroad. 
Examples of unique indicators can include 
the absolute increase in research funds 
received by an individual university. A better 
measure might be to measure the overall 
level of research expenditure in the 
cluster as a whole. 

The science of measuring clusters remains 
in its infancy. So it will not be possible to 
definitively measure the performance of a 
particular cluster. However, it is possible to 
aim for is an understanding of the results of 
particular interventions on the identified 
cluster and its component firms. 

What types of indicators 
might we use? 

The choice of what indicators to use will 
depend on: 

• 
The nature of the cluster; 
• 
The nature of the interventions 
adopted; and 
• 
The overall policy objective. 
We have already suggested that when 
measuring the development of clusters we 
should distinguish between the different 
dimensions of clusters. The choice of 
indicators should reflect this approach. Some 
possible indicators of success are suggested 
in Figure 4 below. These are neither definitive 
nor exhaustive but provide an illustration of 
potential indicators by which the development 
of clusters can be measured. 

Figure 4: An illustrative monitoring framework


Driver – Innovation and R&D 
• R&D employment 
• R&D expenditure 
• Number of business spin-outs 
• Number of patents applied for 
• Number of innovation awards 
• Number of new products/ 
processes adopted 
Driver – Human resources 
• Number of vacancies 
• Educational attainment rates 
• Number of defined qualifications 
• Extent of measured skills gaps 
Driver – Networks and partnerships 
• Number of partnership arrangements 
• Number of co-operation agreements 
• Number of networking events 
• Number of joint research activities 
• Extent of social capital 
Outcome – Economy and enterprise 
• Net employment change • Levels of investment 
• 
Increase in GVA/GDP 
• Levels of profitability 
• Growth of existing businesses • Value of exports 
• Number of firm within the cluster 

A Practical Guide to Cluster Development 

Section A: 3. Measuring Cluster Development 

Where does the information 
come from? 

In general, there are three potential sources 
of information which might be drawn on to 
assess the development of clusters: 

• 
Official statistical data sets. 
• 
Commissioned survey work. 
• 
Qualitative understanding based on 
discussions with cluster members. 
Each of these have their own strengths and 
weaknesses and choosing appropriate 
indicators might be influenced by what 
information can be readily accessed. The 
measurement of some indicators is 
complicated by the manner in which 
statistics are collected. The pros and cons of 
different measures should be carefully 
assessed before indicators are ascribed to 
particular actions. 

Overall a mix of the three sources 
referred to above will provide the fullest 
understanding of the development of 
clusters and the effects that this is having 
on the performance of a wider economy. 
There will of course be a trade off between 
the resources expended and the depth of 
understanding achieved. 

There is some albeit limited evidence that 
practitioners are using more sophisticated 
methods of cluster development such as 
business profiling (an analysis of companies 
by product), supply chain analysis and 
input/output analysis. Where this latter 
analysis can be refined down to the regional 
level it can provide key data on linkages 
between sectors. 

Over what timescale should 
measurement take place and 
targets be set? 

Clusters take a long time to develop; most 
successful clusters have a history stretching 
back several decades. In deciding upon an 
appropriate monitoring framework it is 
important that we ensure that the indicator 
mix identified is capable of providing 
information on a regular basis to assist 
understanding of progress towards more 
long-term targets. Ideally, a monitoring 
framework will set out a number of 
indicators capable of being measured every 
year, coupled with some to be measured 
only every few years. Different aspects of 
cluster development will also require 
different monitoring schedules and this can 
be built into the framework just described. 
For example interventions supporting 
innovation may take some years to come to 
fruition, whilst initial partnership building 
initiatives might have a shorter timeframe. 

A framework that identified indicators and 
targets capable of being monitored and 
reviewed on 1 year, 2 year, 5 year and 10 
year cycles can provide an informative mix 
that is responsive to change. This will also 
allow for different sets of data to be 
collected depended upon statistical 
reporting cycles and the frequency with 
which surveys can be undertaken. 


A Practical Guide to Cluster Development 

Section A: 3. Measuring Cluster Development 

Establishing targets 

Establishing targets for particular indicators is 
an important aspect of cluster development 
initiatives. It is important not only to know the 
direction we wish to head, how far we have 
to go and how long this is likely to take us. 

Targets should be: 

• 
specific to the initiative in hand; 
• 
measurable using identified data sets; 
• 
achievable by the initiative in question 
with the resources available; 
• 
realistic, given the existing state of 
play; and 
• 
timebound, in that there is an agreed 
data by which they will be achieved. 
Learning from experience 

The aim of measuring cluster development 
is so that we can learn from our experience 
in order to improve the actions that we are 
taking. Unsuccessful actions should be 
ended, successful actions continued, 
replicated where relevant or discontinued 
where no longer appropriate. New actions 
should be adopted where information 
suggests that weaknesses are emerging or 
opportunities present and things should be 
left well alone where no actions are needed. 

Monitoring and evaluation is part of the 
policy cycle and information gained from 
measuring cluster development should be 
fed back into the policy process to inform 
future policy development. This requirement 
may itself influence the timeframe adopted 
for the monitoring of cluster development. 


20 

21 
Section B: 
‘What works’: 
Policy Action to 
Support Clusters 

Section B sets out the factors that are associated with 
cluster success, and the types of policy interventions 
that can be deployed. 

Chapter 4 sets out the critical success factors. 

Chapter 5 looks at contributory success factors. 

Chapter 6 discusses complementary factors. 


22 
Section B: 4. Critical success factors 
A Practical Guide to Cluster Development 
This chapter sets out the most critical success factors. These are 
the issues, identified by the research, which should be at the 
heart of any cluster strategy. The chapter explores why they are 
important, and sets out possible policy approaches. 
4. Critical success factors 
The evidence suggests that there are three 
critical success factors that underpin cluster 
success (box 3). 

Box 3: Critical factors for 
successful cluster development 

Our research has highlighted three 
cluster attributes that appear central to 
to successful clusters: 

• Networks and partnerships. 
• Strong skills base. 
• Innovation and R&D capacity. 
The presence of networks 
and partnerships 

Networks that generate formal and 
informal flows of knowledge and 
information throughout a cluster provide 
the gel that binds success over time. 
Access to tacit knowledge can support 
collective learning and more competitive 
performance. Networks can be the 
means through which many cluster-
development activities are delivered. 

“The key to growth for many small
firms within a cluster is its ability to
gain strength through co-operation
and collaboration utilising formal
and informal networks.
”


(OECD, 1996) 

Successful clusters tend to have strongly 
embedded networks and relationship 
systems. Trust and inter-personal 
relationships are highly developed, providing 
the cluster with a strong degree of social 
capital. Developing these relationships 
takes time. Networks may be supported 
through strong institutional structures, 
or through shared cultural values and 
a common purpose. 

The value of informal networks, based on 
social relations and even job-moves, is 
that it enables a transfer of knowledge 
around the cluster. Such ‘untraded’ 
means of information dissemination 
such as informal collaboration and 
extensive contact networks can create 
a ‘knowledge community’. 


A Practical Guide to Cluster Development 

Section B: 4. Critical success factors 

“It might seem that, given their desire 
for secrecy, racing car firms would be 
better off locating outside of this 
region but the reverse is the case – 
they have more to gain by tapping 
into the deep but rapidly circulating 
stream of knowledge.” 

(Pinch and Henry, 1999) 

“It is important to try to get
businesses to work together when
there is a clear logic for them doing
so. Developing a willingness to co
operate among businesses and 
a
profile for the cluster takes years.
”


(Practitioner Observation, 2002) 

The sharing of knowledge through networks 
and partnerships can be achieved through 
face-to- face contacts or through remote 
technologies, such as the web. Technology 
has advanced significantly in this respect 
and cluster practitioners are using 
interactive cluster portals to facilitate 
networking, share information about the 
cluster as well as using them for actual 
business to business interactions. The key 
is that a flow of knowledge occurs and in 
more sophisticated networks that active 
collaboration is encouraged. 

“If the cluster is large3 it is impossible 
to talk to individual firms because 
there are too many. Promotion of 
networking is therefore important so 
word gets around.” 

(Practitioner Observation, 2002) 

Networks can vary in size from a handful of 
companies working together on 

collaborative ideas to associations with a 
hundred or more members. Size is less 
important than the fact that they serve 
a purpose and there are benefits to 
membership. Some networks are highly 
specialised whilst others cover many 
different topics. 

Networks and partnerships are a part of 
the industrial landscape in some clusters, 
such as those in Northern Italy, developing 
naturally through social and cultural 
relationships. In other places they have 
been developed by firms within a cluster, 
or by public sector intervention, often in 
response to an identified weaknesses. 

Where networks and partnerships are 
weakly developed there is a case for 
initiatives that really push the idea of 
clustering forward and place it in the minds 
of SME managers. Showing SMEs the direct 
benefits of clustering and the opportunities 
that they would miss out on is the best way 
to secure involvement and support. Example 
one provides an illustration of a working 
network that has been stimulated by the 
public sector – practitioners can look on the 
web site to see how companies in the 
Scottish Food and Drink Industry are 
encouraged to work together. 

Example 14: Developing networks: 
Scottish Food and Drink 

The Scottish Food & Drink Cluster is a 

good example of a whole industry pulling 

together to help itself. Each of its 

individual companies aims to develop 

themselves through shared experiences 

and innovation. With help from Scottish 

Enterprise and Highlands and Islands 


A Practical Guide to Cluster Development 

Section B: 4. Critical success factors 

Enterprise Scottish Food and Drink has
helped Scottish food and drink
companies to:


• 
access key market information; 
• 
gain new listings with UK retailers; 
• 
build the skills of their workforce; and 
• 
develop new products. 
Scottish Food and Drink is now a 
recognisable brand, is supported through 
the public agencies and has a strong 
information-based website. It has a 
published strategy, developed with food 
and drink companies and organises a 
series of regional forums offering an 
opportunity for related companies to 
meet and make contact. 

Communities of Practice 

Cluster networks need to be more than 
simply opportunities to meet. Networks will 
ideally form ‘communities of practice’, with 
many such networks present in each cluster, 
associated with different interests. What 
causes one company or interest to join a 
cluster will not be the same for everyone and 
their needs are likely to shift in time. It is likely 
that networks will continuously form and 
reform as membership and needs change. 

The development of communities of 
practice can help companies to share ideas, 
trade or innovate with new ideas. They can 
also operate across clusters (for training 
purposes for instance). Communities of 
interest are likely to be a feature of clusters 
of the future and indeed many RDAs and 
industries are taking steps to encourage this 
process – through the creation of virtual 
enterprise networks or centres of industrial 
collaboration (see for example 5 and the 
actions of Yorkshire Forward below). 

Networking and Institutional 
Development Policies 

Making linkages 

Fostering linkages between the members 
of a cluster is one of the most important 
elements of any cluster development 
strategy. In many instances networks are 
formed naturally by cluster-based firms. 
This may simply be about bringing firms 
and others together and allowing an 
internal dynamic to be established, or it 
might involve practical actions to foster 
collaboration and joint working. This can 
involve developing new institutional 
structures or formats, which are able to 
take these roles forward. 

Often networks form naturally within 
clusters in response to needs identified by 
member firms, or on the initiative of one or 
two key individuals. What is critical is that 
all members gain something from their 
participation. In this respect networks tend 
to work best when they develop organically 
and from the bottom up. 

Example 25: Developing new
institutional structures


In some cases a whole host of networks 

and other institutions have been 

established as clusters have developed, 

an often natural phenomenon in maturing 

clusters. In Cambridge for example: 

• 
The Cambridge Network was 
established by local business leaders 
to increase networking between 
local IT firms and to raise their 
international profile; 
• 
an academic-business alliance, 

A Practical Guide to Cluster Development 

Section B: 4. Critical success factors 

Cambridge Futures has also been 
established, with private sector 
funding, to explore different scenarios 
for accommodating anticipated growth 
in the Cambridgeshire area; and 

• 
The Greater Cambridgeshire
Partnership was established in
1998 between local business,
government and the university
for a similar purpose.
In other instances grants are made available 
to firms that wish to organise networks, 
although sometimes more active 
facilitation/assistance is involved. 

Example36:Bringingfirmstogether 

The state of Oregon, like other US states, 
built upon earlier experience in Denmark 
to develop a network programme. This 
was designed to encourage firms to join 
together into networks. The elements of 
the network programme were: 

• 
Network brokers – the key to each 
network, brokers acted as facilitators 
for networking events, as well as 
acting to bring firms together. To 
support the scheme Oregon also 
designed a broker training programme. 
• 
Multipliers – well-placed individuals 
familiar with local firms that can pass 
on information of opportunities for 
collaboration to network brokers. 
• 
Incentives – support to compensate 
small firms for some of the costs of 
network participation. 
• 
Information campaigns – the use 
of media, brochures and newsletters 
to publicise the potential value of 
networks. 
Finland developed the same approach but 
also extended it to promote international cooperation between German and Finnish 
firms7. For several firms the experience has 
been positive and increased the 
competitiveness of firms through lower 
costs, extended market, the application of 
new management procedures and so on. 
However, experience in Finland, and other 
countries that have undertaken such 
partnership development projects, has also 
shown that in some cases co-operation has 
ceased as soon as government funding has 
ended. It seems that successful partnership 
working needs to have a business rationale 
behind it if it is to succeed over the longer-
term without public resources. 

Networks and partnerships can support 
new product development, such as through 
the sharing of information between 
research institutes, between research 
bodies and firms or simply between firms. 
Once a network is established other wider 
benefits may begin to be realised. Networks 
provide a means of building trust and 
understanding, as well as spreading 
knowledge and intelligence. They are 
facilitative in nature, providing a forum for 
participants to assess the potential for joint 
working and collaboration in a given area. 

Example 4: Engaging firms 

There are many ways of engaging firms in 

networks. Scottish Enterprise used the 

following means of engaging businesses 

in its identified tourism cluster: 

1. 
A ‘Leadership Group’ comprised
of industry champions and key
stakeholders was established.

A Practical Guide to Cluster Development 

Section B: 4. Critical success factors 

2. 
Facilitators then worked with firms to 
undertake some background profiling 
and scoping of the sector. 
3. 
Meetings were undertaken to 
discuss potential strategic objectives 
and also to prioritise actions. At this 
stage painting a compelling ‘vision’ 
or shared understanding for the 
cluster was important. 
4. 
These actions were used to develop 
‘Action Groups’ that drew up action 
and business plans for the sector. 
One of the responsibilities of the 
leadership group was to review and 
support the process as a whole. 
Networking with a purpose 

Networks should not be encouraged for their 
own sake; they are a means to an end and not 
an end in themselves. Unless they fulfil some 
need they will not survive. It is ‘networking 
with a purpose’ that delivers the real benefits 
in terms of cluster success. This is true 
whether the networks have sought to deliver 
common skills or training needs, joint 
marketing or R&D. In terms of policy 
intervention care needs to be taken in 
support of such networks in that there is 
a clear drive to take them forward. If this 
isn’t present the network will collapse 
soon after the initial intervention. 

Example 5: Developing 
a
physical focal point


In England, South East England 
Development Agency (SEEDA) has 
developed its Enterprise Hub network 
partly to assist in networking between 
firms. A prominent Business Champion, 
supported by a group of ambitious 
entrepreneurs, leads each Hub. University 

and Network Brokers support the Hub, 
with a team of experts to advise small 
businesses on innovation, product design, 
business finance, IT & e-commerce. 

The Enterprise Hub Network aims to set 
up 30 new Hubs across the South East 
of England. Each Hub will provide: 

• 
Incubator space for new businesses. 
• 
Strong links with venture capitalists. 
• 
An affiliated university research
department.
• 
A Business Club for networking. 
• 
Web based tax & accounts advice. 
• 
Business mentoring. 
What makes effective networks 

In considering what types of network are 
most effective three elements stand out: 

• 
networks need to be capable of 
spreading good practice; 
• 
networks need to extend beyond 
the cluster; and 
• 
networks should be international. 
These points link back to concept of 
‘networking with a purpose’. 

Example 68: Developing
international networks


Officials of the Carolina Hosiery 
Association, along with community college 
technology centre staff, the director of the 
North Carolina technology agency and the 
Governor’s economic advisor travelled to 
Castel Goffredo and Carpi in northern Italy. 
Not only did the trip lead to the 
establishment of links to machine builders 
in Brescia and the development of export 


A Practical Guide to Cluster Development 

Section B: 4. Critical success factors 

networks it also led to a revamp of the local 
technological centre, through offering 
additional research and training activities 
and the formation of an R&D network 
between hosiery firms and North Carolina 
State University. 

This is not say that all networks should 
have these characteristics, merely that 
these are the features of networks in 
more successful clusters. It may form a 
longer-term aspiration. The message is 
that inwardly-focused networking may 
support the development of a local cluster 
identity but it will not serve as well to 
boost the competitive position of firms 
within the cluster over the longer-term. 

“Make sure you belong to a network
with high aspirations to expand
beyond the region.
”


(Practitioner Observation, 2002) 

The role of networking bodies 

Institutions such as universities and trade 
associations can play a key part in nurturing 
the development of the cluster. In the best 
cases network organisations can facilitate 
and animate whole cluster development 
strategies. Sector bodies can play a key role 
in terms of networking and have the 
advantages of being market-led and company 
focused. However this can mean that other 
dimensions of cluster development can be 
neglected and practitioners should consider 
whether such bodies are providing a service 
for members or the sector’s needs as a 
whole – these can be two very different 
things. Be aware also that sector groups can 
act as a barrier to cluster development as 
clusters cut across traditional sector 

definitions – for instance some clusters may 
be defined by common technologies. 

Example 79: Institutional
arrangements for promoting
innovation


Many successful clusters are supported 
by a range of institutional organisations, 
some are focussed on that cluster, 
others have a more general remit. 
Analysical Biotechnology Clusters in 
Massachusetts identified the following 
as amongst the key agents: 

• 
Massachusetts Biotechnology
Council: trade association
representing biotechnology firms.
• 
Massachusetts Department of 
Economic Development: has a key 
role in business and trade 
development, improving the 
business climate (R&D tax credits, 
investment tax credits). 
• 
Massachusetts Technology
Collaborative: state-founded,
independent body to foster
technology-intensive enterprises.
• 
Massachusetts Institute of Technology: 
leading centre for biotechnology 
research and commercialisation; 
campus incubators and technology 
park; MIT Entrepreneurship Centre 
trains scientists in entrepreneurship; 
MIT Technology Licensing Office, 
identifies technologies suitable for 
start-ups, introduces technology 
to potential investors (usually 
venture capitalists). 
• 
Whitehead Institute of Biomedical 
Research: an independent research 
and teaching institution. 

A Practical Guide to Cluster Development 

Section B: 4. Critical success factors 

The case study of networking bodies in 
Massachusetts (Profile 3) are probably some 
of the most well known in the world. 

Profile 310:The Massachusetts 
Technology Collaborative (MTC) 

The Massachusetts Technology (MTC) 
Collaborative was established in 1994 at 
the request of the state legislature to 
support economic development in the 
innovation economy through activities that 
support the growth of technology 
industries. MTC’s Innovation Initiative 
meets this goal in two ways: 

• 
by sponsoring projects in
collaboration with technology
industry clusters, or with regions of
the state that are developing such
clusters; and
• 
by sponsoring projects that cultivate 
a climate of innovation in the 
Commonwealth. 
The MTC cluster initiative sponsors 
projects which strengthen innovation 
within 9 key clusters (representing about 
a quarter of all jobs in the state). It fosters 
the exchange of ideas for new cutting 
edge activities amongst stage agencies, 
private companies/clusters and 
educational institutions. One such project 
involved the creation of Mass MEDIC, a 
trade association for Massachusetts 
based medical device companies, and 
Berkshire Connect, aimed at bringing 
high speed Internet access to the most 
western part of the state. In addition, 
MTC owns, manages and develops its 
Westborough headquarters as the 
Massachusetts Technology Park. The use 

of the 36-acre campus reflects MTC’s 
mission to promote partnerships among 
industrial, educational, and governmental 
sectors. The George Kariotis Center 
serves as MTC’s administrative 
headquarters. The Karl Weiss Education 
and Conference Center is used by UMass 
for its Center for Professional Education11 . 
MTC’s Innovation Center houses the 
Renewable Energy Trust12 and the 
Innovation Initiative13. The campus 
includes a 70,000 square foot state-ofthe art fabrication facility, currently leased 
by Kopin Corporation14, a Massachusetts-
based manufacturer of high resolution 
flat panel displays. 

Networking and partnership at 
different stages of the lifecycle 

At the embryonic stage of the cluster 
lifecycle the establishment, creation and 
nurturing of networks and partnerships 
appears important. As the cluster matures 
then ‘networking with a purpose’ 
becomes more commonplace and 
encouraging inter-company working 
(business to business interactions) can 
be an important role for the cluster 
practitioner. Practitioners can assist 
declining clusters to form partnerships 
or networks to respond to challenging 
market conditions or potential threats. 

In South Yorkshire the focus has been 
on transforming a declining or mature 
industry by focusing efforts on an 
Advanced Manufacturing Research Centre 
a Centre of Excellence for aerospace 
manufacturing which will be the focus of 
a new Advanced Manufacturing Park. 
The purpose of the initiative is to focus 
on individual sub-sector strengths within 
the sub-region and improve joint working 


A Practical Guide to Cluster Development 

Section B: 4. Critical success factors 

and expertise in a particular area. This is in 
part a response to the continuing decline of 
the sector as whole in light of competitive 
and other pressures. 

In the long run, establishing inter-relations 
between firms helps tie together the 
economic fabric and increases the potential 
for firms to adapt to new markets and 
changed economic conditions. 

Box 415: Lessons learned from 
a decade of networks 

• 
Firms will and do co-operate. 
• 
Networks can be accelerated 
by brokers. 
• 
Incentive grants are of limited value, 
networks so started rarely survive 
beyond the life of the grant. 
• 
Social capital has been vastly 
under-rated. 
• 
Learning is a sufficient benefit for 
companies to network. 
The presence of a strong skill base 

There is a consensus across the literature 
that successful clusters are those that 
been able to access and nurture a strong 
skills base, both in terms of higher level 
and management skills and a suitably 
qualified labour force more generally. This 
is seen as a key factor in attracting and 
retaining companies as well as contributing 
to the successful development of 
companies within a cluster. The quality and 
quantity of the available labour force is thus 
a critical component in the development 
of successful clusters. 

As a cultural, media and financial world 
capital, New York offers the growing 
multimedia industry a teeming pool of 
young designers, artists, writers and 
programmers well positioned to exploit 
the dynamic diffusion of personal 
computers and the Internet. The cluster 
flourished because of the ample pool of 
young designers, artists and writers who 
are fluent in digital technology. New 
York’s compactness also facilitates the 
use of support services of regional 
actors in research, education, economic, 
promotional and technology transfer. 
Access to artistic and editorial talent 
are also important factors in the 
cluster’s success16 . 

The skills mix and composition is important 

Successful clusters require a range of 
appropriate skills and abilities. The sorts 
of business skills that are sought within 
successful clusters included those 
associated with global businesses such as 
strategic management skills for business 
leaders, entrepreneurship for graduates, 
management and production techniques, 
leadership skills, mentoring/coaching and 
personal development skills. 

Demand and supply side considerations 

The quality and availability of training can 
also be a factor contributing to the 
development of successful clusters. This can 
apply to the existing workforce as well as to 
new and potential entrants to the labour 
market. The capacity of the available training 
infrastructure to respond to employer needs 
and provide relevant training is a key factor. 
The cluster can have an influence on the 
provider side in terms of encouraging 
appropriate provision that is flexible and 
meets with the needs of employers. 


A Practical Guide to Cluster Development 

Section B: 4. Critical success factors 

Example 817: Informed
training and education


The Northeast Oklahoma Manufacturers 
Council (NEOMC) in Okmulgee, 
Oklahoma, was created by the technical 
branch of the Oklahoma State University, 
Manufacturing Extension Partnership, 
and 30 companies in 1993 in response to 
skill and employment needs of local 
companies. It has successfully 
established internship programs and a 
summer academy that introduces young 
people to high-tech manufacturing as a 
potential career. Other activities 
undertaken subsequently include helping 
members secure contract opportunities 
through the use of a resource matrix and 
training members to develop e-
commerce and e-business capabilities. 
(www.ocevnet.org/neomc18). 

Clusters offer opportunities for focusing 
human resource development provision 
in ways that are particularly beneficial for 
firm development. This may be through 
the provision of specialist advice, guidance 
and information services (for individuals 
and companies), grants/support for 
training for companies, or through the 
development of specialist centres for 
delivering training and development 
activities. Cluster managers should 
engage with local business leaders, 
education providers and their Learning and 
Skills Council(s) in the development of 
effective skills policies. Cluster managers 
should also be aware that employers are 
likely to be given a much greater input in 
the design, content, and assessment of 
qualifications following the publication 
of the National Skills Strategy. 

When developing activities in this area 
practitioners should take every opportunity 
to draw different companies and groups of 
employees together through promoting 
joint provision of training solutions. This 
will both support the development of 
networks themselves and contribute to 
the development of communities of 
practice or purposeful alliances. 

Many practitioners and authors highlight 
the importance of higher education and 
business collaboration (see Clusters: 
Higher Education and Business 
Collaborating for Success19 for a series 
of good practice examples). Creating 
strong links between Higher Education 
Institutions (HEIs) and businesses is an 
essential part of improving economic 
performance, and HEIs have an increasingly 
important role to play in increasing the 
competitiveness of regional economies. 

Example 920: Influencing the 
scope of local training provision. 

British Aerospace has developed an 
aerospace focused engineering and 
science degree in Ayrshire to enhance 
the pool of skilled labour for the local 
companies in the sector. Ireland and 
Canada also have national aerospace 
training initiatives. Oxford Brookes 
University have developed innovative 
training courses to meet the skills needs 
of their local biotechnology, e-publishing 
and motor-sports clusters. 

Providing advice and guidance 

Some successful initiatives are not 
focused on providing training but on 
increasing awareness of what is already 


A Practical Guide to Cluster Development 

Section B: 4. Critical success factors 

available and influencing provision amongst 
educational providers. Profile 4 provides an 
example of a web-service operating in 
California which acts as a comprehensive 
information portal. It was established 
through research and the establishment 
of an institutional structure, demonstrating 
the depth of work sometimes required 
for seemingly simple results. 

Profile 4: SkillsNet™ 

SkillsNet™ is a Californian initiative 
striving to address common multimedia 
workforce issues by providing support, 
training, and an adequate database 
of information for digital employees. 
SkillsNet™ ‘s on-line forum, 
http://www.skillsnet.net, aims 
to encourage various sectors to 
communicate and collaborate. 
The common goal is to support the 
development of a skilled workforce for 
vital multimedia occupations in the 
digital economy of the 21st Century. 
SkillsNet™ provides: 

• 
Advice on the nature of the
multimedia industry.
• 
Types of jobs that are available in
the cluster.
• 
Types of training courses (including a 
database of 158 different courses). 
• 
A ‘job-seekers’ guide to gaining
employment in the industry.
SkillsNet™ was established through
the following steps:


• 
The undertaking of LMI research in 
partnership with stakeholders 
focused on: 
• identifying common needs; 
• developing skills strategies; 
• setting priorities; and 
• building support for action. 
• 
The establishment of an Industry 
Skills Council, composed of industry 
leaders, to guide implementation. 
• 
The use of the results of the LMI 
research, to communicate industry 
needs to education and training 
providers who can supply workforce 
development. 
• 
The development of a regional 
employer-training consortia, building 
on the results of the research and 
contacts and networks established 
during the research21. 
The research did not yield many examples 
of advice and guidance projects focused 
on key clusters. However, there is some 
evidence to suggest that advice and 
guidance activities are particularly important 
within declining clusters (see Profile 5). 

Profile 522: Steel Redundancies 

When a cluster is declining skills
interventions and retraining are often
essential responses. Within the steel
industry in the UK this has taken the
form an initiative called the Rapid
Response Service. This was set up as
a range of local partnership, bringing
together Jobcentre Plus with the local
LSC, Business Link and the Regional
Development Agency. Typically these
initiatives take the form of:


• 
The identification of individuals’ 
transferable skills and re-training 
needs, funding for additional training, 

A Practical Guide to Cluster Development 

Section B: 4. Critical success factors 

and early access to a range of 

standard Jobcentre Plus provision 

(for instance Work Based Learning 

for Adults). 

• 
Assistance and advice offered 
by benefits processing staff offered 
on-site. 
• 
On-site redundancy roadshows, 
which include local training providers 
and colleges, who explain options 
available to the affected workforce. 
• 
Advice to people considering 
establishing their own businesses, 
including business planning and 
accessing funding as well as training. 
• 
A range of learning to workers
affected by the redundancies
(typically offered by local LSC’s)
.
Training for new entrants 

A focus on new entrants to the labour force 
can prove positive in stimulating interest in a 
particular cluster. This may be particularly 
appropriate for mature clusters that are finding 
it difficult to attract labour. Interventions 
targeting youth (apprenticeships) and 
educational (including HE and FE) awareness 
schemes (employer schools links, schools 
initiatives (science education and technical 
skills projects), graduate fairs or other 
graduate retention measures (such as 
placements) can all be appropriate. 

Young people’s high-level qualifications may 
mask poor communication, teamwork and 
problem-solving skills23, reinforcing the 
need to improve the links between work 
and training. Common examples include 
employers and education providers 
working together to develop curricula 
and courses involving industry placements. 
The example provided in Example 8 is a 
good example of this approach. 

Training for re-entrants 

Support for re-entrants to the labour force 
and those currently out of work may also 
assist in broadening the available labour 
force. Interventions can include training 
schemes for the unemployed that 
specifically focus on opportunities in 
identified clusters. Interventions in this area 
may combine social inclusion and cluster 
development objectives. 

Example 10 provides a good example 
of community based cluster focused 
training centre. 

Example 1024:Automotive and 
Pharmaceutical Cluster Training: 
Partnership for Learning (PFL) 
Merseyside 

Partnership for Learning operates as a 
registered charity and with partnership 
from private, public and community. It is 
a self-sustaining, commercial business 
that aims to help regenerate Merseyside 
by helping to provide a route to highly 
skilled, well-paid employment for local 
people and success in business for 
their employers. It provides vocational 
training for 40 major clients in the 
Northwest including companies such 
as Jaguar, Evans Vaccines, Eli Lilly and 
Glaxo Smith Kline. 

The aim of the centre is (a) to deliver
training that enhances the education
and skills opportunities of the local
communities, and (b) to support
businesses with demand-led training
solutions. To this end it provides
community based and SME focused
training for re-skilling and up-skilling.



A Practical Guide to Cluster Development 

Section B: 4. Critical success factors 

The centre was established under the
premise that employers and local
economies cannot thrive if they act
in isolation from each other.


Broadening the skills base 

A cluster may require a broader or deeper 
skills base than is currently present. 
Interventions may focus on ongoing skills 
development raising skill levels of existing 
employees through lifelong learning (including 
keys skills), transferable skills and employee 
development initiatives. ICT/e-commerce 
training for on-line booking was common 
within the service sector whilst CAD training 
and lean manufacturing techniques have 
commonly been promoted in manufacturing 
based clusters. Again having employers at the 
heart of these initiatives can help to give them 
credibility within the sector. Example 11 
highlights good practice in working with the 
cluster to develop the skills base available 
to firms within the cluster. 

Example 1125: Improving
Higher-Level Skills


The BioPharm Skills Task Force was 
funded by SEEDA and aimed at the 
continuing education needs of scientists 
and managers in industry. The 
programme is aimed at employees 
within the biopharm industries who are 
encouraged to broaden their education. 
It comprises of three main elements: 

• 
Investment in resource centres
to provide to provide information,
up-skilling, retraining, careers
advice and teaching.
• 
Benchmarking of opportunities to
attract the right people.
• 
The establishment of a BioPharm 
Skills Unit dealing directly with 
individual companies to analyse 
skills needs and source appropriate 
providers and work with training 
providers to develop their capacity 
(to train). 
Management development 

Skills development should also consider the 
needs of managers and owners within a 
cluster. Strategic management skills for 
business leaders, entrepreneurship for 
graduates, training in management and 
production techniques and in leadership 
skills have all proved successful in 
promoting company development. These 
skills are especially useful when they are 
tailored to a particular cluster’s needs. 

Developing skills centres 

In some clusters there is a pressure to 
develop new training infrastructure, through 
which appropriate training can be delivered. 
This is not essential, existing infrastructure 
may simply need to be redirected, but it can 
provide a valuable focus. In North Carolina 
the Hosiery Technology Centre is located at 
the Catawba Valley Community College, but 
is independent of the state college system. 
Rosenfeld reports that it successfully trains 
production workers and repair people, 
educates mill managers and facilitates 
inter-firm collaboration26. 

A specialist centre need not be a physical 
building but could be a virtual centre that 
organises individuals and teams from 
various educational institutions to support 
the needs of identified clusters. Box 5 
identifies some of the key characteristics 
of skills centres which are associated with 
cluster development. 


A Practical Guide to Cluster Development 

Section B: 4. Critical success factors 

Box 527: Characteristics of 
Cluster Skills Centres 

• 
Cluster-based not technology based. 
• 
Emphasises industry specific 
knowledge. 
• 
Provides crucial links to industry 
associations. 
• 
Uses business not equipment as 
its context. 
• 
Functions as an information 
repository and information portal. 
• 
Stresses staff and curricula in 
budget, not bricks and mortar. 
• 
Shares curricula and information 
region-wide and trains faculty from 
other places. 
• 
Has lead responsibility for cluster 
needs assessments. 
• 
Works with cluster associations on 
skill standards and certification. 
• 
Provides out-reach to socially 
excluded populations. 
Skills interventions at various 
stages of the lifecycle 

Skills development and initiatives for 
‘new entrants’ to a cluster can be a 
valuable component in supporting the 
development of embryonic clusters. Whilst 
established and mature firms can come 
together to address skills issues through 
joint provision this is less likely at an early 
stage of the lifecycle. 

Nevertheless, there is evidence that skill 
shortages can occur at all stages of the 
cluster lifecycle. However, the mechanism 
chosen to support skills development may 
change over the cycle. 

Innovation and R&D capacity 

The evidence shows that product 
development and well-developed research 
structures, together with other forms of 
innovation, are vital for a dynamic cluster. 
Innovation maintains the cluster at the 
forefront of the market whilst a strong R&D 
base can provide the ideas and products for 
future development. The promotion of 
innovation and R&D are two separate 
activities, although inter-related. Innovation 
generally refers to product or process 
development whilst R&D refers to the 
development of new knowledge. In the 
best cases successful innovation is the 
outcome of the R&D process. 

Innovation can be incremental, as existing 
products and processes are gradually built 
upon, or may be more radical, with the 
introduction of a wholly new product or 
approach. Successful clusters are 
inherently innovative and practitioners 
can support the innovation process 
through encouraging networking and the 
sharing of ideas. Where networks extend 
outside of the cluster this can also be 
beneficial as often innovative ideas are 
ones that work well in one setting and 
are being applied for the first time to 
another area. The benefits of information 
and intelligence services in this area are 
often worthwhile exploring. 

Catalysts for research and innovation 

Research institutes including universities, 
non-profit foundations and for-profit R&D can 
play an important role as catalysts for 
research and innovation. They can be the base 
for developing new ideas and applications but 
can also play a critical role in nurturing high 
technology entrepreneurialism. In this respect 


A Practical Guide to Cluster Development 

Section B: 4. Critical success factors 

public and private research facilities can be 
key drivers within the cluster. 

Example 1228: Public or private 
research institutes as key drivers 
of cluster development 

The role of research institutes as drivers 
of cluster development has been 
emphasised by the experiences of places 
like Silicon Valley in the USA and 
Cambridge in the UK where universities 
have been important components in the 
development of the cluster. In the 
Cambridge cluster estimates of the 
proportion of new firms that have spun 
out of the university are up to 31% of new 
firms. 42 out of 50 firms in one survey 
reported free technological advice from 
University based staff, through formal or 
informal networks, with 14 reporting 
these as critical to the success of the firm. 

But a university base is neither 
necessary nor sufficient 

R&D institutions are not essential for 
strong and successful clusters. There are 
numerous examples of clusters that 
perform strongly and are highly innovative 
but have no base in R&D. 

Example 1329: Innovation where 
a university base is not present 

Universities need not be present for the 
development of successful clusters. 
The centre of the US furniture industry 
is located in Mississippi. This has 
developed over time from spin-offs from 
Futorian Furniture; the original furniture-
making firm located in the area. There are 
now more than 200 companies based 

within this cluster, plus suppliers and 

support services, and companies 

compete fiercely in terms of designs and 

innovations. Yet the social fabric of the 

community is very strong and ideas 

travel quickly through social contacts and 

worker mobility. 

Innovation and Research and 
Development Policies 

Support for R&D can take many forms, 
including the use of R&D tax credits 
(rarely cluster specific), funding for basic 
or applied research, technology transfer 
schemes, the development of specialised 
research facilities or simply supporting 
the development of research networks, 
linking firms, research institutes and other 
interested parties together. It is important 
that the role of R&D activity is viewed in 
the context of the cluster as a whole and 
that an integrated strategy that includes 
this element is developed around the 
cluster. Encouraging multi-firm networks 
can be crucial elements in this regard (see 
Example 23 for some approaches). 

Promoting R&D and innovation 
through research infrastructure 

The establishment of science and 
technology parks to attract research-
orientated businesses is a common feature 
in many innovative clusters. In example 14 
we highlight an example that has been 
referred to by various practitioners as an 
illustration of university collaboration on 
R&D policies with effective and tangible 
links to the private sector. 


A Practical Guide to Cluster Development 

Section B: 4. Critical success factors 

Example 1430: The North
Carolina Research Triangle


The 7,000-acre Research Triangle Park 
(RTP) is the largest research park in the 
United States, and is home to over 140 
organisations. RTP has around 42,000 
full-time employees entering the Park 
each day. Recognised internationally as 
a centre for cutting-edge research and 
development, the Park is owned and 
developed by the private, not-for-profit 
Research Triangle Foundation. The 
Research Triangle itself is named for the 
Triangle formed by the three universities: 
Duke University at Durham, the 
University of North Carolina at Chapel 
Hill, and North Carolina State University 
in Raleigh. Companies like Glaxo 
SmithKline Inc., IBM, Covance, Cisco 
Systems, Inc., Sony/Ericsson, Eisai Inc. 
and Nortel Networks thrive and grow in a 
campus-like setting that lends itself to 
interactive research. 

Of course sometimes it is not sufficient to 
simply establish a science or technology 
park. To promote research and innovation 
there must exist strong linkages between 
researchers and local firms. Many 
organisations now provide an integrated 
support service for firms that wish to make 
use of it, nurturing small firms, acting as 
technology transfer bodies and promoting 
university-firm linkages. 

Example 1531: St. John’s
Innovation Centre, Cambridge


Located on the Innovation Park 
developed by St Johns College, 
University of Cambridge, the Innovation 

Centre provides business support and 
accommodation for early stage 
knowledge based companies. The 
Centre was opened in 1987, and as well 
as providing business advice to tenants, 
offers them flexible accommodation in 
leasing terms and the possibility to share 
communal facilities including conference 
rooms and a restaurant. The Centre 
differentiates itself from other property 
developments by: 

• 
Providing high quality free advice to
tenants on business issues.
• 
Supporting tenants and non tenants 
by engaging in local programmes 
with University Departments and 
Government Bodies to help 
promote the creation of wealth 
in the sub region. 
• 
Helping entrepreneurs access
funding through organisations such
as GEIF, CVG and mensaIQcapital.
• 
Acting as a catalyst in promoting 
technology locally, regionally, 
nationally and internationally, 
including hosting the East of England 
Innovation Relay Centre (EEIRC). 
Whilst there are now many examples across 
the UK, the SE case study highlighted in 
Example 15 is one such well established 
centre that has sought to exploit 
commercial opportunities through ‘handson’ business support. 

University research laboratories can provide a 
fertile source of technology and expertise for 
industry. Unlocking this potential can be a 
challenge. As a result many universities have 
established Industry Liaison Offices who 
undertake audits of potential commercial 
applications within their departments and 


A Practical Guide to Cluster Development 

Section B: 4. Critical success factors 

simplify the commercialisation process 
(Example 16). In some circumstances, 
barriers to commercialising research are 
more fundamental and may need national 
action. In France, for example, researchers 
were prevented from establishing 
businesses whilst they held public research 
posts. This reduced the number of 
researchers willing to try to commercialise 
their ideas. New legislation was introduced 
in 1999 to overcome this barrier and 
researchers in fields such as biotechnology 
now have the right to establish profit making 
businesses whilst retaining their research 
posts for up to six years. 

Example 1632: Commercialising 
University Research 

The University of Oxford has 
established ISIS Innovation, a wholly-
owned technology transfer company. 
This is intended to assist University 
researchers who wish to commercialise 
their ideas. The University assigns its 
intellectual property to ISIS and ISIS 
evaluates, protects and markets the 
intellectual property. ISIS has assisted 
in the formation of 28 spin-off 
companies since 1997 and files an 
average of 1 patent application each 
week. Managing over 300 patent 
applications, ISIS seeks to license 
technologies to companies to develop 
and sell technology-based products. 

Out of any royalty return ISIS receives 
30% in recognition of its role in 
marketing and patenting the invention 
and the University receives the 
remaining 70%. The University’s share is 
then distributed between the University 

and the researcher in accordance with a 
published IP policy, generating 
incentives to commercialise research. 
The researcher receives 90% of the first 
£30,000 received by the University and 
their share declines in pre-determined 
bands thereafter. 

“Innovation and the ability to change 
have always been major drivers of the 
Massachusetts economy, with 
universities producing technology and 
talent and investment in research and 
development two of the principal 
drivers in creation of technology.” 

(D’Otreppe, 2003) 

Promoting technology transfer 

Current thinking suggests that the UK 
needs to move faster in terms of translating 
its good record of scientific research into 
commercial ideas33. 

Many networks and intervention systems 
are designed to encourage technology 
transfer. Mention has already been made of 
the dissemination or multi-firm participation 
requirements of some grant regimes. 
Institutional structures have also been 
established to promote technology transfer 
through formal or informal means. Perhaps 
the most well-known example of institutions 
that promote technology transfer is the 
Steinbeis-Stiftung in Germany. 

Example 1734:Technology
Transfer in Baden-Württemberg


The Steinbeis-Stiftung für
Wirtschaftsförderung in Baden-
Württemberg consists of a network of



A Practical Guide to Cluster Development 

Section B: 4. Critical success factors 

220 technology centres. These centres 
enable SMEs to develop their 
technological expertise, products and 
product quality through collaborative 
projects. One of the most important roles 
of the transfer centers has been to 
introduce companies to new 
technologies and products. Technological 
aid schemes subsidise 25% of innovative 
product developments in order to reduce 
financial risks. They are complemented by 
publicly provided low-interest loans for 
SME and start-ups. The state-owned 
Credit Bank of Baden-Württemberg 
works close conjunction with local banks 
(Sparkassen), which are located close to 
the SMEs. Innovation consultancy offices 
run by the Chambers of Commerce are 
well distributed over the whole state, 
such that even firms in rural areas are 
able to profit from access to knowledge. 
The network promotes the diffusion of 
incentives for new technologies. 

Questions are now being raised as to the 
efficacy of the existing structures as the 
patterns of use of the transfer centres 
change. The emphasis is shifting away 
from transfer and consultation projects 
towards individual project development. 
Technology transfer faces new challenges 
including the restructuring of the regional 
economy; the internationalisation of 
products and processes and an 
increasing demand for collaborative R&D 
activities from many companies. 

Collaboration is the key 

When supporting innovation and R&D 
practitioners should avoid promoting 
activities within a single company or 
institution if they are aiming to strengthen 
the cluster. This is unlikely to provide 
benefits to the wider cluster or support the 
development of the cluster itself. Instead 
practitioners should take every opportunity 
to promote joint working and the sharing of 
information, such as through joint research 
projects, so contributing to the development 
of networks with a purpose. Once again 
multi-firm approaches such as those 
highlighted in Example 23 can be helpful 
in achieving this. 

Innovation and cluster Lifecycles 

New ideas need to permeate throughout 
the lifecycle. For instance reinvention and 
innovation policy is a critical part of many 
declining clusters. Support for product and 
process improvements would appear to be 
important for established and mature 
clusters as well as supporting SMEs to 
prepare for new markets. 


A Practical Guide to Cluster Development 

Section B: 5. Contributory factors and policies for success 


5. Contributory factors and 
policies for success 
In this section we examine those factors that were 
identified as being important contributors to the successful 
development of clusters. 
They are not as frequently cited as the 
critical factors discussed in the previous 
section but, nonetheless, provide an 
important basis on which cluster 
strategies can build. 

Box 6: Contributory factors for 
successful cluster development 

In addition to the three critical success 
factors set out in the previous chapter 
the research35 also highlighted that there 
are some other contributory aspects for 
cluster development, particularly: 

• 
The presence of large firms. 
• 
Adequate infrastructure. 
• 
Entrepreneurial spirit. 
• 
Access to finance. 
In the following section we look at each 
of these areas in more detail and provide 
some examples of approaches that have 
been reported as successful in promoting 
these factors. 

The presence of large firms 

Large firms are often present in successful 
clusters. The much desired anchor firms are 
large sources of technology, markets and 
expertise. Large firms act as miniature 
innovation systems in their own right, 
supplying incubation space to employees, 

financing their own start ups, providing 
technical expertise, product specifications 
and initial markets. Large firms also provide 
a steady flow of trained people which small 
innovating firms can hire, and can share 
expertise with the supply chain (example 18). 

Large firms can play a catalytic role in a 
number of respects: 

• 
They create a critical mass of 
experienced managers and workers. 
• 
They can provide a customer and 
supplier base. 
• 
They provide ideal conditions for high 
technology firms to grow and develop. 
• 
They have multiplier effects in terms of 
a region’s local economy for materials 
and services (these can range from 
university graduates to office supply 
services to raw materials’ production). 
The advantages of an ‘anchor’ based 
cluster for practitioners is that: 

• 
They can focus public resources. 
• 
They can stimulate networking. 
• 
They can facilitate industrial 
restructuring. 
• 
Large firms can sometimes marshal 
the resources to assist other companies 
(in terms of offering valuable personnel 
support or helping to nurture the 
cluster for instance). 

A Practical Guide to Cluster Development 

Section B: 5. Contributory factors and policies for success 

• 
They can result in cost savings 
(localisation economies) in terms of 
local suppliers, labour, technology and 
infrastructure. 
Example 1836: Business mentoring 

The DTI and PILOT Business to Business 
Mentoring (B2B)37 programme began in 
October 2000 with 20 mentors from the 
leading oil and gas majors matched with 
20 SME mentees. The primary aim of the 
programme was to build closer industry 
relationships providing the opportunity for 
participants to work with companies from 
the opposite end of the supply chain, 
learn about their paired organisation, and 
access the network of companies who 
played their part in the whole programme. 
The initiative has been useful as process 
of joint learning between large companies 
and SME’s, improving communications 
and understanding each other’s workings 
and constraints. 

Large firms as catalysts 

Large firms have acted as a catalyst for the 
development of clusters and subsequently 
as driving forces in the ongoing development 
of a cluster. In many instances they have 
stimulated the entry and growth of related 
firms into an area, and so supported the 
development of a critical mass of activity. 
Making connections locally therefore can be 
advantageous for firms. In the UK, the 
Society of British Aerospace Companies 
reports that firms within Aerospace clusters 
typically serve one or two of the aerospace 
majors, often located in close proximity. 
Such companies, it reports, benefit from a 
pool of local labour, trained and accustomed 
to working to the required high standards. 

Profile 638: Cluster Origins
in Japan


In Japan the Komatsu machinery cluster 
evolved from the Komatsu Construction 
Company. The machinery cluster evolved 
from a historical network of support 
and related companies in the textile 
(silk in particular). Nakajima Aircraft and 
Fuji Heavy industries sparked the 
development of the auto cluster in 
Ota. Original Equipment Manufacturers 
in Ota provided continuous demand for 
parts, services and products. The 
existence of a large assembler has 
provided a vertically structured subcontracting system. Following the 
development of the aircraft and 
automobile industries in the first half of 
the 20th century, the area attracted a 
number of new entrants and spin off’s in 
the 1950’s and 1960’s. The cluster is 
presently structured hierarchically with 
more than 70 firms operating as first-tier, 
second tier and third tier suppliers for 
Fuji Heavy Industries. Whilst this remains 
the core assembler, many of Ota’s part 
manufacturers also trade with other 
auto assemblers within the region 
and beyond. 

The proximity of suppliers and other 
supporting firms can assist innovation and 
reduce transaction costs. A virtuous circle 
can be established as new firms are 
attracted to an area by the existing cluster 
of firms, or are established by ex-employees 
of the original large companies. 


A Practical Guide to Cluster Development 

Section B: 5. Contributory factors and policies for success 

Profile 739: Origins of the
Arizona Software Cluster


In the 1950s large companies such as 
General Electric and Motorola 
established significant plants in the 
Pheonix area to take advantage of the 
weather, proximity to good universities 
and their students, low land costs and 
low costs of labour. As these firms grew 
so did an associated cluster of interrelated information technology and semiconductor firms, acting as a magnet for 
information technology professionals. In 
turn further large firms have located in 
the area and others have been 
established from engineers who 
previously worked for one of the larger 
firms. Today Arizona is one of the preeminent locations for software 
development. The exposure of workers 
in these large firms, and associated 
university students, to state of the art 
technology and cutting-edge research 
has contributed to furthering Arizona’s 
competitive position in this area. 

Large firms as innovators 

Large firms can play a key role in diffusing 
knowledge and technology to SMEs, 
nurturing future entrepreneurs and inspiring 
spin-outs. They can be important in terms 
of stimulating innovation sales and exports 
and provide a critical ‘route to market’ for 
SMEs, both directly and as a base for 
access to world markets. Where firms do 
not take forward innovative ideas 
themselves then employees sometimes 
choose to start-up their own businesses to 
fill a perceived gap in the market. This has, 
for instance, been recognised as an 
important feature in the ongoing success 
of the British Motorsports cluster. 

Large firms and the lifecycle 

Large firms tend to be a feature of mature 
and declining clusters. In this instance 
common interventions for practitioners 
include the development of new markets, 
management development interventions, 
supply chain development and product and 
process improvements. Large firms are also 
likely to form a focal point for other wider 
cluster actions, such as supporting skills 
development strategies, including 
supporting management development in 
cluster firms. Where a large firm forms the 
focus for an embryonic cluster, the 
interventions are likely to be different once 
again, focusing on efforts to embed the 
firm, promote supply chain linkages and 
support potential spin outs. 

Managing the supply chain 

Research has highlighted several examples 
of where supply chain development has 
been an important element in building the 
relationship between large firms and local 
companies. These include supply chain 
linkages with overseas companies or OEMs 

e.g. supplier certification, building better 
buyer/supplier links such as sub-contracting 
linkages and strategic alliances. 
Facilitating links with key manufacturers 
(Tier 1 suppliers), between suppliers or 
assisting companies find new market 
opportunities can be a key role for the 
cluster practitioner. Essentially the 
practitioner will increasingly act as an 
animateur, managing relationships (through 
the development of a traded network for 
instance) rather than intervening directly. 


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Section B: 5. Contributory factors and policies for success 

Example 1940: Supply chain 
development in France 

‘Mechanic Valley’ in Midi Pyrénées is 
structured around the aerospace, 
automotive and machine tools sectors in 
Aveyron, Corrèze and Lot and comprised 
of some 210 businesses and 14,000 
employees. The area is one of DATAR’s41 
11 cluster development projects in the 
region. The policy in this instance has 
been developed to encourage 
diversification and restructuring through 
supply chain development. Large firms 
(such as the Aerospace company Ratier 
in Figeac) have been encouraged to 
develop within ‘industrial districts’ and 
rely on the local skills base of SMEs. The 
French experience shows that in addition 
to spatial planning strategies can be 
used to help foster inter-firms links and 
to embed firms into the local economy. 
Particularly successful policies designed 
to encourage cluster development in the 
Midi- Pyrénées has included: 

• 
the development of business 
incubators (pépinières) providing 
logistical services (such as fax, 
photocopying and high speed 
network connections) and low 
cost office and workshop space; 
• 
exoneration from property tax for 
three years, which frees new 
businesses from one element 
of the tax burden; 
• 
low levels of (local authority) 
property tax, which make one 
commune more attractive to 
businesses than another; 
• 
the establishment of an ‘Economic 
Development Service’, which can 
range from simple information 
provision to companies wanting to 
move to the area to the organisation 
of meetings and networks with 
outside companies and potential 
finance providers; and 

• 
partial financing of development and 
information units in certain areas. 
These units have different objectives 
(assistance, putting together project 
proposals or grant aid bids, market 
potential studies, communication 
tools to promote the advantages and 
skill base of the local area). 
Promoting inward investment 

Promoting inward investment can 
contribute to cluster development 
strategies. Described as a ‘transplant’ 
strategy by Enright, distinguishing it from 
approaches based upon organic growth, 
this will commonly be pursued in order to 
strengthen the cluster in an identified 
manner. The intention is generally to 
increase the overall stock of businesses or 
to fill an identified weakness in the current 
configuration (for instance a structural gap 
within the supply chain through the 
relocation of a major player). It is less 
common for authorities to try to build a 
whole cluster by this process. 

Practitioners have a range of instruments 
available as part of their inward 
investment are equally effective and do 
not vary significantly from those adopted 
as part of more general inward investment 
strategies. They include the provision 
of financial support, tailored training 
packages, the construction of suitable 
facilities and supporting infrastructure 
as well as more generic advice. Of 


A Practical Guide to Cluster Development 

Section B: 5. Contributory factors and policies for success 

course the inward investor may not be 
the only beneficiary of such advice and 
support, other firms within a cluster 
may also benefit. 

“Developing training courses to 
counter potential skills gaps can be an 
important part of attracting inward 
investment. Enterprise Ayrshire has 
developed a training project funded 
through the European Social Fund to 
match up inward investors with 
people who have the appropriate skills 
and attitudes to meet the needs of 
potential employers.” 

(Practitioner Observation, 2002) 

Equally, dedicated business parks will 
not only benefit potential inward investors 
but they can provide one more reason to 
locate in an area, demonstrating a serious 
commitment on the part of the region to an 
identified cluster, and potentially raising the 
profile of a region in a particular field. 

But image and promotion stand out 

One activity that does stand out as being 
significantly more important in attracting 
cluster related inward investment is the 
development of a positive image for an 
area through marketing and promotion. 
Regions that become ‘known’ for certain 
clusters are more likely to attract inward 
investors that are related to that cluster 
than those that are not known. The 
development of a ‘brand’ or an image for 
an area can thus be a crucial part of any 
cluster development strategy. 

Example 2042: Marketing
the region


The Arizona Department of Commerce 
markets the state globally to promote 
inward investment; provide resource 
assistance for growing Arizona 
companies as well as those considering 
Arizona as a new location. It offers a 
comprehensive portfolio of services – a 
one-stop shop – for businesses including 
the following, the details of which are all 
set out clearly on its website. 

• 
Business Services (Including advice, 
venture capital and export assistance). 
• 
Real Estate Data (property
availability)
.
• 
Information on the
economy/research and business
operating environment (taxes,
labour market data etc)
.
• 
Industrial Reports. 
• 
A Comprehensive List of State
Incentive and Programmes.
• 
Energy programmes. 
• 
Innovation and technology advice 
(Events and networking, Supporting 
Technology Organisations, 
Incubators & Research Parks, 
Technology Assistance Programs). 
• 
A detailed range of small business
initiatives and workforce
development initiatives.
Physical infrastructure 

Communication links, physical infrastructure 
and sites and premises have previously been 
identified as key factors in the development of 
successful clusters. The role of a modern and 
robust physical infrastructure, including the 


A Practical Guide to Cluster Development 

Section B: 5. Contributory factors and policies for success 

provision of facilities for companies and 
employees as well as good transport and 
communication links, is an important 
consideration for cluster managers. 

Good physical infrastructure has the 
potential to reduce transport costs, improve 
access to raw materials and improve access 
to skilled labour. Proximity to customers and 
suppliers is a key feature on the success of 
many clusters and good transport 
infrastructure can improve this position. In 
contrast poor or congested transport and 
communication links can act as a brake on 
the development of a cluster. 

Example 2143: Adequate
infrastructure is essential


Infrastructure can facilitate development 

The development of the M4, M3
and M25, the high-speed rail link to
Paddington and access to Heathrow
have been vital factors in the growth
of the ITCE (Information, Technology,
Communications and Electronics)
industry in the M4 Corridor. The
supporting infrastructure has opened
up international communications and
underpinned the area’s complement
of high profile inward investors.


But insufficient capacity can act as 
a potential brake on development 

The successful development of the software 
cluster in Arizona is causing difficulties in 
infrastructure capacity. Arizona firms believe 
that they are at a distinct disadvantage 
compared to other regions with research 
reported that, ‘it takes longer to surf the web 
from Phoenix than from other parts of the 
Country.’ This is primarily because the growth 

in Web use is outpacing the expansion and 
upgrading of existing infrastructure. 

The availability of adequate business 
infrastructure (suitable premises and 
adequate land supply) is also essential 
features in the development of successful 
clusters. This is particularly the case where 
specialised premises or incubator facilities 
may be required. 

Infrastructure policy interventions 

Ensuring there is room to grow 

Cluster development strategies should 
consider the adequacy of available facilities 
for the development of identified clusters. The 
availability of sites and premises for potential 
investors and for the expansion of existing 
businesses is an important component of 
maintaining the long-term success of a cluster. 
This can involve supporting the provision of a 
suitable supply of sites and premises, taking 
into account any particular needs of specific 
clusters. Science, technology and business 
parks may all be appropriate developments, 
as might manufacturing and distribution parks, 
in that they can encourage opportunities for 
joint working. Equally, specialised space 
such as incubator and ‘grow-on’ space 
might be provided. In other cases it can be 
sufficient to ensure an adequate supply of 
land or premises in areas that reflect 
cluster dynamics. 

Example 2244: Incubators 

Incubators simplify the experience of
running a business for new start-ups,
offering a sheltered environment in
which to grow. From experience UKBI45
(UK Business Incubation) suggests that



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Section B: 5. Contributory factors and policies for success 

four practical steps are required when 

developing incubators: 

• 
The development of ideas. 
Minimising physical and organisational 
barriers and allowing entrepreneurs 
the freedom to innovate. 
• 
Nurturing the idea. Supporting the 
innovator through providing time and 
resources to develop the idea. 
• 
Formalising the development.
Creating a business unit.
• 
Creation of the new company. 
Defining company structures, 
producing a business plan and 
budget. Supporting and assisting the 
new business with investment, 
finance, marketing and sales, law, 
recruitment, ICT and facilities. 
A number of incubators are directly 
related to assisting the development of 
particular clusters. The Babraham 
Bioincubator in Cambridge opened in 
1998 and offers combined laboratory and 
office accommodation for start up and 
early stage bioventures. The Bioincubator 
offers wide-ranging business, technical 
and scientific mentoring to create a 
supportive environment that reduces 
burn-rate during the crucial early stages of 
a new bioventure’s existence. A key entry 
requirement is that all companies must 
be developing technology that maps onto 
the functional genomics research 
programmes of the Babraham Institute. 

Developing science and technology parks 
on their own is no guarantee of success. A 
review of Italian experience found that there 
is no sound evidence that such public policy 
initiatives have had much of a positive impact 
on the economic performance of firms and 

that recent initiatives in the development of 
technology firms have yet to produce desired 
effects. The reasons why some science 
and technology parks are successful and 
others less so are not well documented. 
Increasingly though Parks are offering a 
much wider range of services to resident 
companies (see Examples 5 and 15 for 
instance) and are based on feasibility studies 
that identify target sectors. For example in 
Los Angeles, plans to develop former military 
bases as science and technology parks have 
used cluster analysis to identify potential 
target markets. The analysis for the former 
Cabrillo base in Long Beach reduced the 
initial list of potential clusters to two, based 
on direct assessment of clusters, wider 
regional strategies and promoting a match for 
California State University Long Beach: the 
major investor in the project46. 

Planning policy can play a key role too 

Land use policies have a recognised 
influence on cluster development. In the 
best cases planning has supported and 
facilitated cluster growth for strategic 
reasons, but too often the planning system 
has not offered the support that it might. The 
planning system can also be valuable in so 
far as it preserves amenity values and 
alleviates congestion. Cluster managers 
should be aware that the regional dimension 
of planning and the interlinkage with regional 
economic development is important. 

Transport and communications 

The role of transport and communications 
infrastructure in promoting cluster 
development is less frequently considered. 
There is little evidence of cluster specific 
initiatives most investment programmes 
are, at best, cluster-informed in so far that 
they take into account the needs of 


A Practical Guide to Cluster Development 

Section B: 5. Contributory factors and policies for success 

identified clusters, amongst other 
considerations. However, some cluster 
specific concerns have contributed to 
significant investment eg Massconnect and 
Berkshire Connect (see Profile 3, p.27) or 
the raising of the profile of an issue, as 
identified in the case of Arizona above. 

When developing cluster-based strategies 
consideration should be given to the nature 
of existing transport and communications 
infrastructure and whether this is adequate to 
facilitate and support the development of the 
cluster as proposed. This is illustrated by the 
earlier Example 21 that highlights the 
importance of transport and communications 
to the growth of Information Technology, 
Communications and Electronics Sectors in 
the Thames Valley. 

Entrepreneurial spirit 

The presence of an entrepreneurial spirit is 
an important influence in the development 
of successful clusters. This is generally 
reflected in growth companies, business 
start-ups and spin-outs from existing 
companies or research institutes. It can 
occur within a wide degree of contexts 
within a cluster – within large or small firms, 
within technology transfer organisations, 
or within the ‘culture’ of a sector or 
responsiveness of the public institutions 
(with a ‘can do’ mentality). Equally an ability 
to adapt to market changes has been a 
factor for the continuing success of SMEs 
within successful clusters. 

Successful clusters will contain many 
individuals with entrepreneurial spirit who are 
flexible and willing to try new ideas. They may 
exploit new opportunities or technologies, 
bring innovations to the marketplace or take 

significant calculated risks47. There are few 
examples of policies to encourage a culture 
of entrepreneurialism within the cluster 
literature or amongst practitioners. That is 
not to say one should not encourage 
entrepreneurialism, just that there is little 
knowledge about the application and 
effectiveness of such approaches at the 
moment. Levels of entrepreneurialism 
appear to be used as an indicator reflecting 
the overall health of a cluster – with low rates 
of entrepreneurialism often being cited 
(through low business registrations 
for instance) as a cause for concern. 

Access to finance 

The ability to access finance contributes 
to the successful development of clusters 
through supporting the growth and 
expansion of cluster-related activities. 
This includes access to venture capital, 
specialist resources and financing (e.g. 
for inward investment), public and private 
R&D funding, business angels and 
investor networks. 

The availability of venture capital is 

important as it can reshape the role of 

public risk funding establishing new 

kinds of investment syndicates where 

the public sector carries the technology 

risk and a venture capitalist the 

commercial risk of the enterprise 

(Paija , 2000). 

Proximity to intermediaries such as banks, 
venture capital firms, trading houses 
(which broker and organise exports) and 
other financial institutions is viewed as a 
positive benefit for the development of 
clusters. In part this reflects the flexibility 


A Practical Guide to Cluster Development 

Section B: 5. Contributory factors and policies for success 

of financial institutions to respond to the 
changing needs of the cluster, particularly 
the emergence of new markets. It can 
be helpful for practitioners to build 
relationships with the investment 
community (either informally or through 
formal partnerships). For instance some 
business angels or venture capitalists 
specialise in certain sectors and can 
provide useful sources of specialist 
finance and support. 

Different sources of finance will be used by 
different companies depending upon their 
particular circumstances. A study of the 
biotechnology sector in Oxfordshire, 
highlights the importance of business 
angels, Oxford University, venture capital, 
private investment, parent company 
investment and DTI support (such as 
through SMART Awards). None of these 
are cluster-specific. 

Finance policies 

Providing information and advice 

At its simplest cluster managers can 
support forms through providing advice 
on potential sources of funding. In fact this 
is the form of support most commonly 
offered and may involve cluster managers 
establishing mechanisms to bring potential 
investors and companies together. This 
can be done through web-enabled 
databases or through facilitating contacts 
with local providers (see for example the 
links to finance providers identified in 
Examples 5 and 15). 

Access to types of finance 

Financing policies can also be used to 
attempt to encourage particular types 
of activity that are regarded as a strong 

foundation for future growth. Tax incentives 
for R&D activities are a common feature 
in most US states and in parts of France. 
For example in Massachusetts a number 
of tax incentives are available including a 
10-15% tax credit for 15 years on research 
and 3 year 3% tax credit on fixed assets. 
In Midi Pyrénées three year property 
tax exclusions are provided for new 
businesses. 

The opportunities offered by non-targeted 
financial incentives, such as Regional 
Selective Assistance or the Structural Funds 
for example, should not be over-looked and 
practitioners may wish to consider how 
these might be packaged to the advantage 
of identified clusters within a region. Special 
rules apply to using such funds and these 
should be fully understood in advance. 
Financial support might also be used to 
encourage firms to collaborate – for 
instance on a new product or process. There 
are signs that some funds established 
through programmes such as the Structural 
Funds, are being targeted on identified 
clusters, for example in South Yorkshire an 
Invest for Growth 2 Scheme will support 
companies that can demonstrate that they 
are part of four high growth clusters within 
South Yorkshire. 

Promoting collaboration and networking 

In some cases cluster development is 
being promoted as a side effect of more 
general financial support policies. For 
example, support for R&D activities can 
be made conditional on joint working 
between companies. 


A Practical Guide to Cluster Development 

Section B: 5. Contributory factors and policies for success 

Example 23: Promoting clusters 
through finance policies 

In many instances funding bodies make 
co-operative working a condition of grant 
support. This can be seen, for example, 
in the EU’s multi-annular Research and 
Technological Development Framework 
Programmes. In the USA the National 
Science Foundation links its grants for 
Engineering Research Centres not only 
to advanced engineering research but 
also to documented technology transfer 
to local business, educational and 
journalism communities. 

(Pavlik, 1999) 

Tailored solutions 

More significantly, cluster strategies might 
include developing specialist financial 
services to overcome identified cases of 
market failure. This is often the case where 
the financial markets fail to support firms 
regarded as high risk or seeking relatively 
modest levels of capital. To support 
successful clusters financial support 
mechanisms must either be tailored to the 
particular needs and opportunities of the 
cluster, such as bringing cluster firms 
together with Venture Capital providers, or 
must be packaged together with other 
cluster development actions. 

Example 2448: Supporting access 
to finance in the Netherlands 

In addition to regional authorities the 
national government takes an interest 
in stimulating regional economic 
policies for its aim to promote high tech 

entrepreneurship and to turn the 
Netherlands into a leading ICT region in 
Europe. For that reason the Ministry of 
Economic Affairs launched the so-called 
Twinning policy in 1998, which involves: 
creating Twinning centres which offer 
office accommodation, facilities (such as 
telecom infrastructure) and business 
coaching to promising ICT start-ups; 
establishing funds for financial 
participation in start-ups and young firms 
on a public-private basis; and offering a 
network of (inter)national contacts which 
can be used by start-ups for advice and 
for networking with suppliers, 
distributors and so on. Twinning was 
established in 1998 as an initiative from 
Hans Wijers, a former Minister of 
Economic Affairs (1994-1998), and Roel 
Pieper, a leading businessman. Since its 
establishment, Twinning has invested in 
almost 60 ICT businesses, 35 of which 
are still active and are working on their 
futures with Twinning support. Twinning 
stimulates ICT entrepreneurship in the 
Netherlands by providing risk capital and 
placing its network at the disposal of 
start-up ventures, but the entrepreneur 
remains the pioneer and Twinning’s 
objective is to earn a yield on invested 
funds. Twinning invests exclusively in ICT 
businesses, but the ICT focus is broadly 
interpreted as having a preference for 
enterprises that fit inside one of six 
identified focus areas. 


A Practical Guide to Cluster Development 

Section B: 6. Complimentary measures and the policy environment 


The previous sections have highlighted areas where 
interventions may help to support the development of clusters 
through focusing on those factors identified as critical or 
contributory to the development of clusters. 
6. Complementary measures 
and the policy environment 
There are though a number of other factors 
that can also influence the development 
of successful clusters, as set out in the 
accompanying Evidence Paper. In the 
following section we outline some of these 
aspects. In particular we highlight: 

• 
The role of traditional business 
support activities. 
• 
The context in which the 
cluster operates. 
• 
The role of a supportive policy 
environment. 
Business support policy/ 
interventions 

Support is often provided to businesses 
within a cluster in order to facilitate 
improvements in their performance. 
This support can take numerous forms. 
Common interventions include: 

• 
Support for new business start-ups, 
spin-outs from companies or university 
research bodies, and business growth 
e.g. through advice, ICT support or 
grant assistance. 
• 
Business advice and guidance e.g. 
on management and production 
techniques, training, business planning. 
• 
Marketing, market intelligence and 
networking assistance e.g. directing 
technological capabilities towards 

market needs. 

Available evidence suggests that these 
interventions often have a limited impact 
on the successful development of clusters, 
although supportive of individual firms. 
This is often because of the manner in 
which these activities are delivered rather 
than any failings of the approach itself. 
To successfully contribute to cluster 
development business support activities 
must be tailored to the particular needs 
of the specific cluster. 

Traditional business support measures 
do have their role in that they can promote 
the development of a strong firm base and 
the growth of new companies, contributing 
to a generally stronger economy. They can 
also be highly important in so far that they 
mean support the development of the 
seedbed for new clusters of the future, 
which cluster focused strategies might 
otherwise overlook. However, it is 
important for cluster managers to realise 
that business support measures on their 
own are not enough to promote the 
development of clusters. 


A Practical Guide to Cluster Development 

Section B: 6. Complimentary measures and the policy environment 

Example 2549: Promoting
business start-ups


The Existenzgründungsinitiative 
Hannover Region (EIH) is run as a 
partnership between the city of 
Hannover, the Greater Hannover District 
Association, the Kreissparkasse and the 
Stadtsparkaasse. It acts as a one-stop 
shop for business start-ups offering 
advice on the different types of 
consultation and training on offer, sends 
potential business owners to the 
relevant experts and lends support to 
young firms in their initial stages. It 
has also opened a contact point to 
the Deutsche Ausgleichsbank in its 
premises, providing direct access to 
the bank’s information on the internet. 
Konstadakopoulos reports that this 
approach has contributed to securing 
strong rates of start-ups in Hannover, 
comparable to Munich and only behind 
Hamburg, Düsseldorf and Frankfurt. 

A supportive context 

Leaders can be important 

Successful clusters are often associated with 
strong leadership, either from individuals or 
institutions. Industry leaders can be crucial for 
removing obstacles, assisting in enhancing 
collaboration, developing a vision and acting 
as ‘champions’ for the future strategy of the 
cluster. Strong civic leadership can help to 
foster a ‘collaborative advantage’ too by 
raising mutual awareness of local strengths 
and a shared vision for business growth. 
Leaders are typically people committed to a 
local area, perceived as having a high degree 
of influence and able to cultivate interactions 
between cluster stakeholders. 

Box 750:Two views on leadership 

“The personalities involved are important 

– you must have strong leadership and 
exposure whenever you can. Other areas 
have not had people to ‘run with it’”. 
“The presence of ‘champions’ in clusters 
is key.They motivate other members and 
can provide the energy and enthusiasm 
and continuity to the creation process.” 

Competition is a driving force 

Clusters may develop where the presence of 
key customers stimulates the development 
of, and competitive advantages amongst, 
suppliers. Competition can inspire, motivate 
and stimulate a culture of innovation within 
successful clusters. In areas of intense 
competition rapid product development, new 
start-up firms and spin-off technologies can 
flourish supporting the development of 
dynamic clusters. Competition need not 
preclude collaboration and firms can, and do, 
actively engage in both. No evidence was 
found of interventions by practitioners directly 
supporting competition, although it may be 
seen as a by-product of interventions adopted 
for other objectives.The reason for including 
comment on it here is to stress that clusters 
thrive on competition and that dynamic 
clusters with a turn-over of businesses may 
be the stronger in the long-term. 

Proximity to markets helps 
clusters develop 

The prominence and existence of both 
internal (local and national) and external 
(global) markets is a feature of many 
successful clusters. Access to a wide 
population and dynamic markets are clearly 
advantageous features of some clusters. 
Local markets can help clusters develop and 


A Practical Guide to Cluster Development 

Section B: 6. Complimentary measures and the policy environment 

in some cases gain first mover advantage. In 
other cases access to national or international 
markets has been important in securing the 
continued expansion of a cluster. Again 
cluster practitioners can only influence market 
access at the margins, but advice and 
information can help whilst infrastructural 
investments can bring benefits. 

Quality of life 

The ‘quality of life’ offered by a region can be 
a feature in the development of successful 
clusters. Other things being equal an 
attractive environment can offer advantages 
in attracting key workers and firms. This 
has been taken up as a marketing tool by 
many organisations promoting cluster 
development, as Example 26 illustrates in the 
case of Arizona. In France the development 
of local amenities such as sports facilities and 
green spaces in employment zones and 
residential areas have played a role in terms 
of regional image and have arguably been 
important in attracting both businesses and 
employees to a region. 

Example 26:Trading on your
strengths


Arizona is promoting itself as a centre 
for software development trading in 
the fact that US based high technology 
companies generally seek locations 
where community and quality of life 
features produce an enjoyable living 
environment for the highly educated, 
technical and professional employees. 
As the Department of Commerce states: 

“Companies find it easy to recruit
talented employees to Arizona. Arizona
provides a quality of life unmatched by


any area of its size in the world. 
Residents enjoy a choice of lifestyles, 
excellent health care, and an affordable 
cost of living”51. 

A supportive policy environment 

A supportive, co-operative policy 
environment is an important feature in the 
development of successful clusters. Porter 
highlights that many of the most significant 
influences on industrial development stem 
from the way in which national regulatory 
frameworks influence the demand for 
sophisticated products, the course of 
industrial innovation and levels of 
entrepreneurship. Indeed, in some cases 
the success of a cluster, such as the 
Aerospace cluster near Toulouse, France, 
can be traced almost directly to the role of 
policies pursued by the French state, and 
supported today by European level policies 
concerning competition, regulation and 
aerospace programmes. 

The evolution of Ireland’s ICT sector 
has been driven not only by market 
forces but by the conscious design 
and implementation of public policy 
in the context of EU framework and 
cohesion programmes and, over the 
last decade, social partnership. 

(O’ Donnell, 2000) 

At a national level a stable macro-economic 
environment is a strongly positive factor, 
whilst at a regional level supportive policies 
are also valuable. The common feature is a 
strong commitment from local and regional 
government bodies to deliver growth and 
sustainability. For example, in the Midi 


A Practical Guide to Cluster Development 

Section B: 6. Complimentary measures and the policy environment 

Pyrénées region government policy has 
driven cluster development in the region. 
Positive connections were also made 
between policy and cluster success 
within Baden-Württemberg and the 
tourism industries. 

“Local policy makers can help share 
development vision and give strength 
to collective actions to enhance 
competitiveness of the SME. Regional 
and/or local governments support 
cluster development actively, 
concentrating on complementing 
rather than replacing the community’s 
own efforts.” 

(GFA Management 2001) 

In developing a supportive policy 
environment practitioners should bear in 
mind that there is no ‘magic pill’ that will 
deliver successful clusters, rather a range 
of different actions that are needed, tailored 
to local circumstances. And in considering 
the range of actions that are appropriate 
attention should be paid to the manner in 
which interventions are delivered, just as 
much as to the interventions themselves. 
Measures that actively foster collaboration 
or joint working are more likely to 
strengthen the development of a cluster 
over time than those that do not. 


A Practical Guide to Cluster Development 

Annex A: End notes 


Annex A: End notes 
The Practical Guide has drawn upon a wide range of sources as part of the research 
process. These are fully listed in the accompanying Evidence Paper. The following 
references are cited in the text and are included here as end notes. 

1 
For a fuller exploration of this see Section 3 of the companion document, A Practical 
guide to Cluster Development: Evidence Paper. 

2 
Litzenberger, T and Sternberg, S., ‘Clusters, Innovation System and Economic Policy of 
Baden Wurttemberg’, (2002), appears as Annex 1 in ECOTEC, A Practical Guide to 
Cluster Development: Evidence Paper (2003) 

3 
That is the number of firms within a cluster is many 100’s and impossible even for a small 
team to cover. 

4 
http://scottishfooodanddrink.com/ 

5 
Athreye, S., ‘Agglomeration and Growth: A Study of the Cambridge Hi-Tech Cluster’ 
(2003), in, Bresnahan, T. and Gambardella, A. (eds.) Building High Tech Clusters: Silicon 
Valley and beyond (2004) 

6 
National Governors Association, A Governor’s Guide to Cluster-Based Economic 
Development (2002) 

7 
Korhonen, K.J., ‘Finland: A History of Networking’, in, OECD, ibid (1996) 

8 
NGA, A Governor’s Guide to Cluster-Based Economic Development (2002) 

9 
Cooke, P., ‘Clusters as Key Determinants of Economic Growth: The Example of 
Biotechnology’, in Mariussen, A. (ed.) Cluster Policies – Cluster Development? (2001) 

10 
http://www.mtpc.org/ 

11 
http://www.umass-i495.net/ 

12 
http://www.mtpc.org/RenewableEnergy/index.htm 

13 
http://www.mtpc.org/InnovationEconomy/Federal_Funding.htm 

14 
http://www.kopin.com 

15 
Rosenfeld, S.A., ‘Networks and Clusters: The Yin and Yang of Rural Development’, 
Proceedings (2001) 

16 
Pavlik, J.V., ‘Content and Economics in the Multimedia Industry: The Case of New York’s 
Silicon Alley’, in, Braczyk, H-J., Fuchs, G. and Wolf, H-G. (eds.), Multimedia and Regional 
Economic Restructuring (1999) 

17 
Rosenfeld, S.A., ibid (2001) 

18 
www.ocevnet.org/neomc 

19 
http://www.dti.gov.uk/clusters/2002.pdf 


A Practical Guide to Cluster Development 

Annex A: End notes 

20 from Practitioner Observations (2002)
21 http://www.skillsnet.net/about/history.cfm 
22 DfES, DTI, HMT, 21st Century Skills: Realising our Potential, Individuals, Employers,


Nation, (July), Department for Education and Skills (2003) 

23 
DfES, DTI, HMT, ibid (2003) 

24 
http://www.pfl.org.uk/comm.html 

25 
http://www.seeda.co.uk/seeda_news/newsitems2000/Conference_Signals_Support_ 

for_Biopharm_Skills.htm 

26 
Rosenfeld, S.A., ibid, in OECD, ibid (1996) 

27 
National Governors Association, ibid (2002) 

28 
Athreye, S., ibid (2003); Wicksteed, B., Garnsey, E. et al, The Cambridge phenomenon 

revisited: parts one and two, SQW Ltd. (2000) 

29 
National Governors Association, ibid (2002) 

30 
http://www.rtp.org/ 

31 
http://www.stjohns.co.uk/ 

32 
Mumby-Croft, B., ‘Oxfordshire Bioscience – Pulling Together’, in, Naturejobs, (April) (2002) 

33 
Marsh, P., ‘Britain falls behind rivals on innovation’, FT.com; (2003) 

34 
Heidenreich, M, and Krauss, G., ‘The Baden-Württemberg Production and Innovation 

Regime – Between Past Successes and New Challenges’, in, Braczyk, H-J., Cooke, P. and 
Heidenreich, M. (eds.) Regional Innovation Systems (1998) 

35 
See Figure 4 and Section 3 of the accompanying Evidence Paper 

36 
http://www.og.dti.gov.uk/sponsorship/docs/Pearson%20Harper%20and%20BP.pdf 

37 
Case studies charting the 18 month relationships are available at 
<http://www.og.dti.gov.uk/sponsorship/.> 

38 
Yamawaki H, The Evolution and Structure of Industrial Clusters in Japan (2001) 

39 
Collaborative Economics, The Changing Face of the Software Cluster in Arizona (1999) 

40 
Siino, C. and Vidal, M. ‘Public Support for Local Productive Systems (SPL) in France: The 
Case of the Midi Pyrenees Region’ (2002), in, DTI, Criteria for Success in Cluster 
Development, ECOTEC (2003) 

41 
The Délégation àAmémenagement du Territoire et à l’Action Régionale (DATAR) is the 
government department responsible for spatial planning and regional development. 

42 
http://www.commerce.state.az.us/BusAttraction/default.asp 


A Practical Guide to Cluster Development 

Annex A: End notes 

43 
SQW, Study of the Information Technology, Communications and Electronics Sectors 
(2001) and Collaborative Economics, ibid (1999) 

44 
http://www.babraham.co.uk/ 

45 
http://www.ukbi.co.uk/ 

46 
Gollub J (2000) Regional Cluster Strategy and Successful Science and Technology Parks. 

47 
Lowe, E., Championing the Entrepreneurial Spirit, Edward Lowe Foundation (2003) 
http://edwardlowe.org/champbklt.pdf 

48 
http://www.twinning.com/; Leisink, P.L.M., (2001) Multimedia Clusters and Business 
Development in the Netherlands, Utrecht School of Governance, Utrecht University 

49 
Konstadakopoulos, D., Diez, J.R., Kockel, U. and Mildhan, B., Knoweldge Companies in 
Britain and Germany: A Common Response to the Challenges of the Emerging 
Knowledge Based Economy?, Anglo-German Foundation for the Study of Industrial 
Society (2001) 

50 
Practitioner Observations, 2002 

51 
http://www.azcommerce.com/Why Arizona Quality of Life.htm 


A Practical Guide to Cluster Development 

Annex B: Bibliography 

56 
Annex B: Bibliography 
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Arino M-C. (1999) Les territoires innovants agrobiotechnologiques dans le sud de la France, 
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Arizona Department of Commerce (2001) The Emerging Plastics and Advanced Composite 
Materials in Arizona, prepared by Collaborative Economics for ADC, (February), Arizona 

Athreye, S., ‘Agglomeration and Growth: A Study of the Cambridge Hi-Tech Cluster’ (2003), 
in, Bresnahan, T. and Gambardella, A. (eds.) (2004) Building High Tech Clusters: Silicon Valley 
and beyond, Cambridge University Press, Cambridge (Forthcoming) 

Benko Georges et Lipietz Alain (dir.) (1992), ‘Les régions qui gagnent’, PUF, En particulier: 

G. Garafoli, Les systèmes de petites entreprises: un cas paradigmatique de 
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Benko G., Dunford M., Heurley J. (1998) ‘Districts industriels: vingt ans de recherche’, 
Problèmes économiques, No. 2581, 9 Septembre, pp. 16-21 

Benko Georges et Lipietz Alain (dir.) (2000) La richesse des régions, PUF 

Bergman, E.M., den Hertog, P., Charles, D.R. and Remoe, S. (2001) Innovative clusters: 
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Beslay C., Grossetti M., Taulelle F., Salles D., Guillaume R., Daynac M. (1998) La 
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Boari, C. (2001) Industrial Clusters: Focal Firms, and Economic Dynamism – A Perspective 
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Bortagaray, I. and Tiffin, S. (2000) Innovation clusters in Latin America, 4th International 
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Braczyk, H-J., Cooke, P. and Heidenreich, M. (eds.) (1998) Regional Innovation Systems, 
UCL Press, London 


A Practical Guide to Cluster Development 

Annex B: Bibliography 

Braczyk, H-J and Krauss, G. (1997) ‘Neue Herausforderungen an Innovationspolitik: 
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Bresnahan, T., Gambardella, A. and Saxenian, A. (2001) ‘“Old Economy” Inputs for “New 
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Chinitz, B. (1961) ‘Contrasts in Agglomeration: New York and Pittsburgh’, American 
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Collaborative Economics (1999) The Changing Face of the Software Cluster in Arizona, 
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Development in conjunction with Morrison Institute for Public Policy, (August), Phoenix, AZ 

Commonwealth of Massachusetts (2002) Towards a New Prosperity: Building a New 
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Boston, MA 

Dahl, M.S. and Dalum, B. (2001) ‘The ICT Cluster in Denmark’, in, OECD (eds.) Innovative 
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Daynac M., (1994) ‘Le secteur textile dans le bassin de Castres-Mazamet’, in Dupuy C., 
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DCMS (2002) Creative Industries Fact File, Department of Culture, Media and Sport, London 

Defence Material Organisation (2001) How the Clustering of SMEs Can Assist Defence, 
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DETR (2000) Planning for Clusters: A Research Report, Department of the Environment 
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Denscombe, M. (1998) The Good Research Guide for Small-Scale Social Research Projects, 
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Dixon, R.J. and Thirwall, A.P. (1975) ‘A model of Regional Growth Rate Differentials along 
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A Practical Guide to Cluster Development 

Annex B: Bibliography 

Downer, S. (2003) Skills White Paper set to weld learning and work, (21 May), New Start, 
Sheffield 

DTI (1999) Biotechnology Clusters, Department of Trade and Industry, London 

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64 
Definitions 

Clusters 

Cluster Depth 

Cluster Life Cycles 

Cluster Stage of 
Development 

A Practical Guide to Cluster Development 

Annex C: Glossary 

Annex C: Glossary 
Geographic concentrations of interconnected companies, 
specialised suppliers, service providers, firms in related 
industries, and associated institutions (for example universities, 
standards agencies, and trade associations) in particular fields 
that compete but also co-operate (Porter 1998: 197). 

This refers to the intensity of firms located in a particular 
geographical area. Where there is a large concentration of 
firms in a particular area the cluster is said to be ‘deep’ and 
conversely where there is a low concentration of firms the 
cluster is said to be ‘shallow’. 

This refers to technological life cycles, which are extremely 
important to regional clusters. The emergence of new 
technologies may give rise to new clusters or create further 
opportunities for existing ones. New technologies may 
equally result in the demise or decline of an existing cluster 
(end of the life cycle) as new clusters emerge. 

While cluster depth refers to the number of firms, stage of 
development could be said to refer to the age of the cluster 
(how established it is). The stage of development of a cluster 
has been identified in 2 different ways. Within the literature 
there are 3 broad categories: embryonic, established and 
mature. Embryonic clusters are those newly defined, and 
growing but very possibly ‘shallow’; established clusters are 
those that are growing or stable and most likely ‘deep’; and, 
finally mature clusters are very possibly those that have 
reached or passed their peak, these clusters often require 
harsh interventionist policies to reverse their decline 
(although many are left to come to the end of their natural 
life cycle). Where-as in the practitioner interviews, clusters 
were referred to as growing, stable and declining. Broadly 
speaking growing equates to embryonic, stable to 
established and declining to mature. The associative terms 
are therefore used interchangeably. 


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Annex C: Glossary 

Critical Success Factors This is the policies and interventions used to facilitate the 
development of successful clusters. The critical success 
factors for successful cluster developments were identified 
through a mixture of literature reviews and interviews with 
cluster specialists. Through this research we have identified 
the success criteria, success measures and policy 
interventions that make up the critical success factors. 
Geographical Clusters Are those based in the same region, such as the media 
cluster in Oxford or the advanced engineering and metals 
cluster in South Yorkshire. 
Industrial Clusters These are clusters that are based around industry rather than 
geography. An example of an industrial cluster might be the 
biotechnology cluster in the UK and Germany. 
Inter-Firm Collaboration By facilitating the sharing of resources (human and financial) 
and the creation of trust, a network can lower the cost of 
doing business, create new business opportunities (through 
new markets and/or new products), and reduce the risk of 
doing business. The above explanation is the basis for inter-
firm collaboration. 
Institutional Infrastructure The presence of institutional infrastructure is integral to the 
success of a successful cluster. Examples include the 
presence of university based research centres that support 
industry such as the aerospace manufacturing research 
centre based at Sheffield University. 
Meta Evaluation The term is used for evaluations designed to aggregate 
findings from a series of evaluations. It can also be used to 
denote the evaluation of an evaluation to judge its quality 
and/or assess the performance of the evaluators. 
Policy Interventions Policy interventions are the policies that are put into place in 
order to facilitate the development of clusters. Each policy 
intervention comes under a broader policy lever, these are 
discussed more fully in the Policy Interventions Glossary. 


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Annex C: Glossary 

Regional innovation system


Success Measures Success measures are the indicators used to measure the 
success of clusters. The indicators used to measure success 
are discussed in the Success Measures Glossary. 
Success Criteria This is the criterion used to determine successful clusters. 
The criterion used to identify success is highlighted in the 
Success Criteria Glossary. 
Soft Infrastructure Soft infrastructure relates to less tangible aspects such as 
education and training provision, quality of life infrastructure 
such as park, leisure and library services, business support, 
networking and financing services etc. 
SMEs This is the acronym for ‘small and medium sized enterprises’. 
There is no definitive delineation between a small and 
medium sized business. As a general reference, small is 
often from 5 to 20 employees, medium from 20 up to 200. 
Businesses with fewer than 5 employees are usually called 
micro-enterprises. This is a guide only. 
Inward investment 
Generic Advice Advice to companies prior to investment on soft factors. 
This could range from providing advice on schools and 
facilities to running management schools. 
Marketing Activities which raise the profile of the cluster nationally 
and internationally, in the eyes of companies and skilled 
workers. This could include direct marketing, branding of 
the region, niche product marketing and showcase events 
for specific industries. 
Training Developing links with schools and universities to ensure 
they produce people with the necessary qualifications to 
meet the needs of the cluster’s workforce. Providing 
training courses at the cluster-wide level to ensure that 
skills gaps in companies are addressed. This might include 
training in management, change management or customer 
service skills. 


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Annex C: Glossary 

Finance and 
Funding Advice 

Infrastructure 

Construction of facilities 
for business 

Finance 

Tax Concessions 

Equity Investment 
Mezzanine 

Giving advice to new businesses on how to attract the 
funding necessary for development, including technological 
development, product innovation and capital investment. 

Funding infrastructure that helps facilitate cluster 
development. This could include transport, IT, 
telecommunications, and housing infrastructure. 
Ensuring that the transport needs of the cluster are 
incorporated in transport strategies. 

Assisting development of office, conference and workshop 
space through funding, site assembly, construction and 
relaxing of planning restrictions. Encourage clustering of 
businesses and sharing of workspaces in order to increase 
their interaction. Linking developments with transport 
facilities. 

Tax concessions to businesses encourage inward 
investment and provide companies with a competitive 
advantage. Concessions might include maintaining a low 
level of corporation tax and tax credits for particular 
industries. Tax concessions could also be linked to locating 
within a cluster or increased capital investment and R&D 
activity by companies. 

Examples include the DTI Regional Venture Capital Fund and 
technical investment by Business Angels. 

Mezzanine fills the gap between senior secured debt and 
equity, ranking just below the senior debt in a default 
situation. Covenants are usually similar to those on senior 
debt, but tend to be more flexible. 

Users of mezzanine finance have traditionally paid for the 
capital in three ways. Firstly, there has been the coupon 
payment, which has usually paid about 400 basis points 
above LIBOR (London Inter-Bank Offering Rate). Secondly, 
an additional 400 basis points of interest payments – known 
as payment-in-kind (usually abbreviated to PIK) – is charged. 


A Practical Guide to Cluster Development 

Annex C: Glossary 

Loans 
Financial Advice 

SME Grants 

Regulation 

Skills 

Social Inclusion Measures 

Entering the Workforce/ 
Recruitment 

This payment is receivable at the end of the mezzanine 
term, enabling a greater proportion of the cash flow to be 
reinvested in the ongoing business, rather than used to 
service the debt. The final element of payment comes in the 
form of equity warrants. This can represent up to six per 
cent of the amount lent. Mezzanine providers are looking for 
returns in the high teens and low twenties, but the warrant 
portion can push the returns beyond this. 

Loans can be provided by the public sector or in a public-
private partnership. 

Providing a professional financial advice service. This could 
include helping to formulate meaningful business plans, 
advising firms on the investment risk in particular 
technologies and matching financial investors to appropriate 
enterprises. 

Providing grants to SMEs can encourage the formation of 
new businesses in clusters. Grants could cover feasibility 
work, environmental improvements, start-up costs and 
network brokerage costs. Examples include DTI Smart 
awards and SRB small grants schemes. 

Financial regulations can be used to create incentives for 
company formation and growth within clusters. 

Funding training schemes to provide members of excluded 
groups such as the unemployed and ethnic minorities with 
the skills required by companies within the cluster. 
Recruitment drives and marketing in deprived schools to 
promote a career in the cluster industries. 

Measures aimed at encouraging people to work in the 
cluster industries. These could include: working with schools 
to encourage people to achieve relevant qualifications; 
provision of basic skills training; marketing of careers in the 
industry and attractive branding of relevant further education 
courses; and addressing issues such as high housing costs. 


A Practical Guide to Cluster Development 

Annex C: Glossary 

Advanced Skills 

Management Skills 

Workforce Development 

Training Infrastructure 
Development 

R&D 

Product Development 

Research 

Providing training to employees to enable them to do their 
jobs more effectively and enhance their career prospects. 
Training is most commonly needed in media skills, IT, 
customer relations, and strategic management skills for 
business leaders. Relevant training can be provided by 
collaborating with higher education establishments. 

Providing training to senior staff to enable them to perform a 
more effective management role. Training needs to cover 
leadership abilities, entrepreneurial and business 
development skills, staff management and cluster 
development techniques. 

Encouraging companies to commit themselves to a 
programme of life-long learning and personal development 
ensures that their employees remain competitive and that 
they are able to attract the best staff. Workforce development 
can include apprenticeships, work placements, and ongoing 
technical, IT, customer care, and management training. 

Improving existing training facilities available to businesses. 
This could include: establishing formal linkages between firms 
and higher education establishments, and vocational and 
technical training schools; the creation of national skills centres 
in particular sectors; and the creation of cluster skills centres. 

Helping firms to improve their product development 
processes will make them more competitive. Measures 
could include: tax incentives, funding and assistance for 
product development and firms that collaborate; cluster-wide 
or national product development centres; and research into 
the links between supplier firms in order to establish the 
scope for collaboration. 

Encouraging firms in cluster to work with each other and 
with universities to carry out technological and product 
research. Where possible firms and universities should be 
encouraged to establish ‘technopoles’ (shared research 
facilities in the same location). 


A Practical Guide to Cluster Development 

Annex C: Glossary 

Applied Research 

Market Exploitation 

Corporate Intelligence 

Technology Transfer 

Business support 

New Business Start Up 
High Growth Start Up 
Spin Outs 

SME Support (existing) 

Encouraging firms, universities and research institutes to 
work together to ensure that research meets the practical 
needs of business. 

Helping businesses in the cluster to target and access their 
markets. This could include assistance with: market research 
and consumer profiling; market segmentation analysis; 
development of a brand image for the industry; and niche 
marketing. 

Helping companies to compile information on other firms 
within the industry. Companies need to be aware of: 
potential investors; local, regional, national and overseas 
competitors; and the extent of research and development 
outside the company. 

Encouraging companies within the cluster to share 
technologies and products that enhance productivity. 
Businesses within the cluster should also be encouraged to 
share beneficial innovations, services and best practise. 
Firms should be encouraged to enter into formal 
partnerships with universities developing new technologies 
that have applications within their industry. 

Providing funding, advice, and ICT support for new 
businesses within the cluster. 

Providing funding, advice, and ICT support for new 
businesses within clusters in high-growth sectors. 

Encouraging the formation of new business start-ups based 
around the activities of university research departments and 
spin-off activities from existing companies. 

Providing support to existing SMEs. This could include: 
helping them establish networks and cluster processes; 
intellectual property issues; strategic thinking; business 
modelling; ICT support; advice on matching technological 
capabilities to market needs; and advice on new production 
and management techniques. 


A Practical Guide to Cluster Development 

Annex C: Glossary 

SME Support (new) 

Support for Large Firms 

Supply Chain 
Development 

Business Advice 

Business Incubator 
Support (generic) 

Business Incubator 
Support (specific) 

Export Support and 
International Trade 

Marketing 

Providing support to new SMEs. This could include: helping 
them establish networks and cluster processes; intellectual 
property issues; strategic thinking; business modelling; ICT 
support; advice on matching technological capabilities to 
market needs; and advice on new production and 
management techniques. 

Encouraging larger firms to consider the needs of their 
suppliers and to engage in clustering behaviour in order to 
gain agglomeration benefits. 

Helping to build stronger linkages between all the 
companies in a supply chain. Developing linkages between 
foreign-owned large enterprises and SME clusters. 

Providing advice to businesses on a range of issues 
including; funding sources; training; developing business 
plans; responding to market opportunities; and working with 
financial institutions. 

Business incubator support provides support (in terms of 
advice, finance, in-kind support with, e.g. low-cost premises 
etc.) to businesses during the incubation period, i.e. 
between start-up and achieving stable profitability. 

Business incubator support provides support (in terms of 
advice, finance, in-kind support with, e.g. low-cost premises 
etc.) to businesses during the incubation period, i.e. between 
start-up and achieving stable profitability. Specific business 
incubator support could help with, for example, provision of 
laboratory equipment for pharmaceutical business. 

Helping companies within the cluster to expand their export 
markets. This could include; brokering contact with large 
companies overseas, direct marketing, branding of the 
cluster, niche product marketing and showcase events and 
fairs for specific industries 

Helping businesses in the cluster to access new markets. 
This could include assistance with: direct marketing, 
branding of the cluster, niche product marketing and 
showcase events and fairs. 


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Annex C: Glossary 

Business Planning Advising firms on how to produce genuine business 
development plans that will help ensure the success and 
growth of the company, rather than unworkable plans that 
are produced for the benefit of the bank or other investors. 
Sales and Marketing Assisting firms with developing their sales and marketing 
approach; or carrying out marketing activities on behalf of 
the cluster. 
Finance Providing financial assistance to businesses, e.g. in the 
form of tax concessions, equity investment, mezzanine or 
other loans. 
Mentoring and 
Business Angels 
Providing business advice and consultancy, either directly 
through the provision of public sector staff members or 
informally by setting up mentors within the existing 
business community. 
HR DevelopmentAssistance to business to develop their 
HR approach. 

Institutional development/networks 

International Networks 
Forming links with companies overseas helps companies 
within the cluster to expand their markets and global 
influence, and to learn about new products and research. 
Links can be formed through: informal networking; formal 
networking; co-ordination of networking and information 
brokerage by central government and regional actors. 

Networks Beyond 
Establishing links with other companies, supply chains, 

the Cluster 
clusters and sectors on a regional or national basis. This can 
increase the breadth of suppliers and lead to increased 
technology transfer. Links can be formed through: informal 
networking; formal networking; co-ordination of networking 
and information brokerage by central government and 
regional actors. 

Non-Profit Making or 
Collaborating with voluntary sector organisations and 

University Led 
universities. Links with universities provide access to 
training facilities and research programmes. 


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Annex C: Glossary 

Trade Associations or 
Professional Bodies 
Creating or expanding trade associations and professional 
bodies can help to create more formal networks, facilitate 
the sharing of best practice and help businesses to influence 
government policy. 
Strategic Alliances/ 
Trade Agreements 
Establishing alliances between business and local and 
regional government helps provide a strategic approach 
to cluster and regional development. Establishing trade 
agreements between large companies and their suppliers 
can promote skill and technology transfer. 
Company Led Company-led networks provide the opportunity for a flagship 
business or anchor tenant in a cluster to lead business 
associations or networks and influence local public policy. 
Centres of Excellence Creating a centre for the research and commercial 
exploitation of new areas of knowledge. Involving 
universities, research institutes and business. 
Good Practice Good practice can be shared between companies through 
networks, workshops or the creation of formal information 
and measurement centres. 
Marketing Networks or business associations can provide overarching 
marketing on behalf of a cluster or sector. 


A Practical Guide to Cluster Development 

Annex D: Consultees 

74 
Annex D: Consultees 
Sector Organisation Name 
Digital, Cultural and Creative SEEDA 
Yorkshire Forward 
Comedia 
Peter Taylor 
Jim Farmery 
Phil Wood 
Business and 
Cultural Policy and Planning Professor Colin Mercer 
Research Unit, Nottingham 
Trent University 
Bristol Cultural Development Andrew Kelly 
Partnership 
Leeds Financial Services 
Financial Services Initiative Ltd John Ansbro 
Warwick Science Park 
Corporation of London 
Bill Taylor 
Malcolm Cooper 
Pro-Manchester John Barnacle 
Barden Wuttenberg Centre for Technology 
Research Dr Gerhard Fuchs 
University Stuttgart Dr Simone Strambach 
Hi Tech Centre for Automobile 
Industry Research 
Engineering Industries 
Association 
Yorkshire Forward 
Dr Paul Nieuwenhuis 
Pat Young 
Bob Heywood 
EMTA Dr Michael Sanderson 
EMDA Graham Brown 
Midi Pyrenees ON-X Gilles Surlaive 
Clairis P Jullie 
Actigenix 
Ariege Expansion 
Director of the start up 
Xavier Bernard-Sans 
CIEU 
ADIMAC 
Regis Guillaume 
Bernard Lelong 


A Practical Guide to Cluster Development 

Annex D: Consultees 

Sector Organisation Name 
Aerospace Northwest Aerospace 
Alliance Paul Hughes 
Sheffield University Keith Ridgway 
Northwest Regional 
Development Agency Iain Bentley 
West Of England 
Aerospace Forum Howard Chesterton 
East and West Midlands 
Aerospace Alliance Dr Andrew Mair 
ICT Advantage West Midlands Stuart Webb 
SEEDA Peter Taylor 
Regional Information 
Technology Association Peter Verhoeven 
Birmingham University 
Computer Science 
Department Padma Reddy 
Warwick Manufacturing 
Group, Warwick University Dr Ian McCarthy 
Business Link Dianne Williams 
Tourism Northwest Development 
Agency James Berresford 
East of England 
Tourism Board Gillian Artis 
Southwest Tourism Board Gwyneth Leonard 
One Northeast Lynne Del-Greco 
Northwest and Western 
Lancashire Business Link Debbie Chinn 
Scottish Enterprise Nicky Yule 
South East The Oxford Trust Paul Bradstock 
Oxfordshire Biolink Jonathan Reynolds 
Lugor Ltd Dr Daryl Fernandes 
Think Pieces Toulouse University Corrinne Siino 
Stuttgart University Professor Rolf Sternberg 
Oxford Brookes University Professor James Simmie 
ECORYS US Etienne D’Otreppe 


A Practical Guide to Cluster Development 

Annex E: Quick reference guide to cluster development 

76 
Annex E: Quick reference guide 
to cluster development 
Developing 
networks 
Promoting 
innovation 
Promoting 
R&D 
Developing 
skills 
Establishing 
clusterinfrastructure 
Promoting 
inward 
investment 
Strengtheninginternallinkages 
Strengtheningexternal 
linkages 
Supportingaccessto finance 
Promoting 
entrepren-eurship 
Supportingnew business 
start-ups 
Supportingbusinessdevelopment 
Establishing linksbetween companiesCollaborating withuniversities toencourage technology transferCreating networks withtrade associations,
professional bodiesor unionsPromoting physicalco-locationCreation of arms-
length agenciesAwareness raisingevents (conferencesand trade visits)
Creation ofstrategic networksImproving communication channelsEstablishing strategicalliancesDeveloping centresof excellenceEstablishinginternationalcollaborative networksDeveloping facilitiesfor collaborationMarketing the region 


A Practical Guide to Cluster Development 

Annex E: Quick reference guide to cluster development 

Developing 
networks 
Promotinginnovation 
PromotingR&D 
Developingskills 
Establishingclusterinfrastructure 
Promotinginward 
investment 
Strengtheninginternallinkages 
Strengtheningexternallinkages 
Supportingaccessto finance 
Promotingentrepren-eurship 
Supportingnew business 
start-ups 
Supportingbusinessdevelopment 
Advice to companiesTraining supportpackagesSecuring an adequateskills baseFinance and fundingadviceProviding sitesand premisesProviding transportinfrastructureProviding ICTinfrastructureProvision of taxincentivesFunding researchprojectsSupporting technologytransfer schemesSupporting enhancedproduct developmentDeveloping researchfacilitiesTargeting new entrantsOn-going skillsdevelopment, includinghigher level skillsSupport for re-entrantsto the labour force 


A Practical Guide to Cluster Development 

Annex E: Quick reference guide to cluster development 

Developing 
networks 
Promoting 
innovation 
Promoting 
R&D 
Developing 
skills 
Establishing 
clusterinfrastructure 
Promoting 
inward 
investment 
Strengtheninginternallinkages 
Strengtheningexternal 
linkages 
Supportingaccessto finance 
Promoting 
entrepren-eurship 
Supportingnew business 
start-ups 
Supportingbusinessdevelopment 
Developing trainingfacilitiesSpecialist advice andguidance servicesDevelopingcollaborative coursesSupport for newbusiness start-upsand spinoutsSupporting thedevelopment ofsupply-chain linkagesBusiness adviceand guidanceProviding marketintelligenceFinancial incentivesfor company growthSupport for networkbrokers