From clusters to cluster-based economic development

Over the last decades, changes in the global economy and the emergence of Global Value Chains (GVCs) have raised the interest in understanding the specific conditions and cross-company interactions within and across locations. For companies, the need to choose the right location for specific activities moved from an operational to a strategic issue. For countries, regions and cities, competition raised the stakes of understanding how to improve productivity and attract firms in specific fields beyond providing low factor costs and subsidies. Many countries, from natural-resource-rich, to transition economies, and to developed countries have launched competitiveness policies and cluster initiatives involving various stakeholders. The paper addresses how clusters can be leveraged for economic policy and what the role of different stakeholders in this process is. This paper summarises the cluster concept, focusing on the main theoretical framework and on recent empirical findings, and discusses key pillars of a cluster-based economic policy approach. The paper concludes with an application of the concept to resource-rich, oil-dependent economies.