Theoretical Perspectives on Industry Clusters

The concept of industry clustering has generated much discussion in regional economic development theory and practice in recent years. Yet it is fair to say that an accepted definition or a unified theoretical framework has failed to emerge from the discussion, as the concept often seems to enliven itself under divergent theoretical approaches, including but not limited to work on agglomeration economies, industrial districts, business networks, knowledge spillovers, and regional innovation systems. This paper provides a review of the major theoretical propositions that seek to explain the clustering of economic activity and its presumed link with regional economic development. While there is undoubtedly some overlap on some of the explanations offered by various theoretical perspectives, the concept of clustering has been used so widely in varying contexts and in a multifaceted manner that it risks creating more confusion than clarity, especially in empirical research.