What qualifies as a cluster theory?

This paper investigates the theoretical backgrounds of the “cluster” and proposes a framework aiming at drawing the contour of cluster theory. The profundity of the notion of ‘clusters’ is arguably conditional on the coherence of three fundamental issues associated with the concept: 1) the economic and social benefits that may accrue to firms when clustering or co-locating (the existence argument); 2) the diseconomies encountered when clustering exceeds certain geographical and sectoral thresholds (the extension argument); and, finally, 3) the possible erosion of economies and onset of diseconomies over the lifecycle of the cluster (the exhaustion argument). Each of these three issues is examined in terms of three relevant major theoretical frameworks that can be brought to bear on the cluster concept. The paper considers approaches based on the idea of externalities (illustrated by the Marshall's work on ‘Industrial district’); on competitiveness issue (illustrated by Michael Porter’s theory of cluster growth); on a territorial perspective (illustrated by the GREMI approach). The paper acknowledges the general shift in explanatory emphasis from considerations of static cost efficiency towards more dynamic interpretations that highlight the creation and use of knowledge as their pivotal theoretical element. By placing these changes within a common conceptual framework the paper shows how different theoretical solutions provide distinct points of departure for subsequent policy recommendations. Three distinctive groups of solutions are identified focusing respectively on local spillovers, on competitiveness and on the region and its development. The paper concludes by identifying areas of particular ambiguity where further theoretical work is most urgently needed.