Defining Clusters of Related Industries

48 Pages Posted: 18 Aug 2014 Last revised: 5 Mar 2023

See all articles by Mercedes Delgado

Mercedes Delgado

Copenhagen Business School

Scott Stern

Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)

Michael E. Porter

Harvard University - Strategy Unit

Date Written: August 2014

Abstract

Clusters are geographic concentrations of industries related by knowledge, skills, inputs, demand, and/or other linkages. A growing body of empirical literature has shown the positive impact of clusters on regional and industry performance, including job creation, patenting, and new business formation. There is an increasing need for cluster-based data to support research, facilitate comparisons of clusters across regions, and support policymakers and practitioners in defining regional strategies. This paper develops a novel clustering algorithm that systematically generates and assesses sets of cluster definitions (i.e., groups of closely related industries). We implement the algorithm using 2009 data for U.S. industries (6-digit NAICS), and propose a new set of benchmark cluster definitions that incorporates measures of inter-industry linkages based on co-location patterns, input-output links, and similarities in labor occupations. We also illustrate the algorithm's ability to compare alternative sets of cluster definitions by evaluating our new set against existing sets in the literature. We find that our proposed set outperforms other methods in capturing a wide range of inter-industry linkages, including grouping industries within the same 3-digit NAICS.

Suggested Citation

Delgado, Mercedes and Stern, Scott and Porter, Michael E., Defining Clusters of Related Industries (August 2014). NBER Working Paper No. w20375, Available at SSRN: https://ssrn.com/abstract=2482137

Mercedes Delgado (Contact Author)

Copenhagen Business School ( email )

Kilen
Frederiksberg, 2000
Denmark

HOME PAGE: http://www.delgadom.com/

Scott Stern

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

Cambridge, MA 02142
United States
617-253-3053 (Phone)
617-253-2660 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Michael E. Porter

Harvard University - Strategy Unit ( email )

Harvard Business School
Soldiers Field Road
Boston, MA 02163
United States
(617) 495-6309 (Phone)
(617) 547-8543 (Fax)

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