Clusters and Competitiveness: A New Federal Role for Stimulating Regional Economies

Karen G. Mills, Andrew Reamer, and
Andrew Reamer Former Brookings Expert
Elisabeth B. Reynolds
Elisabeth B. Reynolds Executive Director, MIT Task Force on the Work of the Future - Massachusetts Institute of Technology

April 22, 2008

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Regional industry clusters—geographic concentrations of interconnected firms and supporting organizations—represent a potent source of productivity at a moment of national vulnerability to global economic competition. For that reason, the federal government should establish an industry clusters program that stimulates the collaborative interactions of firms and supporting organizations in regional economies to produce more commercial innovation and higher wage employment.

America’s Challenge
Due to rising global competition, the nation’s capacity for generating stable, wellpaying jobs for a large number of U.S. workers is increasingly at risk. In this environment, regional industry clusters represent a valuable source of needed innovation, knowledge transfer, and improved productivity. For that reason, the public sector around the world has launched numerous programs to catalyze growth producing collaboration in key industry clusters. However, this nation’s network of cluster initiatives remains thin and uneven. As a result, many U.S. industry clusters are not as competitive as they could be, to the detriment of the nation’s capacity to sustain well-paying jobs.

Limitations of Existing Federal Policy
The federal government has the reach and the resources to stimulate the growth of cluster initiatives and to address the various barriers that limit cluster development and growth. However, current federal programs do very little to support competitive regions in general and competitive clusters in particular. They have evolved in a wildly ad hoc, idiosyncratic, and uncoordinated fashion. Further, the few federal programs that do focus on cluster and network development remain inadequate to the task.

A New Federal Approach
The federal government should move to promote cluster development and growth nationwide. In this, the federal government’s approach should be flexible, “bottom-up,” and collaboration-oriented, rather than prescriptive, “top-down,” or inputfocused. Consistent with this, the federal government should boost the nation’s competitiveness by catalyzing increased cluster activity in U.S. regions through a twopart federal clusters program:

  • Create an information center to map the geography of clusters, maintain a registry of cluster initiatives and programs, and conduct research on cluster dynamics and cluster initiative and initiative program impacts and best practices
  • Establish a grants program to support regional and state cluster initiative programs nationwide that would direct financial and other assistance to individual cluster initiatives

View appendix of federal economic development programs »

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