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PROCEEDINGS
OECD

APPROACH
BOOSTING

THE CLUSTER
INNOVATION
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 Chapter 17

CLUSTER ANALYSIS AND CLUSTER-BASED POLICY MAKING:

THE STATE OF THE ART

by

Theo J.A. Roelandt

Dutch Ministry of Economic Affairs

Pim den Hertog

Dialogic, Utrecht

1. Introduction

The contributions presented in the preceding chapters illustrate that both cluster analysis and cluster
policies are practised worldwide. The cluster approach is a viable alternative to the traditional sectoral
approach. The cluster approach is valued in many countries because it offers useful insights into the
linkages and interdependencies among networked actors in the production of goods and services and
in innovation (Box 1). It has revealed systemic imperfections in innovation systems as well as policy
responses aimed at improving the efficient and dynamic functioning of innovation systems. However,
this book has pointed to the wide variety of cluster approaches adopted in different countries. In fact,
not only do levels of analysis and methodologies differ across countries, but also the degree to which
cluster-based policies have been implicitly or explicitly implemented as well as their form in terms of
instruments used. This chapter discusses and summarises the similarities and differences between the
contributions to this book. What are the lessons that have been learned so far? And how can the cluster
perspective be further developed in the near future?

Box 1. Innovation, interdependency and the cluster approach

Innovation is not usually a single-firm activity, it increasingly requires an active search process in order to tap new
sources of knowledge and technology and apply these in products and production processes. Systems of
innovation approaches give shape to the idea that companies in their quest for competitiveness are becoming
more dependent upon complementary knowledge in firms and institutions other than their own. The cluster
approach focuses on the linkages and interdependencies among networked actors in the production of goods and
services and in innovation. In so doing, the cluster approach offers an alternative to the traditional sectoral
approach.

The following research questions were formulated in Chapter 1:

1. Which clusters can be identified economy-wide?

2. How do clusters innovate? Which innovation styles are most successful in which
clusters?

3. How do the same clusters in different countries vary in their economic and innovation
performance and how can the differences in performance be explained?
413
 4. What are the lessons to be learnt from the above for policy making?

5. Which policy instruments have been used in the various countries and what is the role of
cluster analysis?

6. What are the key instruments and pitfalls of cluster-based policy making?

These questions are addressed below, synthesising the results on cluster analysis (mainly
questions 1-3) and cluster-based policies (questions 4-6) and using some overview tables.

Box 2. Clusters as reduced-scale national innovation systems

Economic clusters can be characterised as networks of production of strongly interdependent firms (including
specialised suppliers) linked to each other in a value-adding production chain. In some cases, clusters also
encompass strategic alliances with universities, research institutes, knowledge-intensive business services,
bridging institutions (brokers, consultants) and customers. Clusters are usually cross-sectoral (vertical and/or
lateral) networks and contain dissimilar and complementary firms specialised around a specific link or knowledge
base in the value chain. The cluster concept is, in fact, a specific type of a much larger family of “systems of
innovation” approaches which have systems analysis as their common-starting point but which differ in the object
and level of analysis (supranational, regional, sectoral or technological systems of innovation, clusters). Clusters
can be interpreted as reduced-scale national innovation systems: The dynamics, system characteristics and
interdependencies are similar to those for national innovation systems.

2. The scope of cluster analysis

In the countries in which cluster analysis is practised, it has produced useful information on the actors
involved in clusters, value-chain relations of firms, and innovation interaction linkages as well as the
institutional setting for clusters’ innovation systems and the imperfections of these cluster-based
innovation systems. Many of the country contributions have in common that they describe networks of
strongly interdependent firms or industry groups:

♦ In some cases based on trade linkages (Hauknes, this volume; Roelandt et al., this
volume; Bergman and Feser, this volume).

♦ Sometimes on innovation linkages (DeBresson and Hu, this volume).

♦ Sometimes on knowledge flow linkages (Viori, 1995; Poti, 1997; Roelandt et al., this
volume; van den Hove and Roelandt, 1997).

♦ Sometimes based on a common knowledge base or common factor conditions (Drejer

et al., this volume).

In all events, the common starting-point of these perspectives is the assumption that, in order to
innovate successfully, firms need a network of suppliers, customers and knowledge-producing agents.
Most cluster analyses use a combination of different techniques at different levels of aggregation.
Table 1 shows how the level of analysis, cluster techniques and cluster concept used varies among
countries. Most countries combine various techniques to overcome the limitations of a single
technique; different methodologies can be used to answer different questions and to provide different
sorts of information.

414
 Table 1. Level of analysis, cluster technique and cluster concept adopted in various countries

Country Level of analysis Cluster technique Cluster concept

Micro Meso Macro I/O Graph Corresp. Case Other
AUS X X X X X Networks of
production, networks
of innovation, networks
of interaction.
AUT X X X X Patent data Marshallian industrial
and trade districts.
performance
BEL X X Scientometrics Networks or chains of
production, innovation
and co-operation.
CAN X X X X Systems of innovation.
DK X X X X X Resource areas.
FNL X X X Clusters as unique
combinations of firms
tied together by
knowledge.
GER X X X X Similar firms and
innovation styles.
IT X X Interindustry
knowledge flows.
MEX X X X Systems of innovation.
NL X X X X Value chains and
networks of
production.
NOR X X X X Value chains and
networks of
production.
SP X X X Systems of innovation
SWE X X Systems of
interdependent firms in
different industries.
SWI X X X X Patent data Networks of
innovation.
UK X X X Regional systems of
innovation.
USA X X X Chains and networks
of production.

What can we learn from cluster analysis?

The cluster analyses conducted in the various countries reveal the value added of using cluster
analysis.1 The advantages of cluster analysis highlighted in this book include the following:

♦ Cluster analysis offers a new way of thinking about the economy and organising
economic development efforts; it overcomes some of the limitations of traditional
sectoral analysis.

♦ Cluster analysis accounts better for the changed nature of competition and market-based
innovation systems and the main sources of competitive advantage. It captures important
linkages in terms of technology, skills, information, marketing and customer needs that
cut across firms and industries. Such linkages and interdependencies are fundamental to
the direction and pace of innovation.
415
 ♦ Studies of clusters, as reduced-scale innovation systems, have improved our
understanding of innovation systems, including systemic imperfections and policy
options.

♦ Cluster studies are now the cornerstone of industrial policy making in many countries.
Cluster studies not only provide an analytical tool for studying systems of innovation,
they can also be used as a working method for policy making in this area and as an
economic development tool for strategic business development, in industrialised as well
as developing countries (Ceglie et al., this volume).

♦ Cluster analysis provides the possibility to recast the role of the private sector,
government, trade associations and educational and research institutions, and presents
business development opportunities of firms of all sizes, crossing traditional industry
lines.

♦ Cluster analysis provides a starting-point for a forum for constructive business-

government dialogue. Not only have common problems been identified, cluster analyses
can serve to identify common development opportunities and highlight attractive public
and private investment opportunities.

Methodological bottlenecks

However, a number of methodological bottlenecks and complications seriously hamper the

international comparability (both quantitative and qualitative) of cluster studies performed in
individual (national, regional, cluster) innovation systems. Countries’ experiences with cluster analysis
revealed the following methodological bottlenecks:

♦ The use of existing official national and international data sources for cluster analysis is
limited by conventions on official classification systems of economic activities and
industries. These sources were not designed to cover flow relations between different
industries (Peneder, this volume) or to measure dynamic interactions and linkages
between industries and firms. Some countries (especially Canada, Denmark and Finland)
have decided to improve the statistical information on clusters by establishing statistical
groups and research teams to produce data in line with the needs of cluster analysis and
cluster-based policies (Drejer et al., this volume; Sulzenko, 1997). Other countries
(e.g. Belgium, the Netherlands, Sweden) would also like to improve their statistics for
cluster analysis.

♦ Using input-output (I/O) tables to identify clusters or technology flows has considerable
methodological limitations (Drejer et al., this volume). Identifying networks of
production requires a very fine level of aggregation of the I/O tables, and cluster analysis
needs data at very low levels of aggregation (the three- or four-digit industry code level).
Some countries (Canada, Denmark, the Netherlands, the United States) have very
detailed and useful I/O tables (as well as make & use tables at the product level); other
countries only have tables at a relatively high level of aggregation (two-digit) (Germany,
Spain), while yet another group of countries have severe data shortages in this field
(Austria, Belgium, Sweden, Switzerland). The data for OECD countries contained in the
official OECD I/O database is too aggregated for internationally comparable cluster
analysis. Countries that do have access to very detailed I/O tables have been able to
produce stable and useful results in identifying networks of production and innovation.
Countries with severe data problems are currently seeking to improve their I/O data
sources (e.g. Belgium, Germany, Sweden).

416
 ♦ The use of innovation interaction matrices describing the flows of innovations from
suppliers to users is promising, but is limited to the flows of major innovations of using
and supplying industries. The main advantage of these tables is their focus on innovation
interdependency and interaction between industry groups when innovating. However, the
tables suffer from their relatively high level of aggregation. In future, the availability of
this type of data could be improved with the addition of questions on the main users and
producers of innovations to Eurostat’s Community Innovation Survey (CIS)
questionnaire.

♦ In addition to statistical analysis, most countries combine their statistical cluster analysis
with qualitative and monographic cluster case studies. One of the major disadvantages of
case studies is that the approach is intrinsically qualitative. A quantitative approach is
needed to map production relations, innovative networks and clusters of economic
activity. Combining the more qualitative cluster studies with input-output analysis can
considerably reinforce the results. The dynamics in the clusters identified statistically can
only be interpreted sensibly in combination with the more qualitative insights gained
through monographic case studies.

♦ A final complication concerning an international comparison of the same clusters in

different countries is changing specialisation patterns worldwide.2 A trend towards
growing specialisation among OECD countries, and among the same industry groups and
clusters in different countries has been observed (OECD, 1997). This implies that the
growing importance of networking between dissimilar and complementary firms with
different specialisation patterns discussed above has an important international
dimension. As a consequence, the innovation systems and specialisation patterns of the
same clusters (operating in value chains producing products and services for the same
end-product markets) within different countries can differ significantly in institutional
setting and innovation performance. This makes identifying “best practices” or “optimal
incentive structures in innovation systems” almost tautological. International
comparative research in this field can reveal the critical factors of these diverging
strategies.

Table 2. Clusters identified in the participating countries

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
AUS X X X X X X
AUT X X X X X X
BEL X X X X
CAN
DK X X X X X X X X
FNL X X X X X X X X X X
GER X X X X X X
NL X X X X X X X X X X X
NOR X X X X X
SP X
SWE X X X X X X X X X
UK
USA X X X X X X X X X X X
Note: 1. Construction, 2. Chemicals, 3. Commercial services, 4. Non-commercial services, 5. Energy, 6. Health,
7. Agro-Food, 8. Media, 9. Paper, 10. Metal-electro, 11. Transport & communication, 12. Bio-medical,
13. Information & communication technology, 14. Wood & paper, 15. Biotechnology, 16. Materials, 17. General
supplier business, 18. Consumer goods & leisure, 19. Environmental, 20. Machinery, 21. Transport (vehicles),
22. Aerospace.

417
Table 2 illustrates the clusters identified in the participating countries. Due to differences in cluster
methodology (see Table 1), this table should be interpreted with caution when comparing countries’
cluster maps internationally.3

3. Countries’ strategies in cluster-based policy

Clustering/networking is basically a bottom-up, market-induced and market-led process. Following the

classical line of reasoning, the primary task of government should be to facilitate the dynamic
functioning of markets and ensure that co-operation does not lead to collusive behaviour which
restricts competition. This classical approach can be criticised for its limited scope and for the fact that
it has not evolved in line with the changing character of market-based innovation systems, growing
understanding of the functioning of market-based innovation systems and insights derived from modern
innovation theory. Nevertheless, cluster studies have also revealed the need to redefine the role of the
government as a facilitator of networking, as a catalyst of dynamic comparative advantage and as an
institution builder, creating an efficient incentive structure to remove systemic inefficiencies in
systems of innovation.

Box 3. The systemic imperfections argument and systemic cluster-based innovation

and industrial policies

Four rationales for innovation and industrial policy making are reported in the literature: i) creating favourable
framework conditions for an efficient and dynamic functioning of markets; ii) externalities associated with
investments in knowledge; iii) the economic role of government as a demanding customer; and iv) systemic
imperfections. In the majority of countries, industrial and innovation policy making actually focus on improving the
efficient functioning of their systems of innovation. The latter rationale is increasingly seen as the key rationale for
systemic innovation and industrial policies.

In practice, countries’ cluster policy approaches differ. One fundamental difference relates to the
distinction between a bottom-up approach, on the one hand, and a more or less top-down approach, on
the other (Boekholt et al., this volume). The first approach focuses on fostering dynamic market
functioning and removing market imperfections; the starting-point lies in market-induced initiatives,
with the government acting as a facilitator and moderator but with no setting of national priorities (the
Netherlands, the United States). In the second approach, government (in consultation with industry
and research agencies) sets national priorities, formulates a challenging vision for the future and –
prior to initiating the dialogue process – decides on the actors to be involved in the dialogue (this is the
case in some of the Nordic countries). Once national priorities have been set and the dialogue groups
implemented, the clustering process becomes a market-led process, with little government
intervention.

What country strategies can be discerned in cluster-based policy? Policy researchers4 point to various
roles for government in cluster-based policy, for example:

♦ Establishing a stable and predictable economic and political climate.

♦ Creating favourable framework conditions for the smooth and dynamic functioning of
markets (infrastructure, competition policy and regulatory reform, provision of strategic
information).

♦ Creating a context that encourages innovation and upgrading by setting a challenging

economic vision for the nation or region.

♦ Raising awareness of the benefits of knowledge exchange and networking.

♦ Providing support and appropriate incentive schemes for collaboration and initiating
network brokers and intermediaries to bring actors together.

418
 ♦ Acting as a facilitator and moderator of networking and knowledge exchange.

♦ Acting as a demanding and launching customer when addressing needs.

♦ Facilitating the informal and formal exchange of knowledge.

♦ Setting up competitive programmes and projects for collaborative research and

development.

♦ Providing strategic information (technology foresight studies, strategic cluster studies).

♦ Ensuring that (public) institutions (especially schools, universities, research institutes)

cultivate industry ties.

♦ Ensuring that rules and regulations maximise flexible adaptation to changed market
conditions and stimulate innovation and upgrading processes.

In most countries with cluster-based policies, these initiatives have originated in a trend towards
designing governance forms and incentive structures to reduce systemic imperfections in national
systems of innovation. These policy responses to systemic imperfections can be categorised as
follows:

♦ Establishing a stable and predictable economic and political climate.

♦ Creating favourable framework conditions for the efficient and dynamic functioning of
free markets.

♦ Stimulating interactions and knowledge exchange between the various actors in systems
of innovation.

♦ Removing informational failures by providing strategic information.

♦ Removing institutional mismatches and organisational failures in systems of innovation,

i.e. mismatches between the (public) knowledge infrastructure and private needs in the
market or a missing demanding customer in the value chain.

♦ Removing government failures and government regulations that hinder the clustering
and innovation process.

Table 3 summarises countries’ cluster-based policy responses to systemic imperfections.

In many countries, the clustering process has been initiated through the establishment of forums,
platforms and regular meetings of firms and organisations related to a particular network of production
in the value chain. Strategic information (technology foresight studies, strategic cluster studies) is
often used as an input to the dialogue process. The organisation of the clustering process differs across
countries, depending on policy culture, the way in which dialogue among industry, research and
governments is institutionalised, the size of the economy, the level of government intervention and the
degree of industrial and technological specialisation.

419
 Box 4. Market-induced cluster formation and new forms of governance

Cluster initiatives originate in a trend towards governance forms and incentive structures based on networks and
partnerships. In practice, this means a shift away from direct intervention towards indirect inducement. The main
task of policy makers is to facilitate the networking process and to create an institutional setting which provides
incentives for market-induced cluster formation.

Table 3. Systemic and cluster-based policy response

Systemic and Policy response Countries’ focus in cluster-based

market failures policy making
Inefficient functioning ΠCompetition policy and regulatory ΠMost countries.
of markets reform.

Informational failures ΠTechnology foresight. ΠNetherlands, Sweden.

ΠStrategic market information and ΠCanada, Denmark, Finland,
strategic cluster studies. Netherlands, United States.
Limited interaction ΠBroker and networking agencies and ΠAustralia, Denmark, Netherlands.
between actors in schemes.
innovation systems ΠProvision of platforms for constructive ΠAustria, Denmark, Finland, Germany,
dialogue. Netherlands, Sweden, United
Kingdom, United States.
ΠFacilitating co-operation in networks ΠBelgium, Finland, Netherlands,
(cluster development schemes). United Kingdom, United States.
Institutional ΠJoint industry-research centres of ΠBelgium, Denmark, Finland,
mismatches between excellence. Netherlands, Spain, Sweden,
(public) knowledge ΠFacilitating joint industry-research Switzerland.
infrastructure and co-operation. ΠFinland, Spain, Sweden.
market needs ΠHuman capital development.
ΠTechnology transfer programmes. ΠDenmark, Sweden.
ΠSpain, Switzerland.
Missing demanding ΠPublic procurement policy. ΠAustria, Netherlands, Sweden,
customer Denmark

Government failure ΠPrivatisation. ΠMost countries.

ΠRationalise business.
ΠHorizontal policy making.
ΠPublic consultancy.
ΠReduce government interference.
ΠCanada.
ΠCanada, Denmark, Finland.
ΠCanada, Netherlands.
ΠCanada, United Kingdom,
United States.

Our review of experiences with clusters in OECD countries has highlighted some of the pitfalls of
cluster-based industrial policy making:

♦ The creation of clusters should not be government-driven but rather should result from
market-induced and market-led initiatives.

♦ Government policy should not be strongly oriented to directly subsidising industries and
firms or to limiting rivalry in the marketplace.

♦ Government policy should shift away from direct intervention towards indirect
inducement. Public interference in the marketplace only can be justified in the presence
of a clear market or systemic failure. Even if clear market and systemic imperfections
exist, it cannot necessarily be concluded that government intervention will improve the
situation.

420
 ♦ Government should not try to take the direct lead or ownership in cluster initiatives, but
should work as a catalyst and broker, bringing actors together and supplying support
structures and incentives to facilitate the clustering and innovation process.

♦ Cluster policy should not ignore small and emerging clusters; nor should it focus only on
“classic”, existing clusters.

♦ Clusters should not be created from “scratch”. The cluster notion has sometimes been
appropriated by (industrial) policy makers and used as an excuse to continue more or less
traditional ways of defensive industrial policy making

An awareness of these pitfalls can be helpful in designing the leading policy principles of a
comprehensive cluster-based policy.5

Table 4 summarises the strategies used in the cluster analysis and cluster-based policy initiatives of a
number of countries. The most common features of cluster-based policy include:

♦ Vigorous competition and regulatory reform policy (almost all countries).

♦ Providing strategic information through technology foresight studies (e.g. the

Netherlands, Sweden,), cluster studies (e.g. Austria, Denmark, Finland, Italy, the
Netherlands, Sweden, the United Kingdom, the United States), special research groups
(e.g. the Austrian TIP research programme, Denmark, the German Delphi report), or
special Web sites (e.g. STRATEGIS in Canada).

♦ Broker and network agencies and schemes (e.g. the Danish network programme and the
Dutch Innovation Centres).

♦ Cluster development programmes (e.g. cluster programmes in Finland and the

Netherlands, regional development agencies in Germany, the United Kingdom and the
United States, and Flemish R&D support to clusters).

♦ Initiating joint industry-research centres of excellence (e.g. Belgium, Denmark, Finland,

Germany, the Netherlands, Spain, Sweden, Switzerland).

♦ Public procurement policy (e.g. Austria, Denmark, the Netherlands).

♦ Institutional renewal in industrial policy making (e.g. Canada, Finland).

♦ Providing platforms for constructive dialogue (e.g. the Danish reference groups, Dutch
broker policy, the Finnish National Industrial Strategy, the German Council for
Research, Technology and Innovation, the Swedish industrial system approach, the UK
regional development agencies, and the US focus groups).

421
 Table 4. Countries’ strategies in cluster-based policy

Country Approach Cluster analysis Policy initiatives/Policy principles

Austria Systems of ΠImproving I/O tables. ΠCluster policy under construction.
interdependent ΠTraditional statistical ΠFramework conditions (regulatory
economic entities. cluster analysis screening reform, human capital development).
for patterns of innovative ΠProviding platforms for co-operation
activities. and experimentation.
ΠCase studies. ΠRaising public awareness of
technologies.
ΠDemand pull by public procurement.
Australia Networks of ΠCase studies of industrial ΠNo comprehensive cluster-based
economic activity. districts (geographical policy.
propinquity) and resource ΠNetworking schemes encouraging the
based clusters. emergence of inter-firm networks.
ΠI/O analysis of interindustry
linkages.
Belgium Networks or chains ΠGraph analysis and case ΠCluster-based policy under
(Flanders) of production, study work. construction.
innovation and co- ΠImproving I/O statistics. ΠMarket induced cluster initiatives.
operation. ΠTechnology flows. ΠGovernment facilitating co-operation.
Œ Technology clubs (similar Œ Subsidies and firms’ co-financing in
collaboration patterns). cluster programmes (in metal
processing industry, plastics, space
industry, SMEs, furniture).
ΠStimulating cross-sectoral technology
diffusion
ΠSupporting supplier-producer
networks.
ΠCentres of excellence around newly
emerging technologies.
Denmark Resource areas ΠIndustrial districts/ ΠDialogue in reference groups.
development blocks. ΠCentres of excellence in specific
ΠPorter-like cluster studies. areas.
ΠImproving statistics. ΠNew educational programmes in
ΠCluster analysis as an specific areas
input to the process of ΠDevelopment centres in specific areas
dialogue. ΠTop down approach (selected priority
fields)
ΠInstitutional reform in policy making
(co-ordination between ministries)
Finland Clusters as a ΠPorter-based cluster ΠClusters as an economic
unique studies. development tool.
combination of ΠIdentifying sources of competitive
firms tied together advantages in Finnish economy.
by knowledge and ΠCompetition policy and structural
production flows. reform.
ΠCreating advanced factors of
production (basically creating
favourable framework conditions).
ΠCluster programmes, strategic
research, centres of excellence.
Netherlands Value chain ΠPorter-like cluster studies. ΠDialogue in specific platforms.
approach. ΠCluster benchmark studies. ΠBrokerage and network policy.
ΠInput-output analysis. ΠPublic consultancy.
ΠProviding strategic information (a/o.
technology foresight studies).
ΠRenewal in procurement policy.
ΠDeregulation and competition policy.
Spain Inter-sectoral ΠTechnology and innovation ΠFramework policy.
linkages and flow analysis. ΠStimulating R&D co-operation and
dependency. R&D networks.
ΠResearch centres (mixed private and
public participation) and science
parks.

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 Country Approach Cluster analysis Policy initiatives/Policy principles
Sweden Interdependencies ΠDevelopment blocks ΠCluster-based policy under
between firms in (1950s). construction.
different sectors. ΠTechnological systems ΠGeneral framework conditions.
(late 1980s). ΠTechnology procurement.
ΠNetwork approach (since ΠStimulating R&D co-operation.
the 1970s). ΠResearch centres.
ΠPorter studies (since the ΠIndustrial systems project (is being
mid-1980s). set up) to stimulate strategic dialogue.
ΠTechnology foresight studies
identifying actual or potential
innovative clusters.
Switzerland Networks of ΠCase study work on ΠAction programme for diffusion of
innovation. restructuring system of specific technology (Computer
production and innovation Integrated Manufacturing).
(Swiss Jura arc). ΠSetting up competence centres
ΠAnalysing technological integrated in regional networks.
spillovers and innovation
styles.
United Regional systems ΠCluster case studies focus ΠClusters as a regional development
Kingdom of innovation. on identifying actors and tool.
development opportunities ΠGovernment as catalyst and broker.
for the region. ΠRegional cluster programmes.
United Clusters (chains of ΠCluster analysis focusing ΠDialogue in regional focus groups.
States production) as a on the strengths and ΠRegional development plans.
regional weaknesses of the local
development tool. economic structure and
identifying business
opportunities.
ΠCluster analysis used as
an input to the consultation
process.
ΠI/O analysis combined with
insight information from
business.

Most countries use the cluster approach to organise a market-led economic development strategy by
initiating dialogue between the various actors in their relevant systems of innovation. In the majority
of countries reported in this book (Finland, Denmark, the Netherlands, Sweden, the United Kingdom,
the United States), cluster-based policy is seen as a market-led business development strategy to bring
together actors and organisations and to foster knowledge exchange and transfer. One common lesson
from the cluster-based policy review is that cluster studies not only provide an analytical tool for
studying systems of innovation at the reduced-scale level of networks, but in practice can also be used
as a working method for policy making and as an economic development tool for strategic business
development. Cluster policy making, in this sense, is – as are many policy processes – a policy-
learning process and thus requires a willingness on the part of policy makers to see cluster policy
making as a continuous learning process.

Cluster-based systemic innovation policies aimed at increasing the competitiveness of clusters from a systems of
innovation perspective offer a powerful alternative to partial and rather “old fashioned” interventionist technology
and industrial policy making. Cluster analysis is increasingly perceived as a useful working method for systemic
innovation policy making, as it serves not only to link cluster analysis to cluster-based policy making, but also
greatly facilitates cluster policy learning.

423
Creating incentives for innovative behaviour in the market requires innovations in policy making and
institutional renewal of government agencies (Ormala, 1998; Sulzenko, 1997; Roelandt et al., this
volume). There is a strong and growing need for “horizontal policy”, integrating the various aspects of
functionally organised policy instruments (e.g. education policy, science policy, trade policy,
competition policy, technology policy, public works, fiscal policy, etc.). As stated by Ormala (1998),
governments are not necessarily organised to manage innovation policy in the best possible way.
Ministries usually have sectoral and functional responsibilities. Innovation policy demands horizontal
policies, requiring a co-ordinated contribution from a number of different sectors. Governments have a
key role to play not only in managing knowledge in their ministries and agencies, but also in
improving the acquisition and application of knowledge on an economy-wide basis. One solution
could be to encourage the mobility of personnel between the public sector and business
(Ormala, 1998).

424
 NOTES

1. See, in particular, the contributions of Drejer et al. (this volume); Roelandt et al. (this volume);
Rouvinen and Ylä-Anttila (this volume); DeBresson and Hu (this volume); DeBresson (1996); Porter
(1997).

2. It goes without saying that this bottleneck also holds for sectoral analyses.

3. The OECD Focus Group is currently working on developing a common cluster methodology and
some pilot studies adopting a common methodology. For preliminary results, please contact the
authors.

4. See, for example, Boekholt et al. (this volume); Heath (this volume); Rouvinen et al. (this volume);
Roelandt et al. (this volume); Lagendijk and Charles (this volume); Ormala (1998); Held (1996);
Porter (1997).

5. See also Held (1996); Porter (1997); Roelandt et al. (this volume); Rouvinen et al. (this volume);
Dunning (1997).

425
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