Economic Development Recovery and Resiliency Playbook - Flipbook - Page 48
Using Cluster Analysis
Industry clusters take a broader perspective by examining all parts of a production chain and how the relationships between
diferent parts of that chain fit together. Cluster analysis has been a firmly embedded part of economic development practice
for many years, afer the publication of The Competitive Advantage of Nations by Michael E. Porter in 1990 helped to popularize
the cluster-based perspective in economic development. The U.S. EDA includes clusters as part of the suggested background
information that can be included in the CEDS funded by the agency.
Clusters can include a combination of core industries as well as suppliers and post-production service providers with an
export orientation that generates net wealth for a region. Examining how these components interact and mutually create
interdependencies and economic opportunities for each other is central to cluster analysis. This can also reveal common
vulnerabilities for an economy if the core industries in a cluster are disrupted, as well as emerging opportunities for growing
sectors that have not yet reached high levels of concentration.
Economic Development Takeaway
Cluster analysis can also reveal common vulnerabilities for an economy if the
core industries in a cluster are disrupted, as well as emerging opportunities
for growing sectors that have not yet reached high levels of concentration.
Using Benchmark Clusters
While cluster analysis can be a very involved and lengthy process, some tools and approaches provide localities with snapshots
of how their economies look when taking a cluster-based perspective. For quick and easy online access to employment data
organized by cluster, the Cluster Mapping website (a joint venture of Harvard Business School, EDA, and the U.S. Department
of Commerce) provides a good starting point for identifying areas of strength in an economy that can be expanded into other
sectors, as well as dependencies to watch out for when planning for disaster recovery.52 The benchmark clusters can also help
identify emerging clusters in an area that indicate potential economic diversification opportunities. The site provides a list of the
top clusters and other indicators for each county, MSA, economic region, and state in the nation.
The Cluster Mapping data is not updated as frequently as other job data sources, but it provides documentation about the
composition of its standard benchmark clusters, which are defined as either traded (serving export markets) or local (serving
local markets).53 Applying these definitions to more current and geographically specific employment data allows a locality to see
which clusters have concentrated in its area and view the trends at a district or neighborhood level. StatsAmerica also provides
information using a more simplified list of 17 benchmark industry clusters. 54 In 2015, EDD produced a series of regional economic
analysis reports for every region in California, using its own list of benchmark clusters, and provided documentation on how the
agency defined those clusters.55
Relationships Between Local Businesses
Benchmark clusters provide a framework for quickly identifying and analyzing clusters within a geographic area; however,
they have limitations. To begin with, the benchmark clusters do not focus on how regional linkages create interdependent
relationships that can cross over between diferent cluster groupings.
52
https://www.clustermapping.us
https://clustermapping.us/content/cluster-mapping-methodology
54
https://www.labormarketinfo.edd.ca.gov/Publications/REA-Reports/Industry-Cluster-Definitions.pdf
55
https://www.labormarketinfo.edd.ca.gov/Publications_Library.html
https://www.labormarketinfo.edd.ca.gov/Publications/REA-Reports/California-REAP2015.pdf
53
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