BUSINESS STRATEGY AND CROSS-INDUSTRY CLUSTERS

Although industry clusters are becoming the focus of state economic de velopment policies, mast states continue to define clusters in ad hoc ways, often focusing only on clusters affirms in single industries. Su ch policies run the risk of wasting development resources by neglectin g important linkages among firms that cut across industries. Exploitin g the dynamic nature of the competitive advantages associated with the clustering process requires an understanding of strategic business de cisions made at the firm level. This article draws on previous field r esearch to identify several external economies that contribute to the clustering of firms across industries-collaboration economies, transfe rs of knowledge, local specialized labor pools, and relationships with nonbusiness institutions. The article concludes by suggesting specifi c development policies that can identify and use these external econom ies to attract industry clusters.