More than six in seven local economic development districts are pursuing at least one industry cluster goal, according to an analysis of recent Comprehensive Economic Development Strategies (CEDS). These strategies cover sectors ranging from advanced manufacturing to tourism and leverage tactics as diverse as business recruitment, technology development, and workforce training.
The prevalence of sector-specific efforts demonstrates broad recognition of the value of cluster development in the 25+ years since Michael Porter’s initial work to mainstream the approach.[i] However, the degree of existing implementation varies greatly. Some districts are early in their adoption and have a CEDS goal simply to identify regional clusters. Other districts articulate fuller cluster approaches through multi-part plans to advance one or more sectors important to their region.
This variability in approach sophistication suggests an ongoing need for resources to facilitate local cluster development strategies.
About the CEDS data and methodology
Excel’s analysis is made possible by previous work conducted by the Center for Regional Economic Competitiveness (CREC) and the National Association of Development Organizations (NADO) Research Foundation.
From Oct. 2021-May 2022, CREC and NADO Research Foundation reviewed 402 CEDS approved by the U.S. Economic Development Administration (EDA) and 53 state economic development plans (an update of the state plans was completed in 2025). The team assessed each plan to identify and categorize 3,699 unique goals and 17,331 unique strategies (some goals/strategies are included multiple times to capture that multiple sectors or activities a single effort may cover, and the database includes 21,686 total rows of data). These items are compiled in the State and Local Economic Development Strategies (SLEDS) database, which is available to the public.
Unless otherwise noted, Excel is reporting figures directly from the SLEDS data.
CEDS are a useful but imperfect tool to evaluate regional economic development priorities:
- CEDS are a standardized form of regional economic development strategies. All formal CEDS have been approved by EDA as being in line with the agency’s guidelines. EDA’s recognition is essential for regions that want to establish an Economic Development District or apply for EDA’s Economic Adjustment Assistance, Public Works, or other grants that require applicants to submit projects that conform with an approved CEDS. This standardization, which is enhanced by an expanding library of CEDS reference materials, creates a comparable product in participating regions.
- CEDS may not align 1:1 with regional action. There often is slippage between a region’s strategy and its current activities, and CEDS are no exception. Indeed, regions may find it useful to publish a plan that is broader than its intentions, whether to appease stakeholder interests, to signal that local practitioners understand the field’s best practices, or to maintain a wide eligibility for programs with a CEDS requirement. Therefore, a cautious interpretation is that CEDS indicate what a region considers to be effective approaches for actions that it may be willing to take, given the right opportunity.
Given this understanding, this analysis does not assume that the CEDS represent the actual efforts that are being made in economic development districts across the country. Instead, the goals and approaches defined in the CEDS are of interest because of what they reveal about economic development practitioners’ knowledge and perceived value of industry cluster development as a regional strategy tool.
Industry cluster development among other strategies
CREC and NADO Research Foundation identified 347 CEDS (out of 402) that name at least one effort to advance industry clusters. These CEDS contain 865 unique goals and 2,125 unique strategies related to industry clusters identified in the SLEDS database.
With a presence in 347 plans, industry cluster development is the 4th most prevalent economic development category across all CEDS.[ii] Higher-ranking categories are:
- Community support (368 CEDS),
- Workforce development (366), and
- Infrastructure and project development (360).
Industry cluster development ranks third in the number of unique goals. Community support (965) and administration (896) are the only categories with more goals in the SLEDS database.
Looking at the number of unique strategies in these CEDS, industry cluster development ranks second. Only community support (2,501 strategies) is higher.
Targets of districts’ industry cluster development
CREC and the NADO Foundation identify 18 categories of sectors that are the targets of industry cluster development. Tourism is by far the most common industry addressed in the CEDS, followed by agriculture/agribusiness and a long tail of other sectors.
Figure 1. Sectors most frequently targeted[iii] by CEDS industry cluster development efforts, 2021-2022.
The information readily available from the CEDS does not always indicate whether regions are utilizing industry cluster development strategies as part of a deliberate approach to realize the region’s economic goals (e.g., increasing sales, new business formation, employment growth, quality-of-life improvements) by strengthening an important sector, or if the sector support merely is incidental to the region’s plans.
To illustrate this distinction, consider the following examples:
- The Cape Cod Economic Development District explicitly connects its strategy to support a Blue Technology Commercialization Center to assistance for new businesses and technologies in maritime and other water-related sectors.
- Many of the CEDS that have a strategy or goal to improve tourism do not explicitly discuss this in the context of bolstering local hospitality or retail businesses, but as a desire to have more people visit the region.
- Several CEDS include strategies to expand access to health care without further clarifying whether the intention is to build the customer base for local medical practitioners (perhaps so strong demand stimulates sector growth or because medical salaries contribute to a strong income tax base) or if the primary intention is to improve residents’ quality-of-life.
The fact that most plans do not include a full logic model can give a surface-level appearance that many regions have a disconnect in their planning between activities that would contribute to industry cluster development and the regional outcomes practitioners hope to achieve. Under the surface, some regions likely do have sophisticated approaches that simply are not made explicit within the space of the CEDS. However, others likely lack a deeper model for how the plan’s industry-specific strategies would drive the private sector to contribute to the region’s goals. For these regions, further education and accessible resources could contribute to meaningful improvements in their approach and impacts.
Actions to advance industry cluster development
The strategies that CEDS report related to industry cluster development are varied. A text analysis by Excel finds some notable and specific examples of regions targeting their efforts toward important elements of a robust sector.
- Workforce development is in 192 unique strategies across 111 CEDS. Regional needs can encompass current and projected capacity and skill concerns. For example, the Mid Region Council of Governments’ (New Mexico) CEDS identified ongoing workforce challenges in healthcare and planned an aggressive approach combining education loan forgiveness, rural clinic apprenticeships, and support to expand local education opportunities. Strategies in this category were counted if any of the following terms were present: “workforce development,” “train,” “training,” “educate,” “education,” and “skill.”
- Innovation and research approaches are part of 117 unique strategies in 72 CEDS. Efforts to advance innovation can emphasize adoption by existing companies, rather than only supporting the development of novel technologies. An example of this approach can be found in the Southern Georgia Regional Commission’s CEDS, which lists one of its objectives as helping traditional manufacturers to adopt advanced technologies. Strategies in this category were counted if any of the following terms were present: “innovation,” “commercialize,” “commercialization,” “research,” and “R&D.”
- Entrepreneurship efforts are included in 60 unique strategies by 45 CEDS. Sophisticated strategies recognize that some sectors and regions require multi-faceted assistance to boost new business formation. For example, the West Texas Economic Development District plans to support its life sciences sector through the construction of additional lab capacity, by attracting experienced entrepreneurs to the region, and securing investments in new companies and research. Strategies in this category were counted if any of the following terms were present: “entrepreneur,” “entrepreneurship,” “startup,” “incubator,” and “accelerator.”
The SLEDS database identifies 22 types of activities that CEDS’s economic development efforts represent to pursue these goals.
Table 2. Activities most frequently referenced[iv] by CEDS industry cluster development efforts, 2021-2022.
Considering that tourism is the top target for industry cluster development efforts, it may not be surprising that marketing/advertising is the category’s most common activity. Ecosystem building and collaboration—a critical factor in facilitating a cluster’s cohesion and helping related researchers, entrepreneurs, investors, and corporations to produce a sector that is stronger than the sum of its parts—is the second most common activity, closely followed by program development and support.
Examples of industry cluster development in CEDS
Few, if any, CEDS offer a particularly detailed economic development strategy for any one single sector—the plans tend to provide an overview of the region’s economic needs and opportunities. Nonetheless, the CEDS plans in place as of 2022 offer numerous examples of effective industry cluster development recommendations that could be, and likely are, part of a sophisticated cluster strategy. Several of these plans are discussed below.
Kenai Peninsula Economic Development District (Alaska)
The Kenai Peninsula 2021-2026 Comprehensive Economic Development Strategy offers a robust example of a strategy to support a legacy industry cluster. This CEDS includes multiple actions to strengthen maritime and mariculture businesses, including:
- Assist mariculture operations in meeting capital needs
- Pilot a project to translate seafood byproducts into commercial products
- Provide maritime businesses with counseling and technical assistance
- Expand shoreside infrastructure to support the mariculture and maritime traded sectors
Mid-America Regional Council (Missouri)
The Comprehensive Economic Development Strategy for Metropolitan Kansas City offers an example of both a life sciences industry strategy and an effort that targets sector-specific workforce needs. The region’s life sciences strategy is implemented by BioNexus KC, a cluster development organization that, as of the region’s 2022 plan, was particularly supporting economic growth related to life science research, animal health, and data analytics.
Mid-America’s CEDS cited multiple approaches to strengthening the region’s life sciences talent, including:
- Produce additional opportunities for experiential learning
- Define skill and education needs for bioinformatics and other high-demand roles
- Engage teachers in interdisciplinary education and externships
- Create stackable credentials to strengthen career pathways and continuous learning
Oahu Economic Development Board (Hawaii)
The Oahu Comprehensive Economic Development Strategy, like other CEDS in the state, is part of Hawaii’s statewide strategy. The strategy for Oahu city and county is an example of a region with an economy built around a strong institutional presence—in this case, the defense sector—and one that is in the earlier stages of creating linkages across the region’s various elements of the industry.
Items in the Oahu CEDS include:
- Leverage the U.S. Department of Defense’s Small Business Innovation Research program and Hawaii Tech Development Corp. support to strengthen innovative companies
- Train local contractors and workers about criteria for working with the military
- Improve workforce-client coordination by establishing regular meetings with Defense, workforce organizations, and higher education
- Create an asset map of Oahu businesses and their relation to the defense sector
South Jersey Economic Development District (New Jersey)
The South Jersey Economic Development District Comprehensive Economic Development Strategy demonstrates an effort to cultivate synergistic effects by bridging the opportunities connected to two related industry clusters. The region’s CEDS cites one point of emphasis to achieve linkages between the region’s more established aviation industry and its emerging offshore wind industry:
- Identify repair service and component manufacturers that can work across both sectors and allow the offshore wind industry to more easily meet its maintenance needs locally
Strengthening industry cluster development strategies
Industry cluster development has achieved broad diffusion across regional economic developers in the 25+ years in which it has been popularly espoused.
However, this review of recent CEDS indicates also that many regions may not be maximizing the benefits that cluster approaches can offer. Much of the research into clusters’ effectiveness has focused on their ability to drive innovation[v] and entrepreneurship[vi] and tends to emphasize benefits in traded sectors and across complementary industries.[vii] The industry cluster development activities, strategies, and goals covered in CEDS appear to emphasize sectors (e.g., tourism) and approaches (e.g., advertising) that are likely to have a more limited economic impact than what cluster approaches have the potential to achieve.
Resources that make sophisticated industry cluster development strategies easier to understand, develop, and articulate—similar to the guides that EDA provides for other topics relevant to creating effective CEDS—could, perhaps, help ensure that more regions benefit from the types of economic outcomes that made cluster development achieve its wide adoption.
Footnotes
[i] For an early example of Porter’s work to popularize cluster development, see: Porter, M.E. (1998, Nov.-Dec.). “Clusters and the new economics of competition.” Harvard Business Review. Available: https://hbr.org/1998/11/clusters-and-the-new-economics-of-competition.
[ii] Goals and strategies may have been coded as fitting more than one economic development category in the SLEDS database. Goals and strategies related to economic development Administration also were more common than Industry Cluster Development, being present in 349 CEDS.
[iii] Table uses the SLEDS database’s “Approach” column and does not include “sector-building strategies” (109 CEDS) or “other industries” (84 CEDS).
[iv] Table does not include items where the SLEDS database’s “Activity” field is blank (559 of 2,426 rows within the industry cluster development category).
[v] See, for example: Moretti, E. (2019). “The effect of high-tech clusters on the productivity of top inventors.” NBER Working Paper Series, 26270. Available: http://www.nber.org/papers/w26270.
[vi] Delgado, M., Porter, M. E., & Stern, S. (2010). “Clusters and entrepreneurship.” US Census Bureau Center for Economic Studies Paper, No. CES-WP-10-31. Available: http://ssrn.com/abstract=1689084.
[vii] Ketels, C. & Protsiv, S. (2021). “Cluster presence and economic performance: a new look based on European data.” Regional Studies, 55, 2, 208-220. Available: https://www.tandfonline.com/doi/full/10.1080/00343404.2020.1792435.