A business cluster is a geographic location with interconnected businesses, suppliers, and related institutions. It can develop for various reasons, including tax breaks and access to resources. Information technology has led to the development of additional clusters. Benefits include minimized production delays and job opportunities.
Also known as an industrial cluster or a competitive cluster, a business cluster is a term used to describe a geographic location that is home to a significant number of businesses that are all interconnected in some way. Such a group will often include several companies that offer similar goods and services, suppliers that supply raw materials and other essentials to those companies, and possibly also related institutions such as colleges or universities that offer courses of study related to the industry associated with those companies. Cluster development can occur for a variety of reasons, including examples such as tax breaks, access to resources or transportation hubs, or an abundant supply of labor.
While the actual reference to a business cluster began to emerge in the latter part of the 20th century, the concept was already well established in a number of locations and encompassed a variety of industries. Cities that housed large textile plants were also often the location of choice for companies that supplied machine parts and raw materials to those plants. In the automotive industry, automobile plants were and continue to be complemented by the establishment of distributors supplying various components in relatively close proximity to those plants. Either way, colleges and universities near these industry hubs would offer courses and in some cases degrees that had to do with some aspect of how the industry worked.
The advent of information technology has led to the development of additional business cluster communities at strategic points around the world. As with previous models, a cluster dealing with information technology can include companies that use hardware to build systems, those that manufacture that hardware, and even companies that develop software to run on those systems. Related industries such as web browsing companies may locate in those areas as well. Local higher education institutions may also offer courses that have to do with industry, a strategy that helps renew the supply of new workforces to keep such operations going.
A number of benefits come from creating an enterprise cluster. By having key resources relatively close, production delays are minimized. Jobs tend to remain plentiful which in turn encourages young people to stay in the area rather than seek opportunities elsewhere. As long as the demand for goods and services produced by business cluster members remains high, the community benefits from a continuous flow of cash through the local economy, which in turn helps maintain the standard of living at a fair level.
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