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In the past few decades, clusters have attracted the attention of both academicians and
politicians. Porter (2003) stated that the existence of one or several regional clusters is
regarded as a prerequisite for regional prosperity. Since the end of 1980s, national and local
governments of Germany, Brazil, Japan, South Korea, and France have attempted to foster their
development. A typical defense of cluster policies is that cluster brings economic gains and
should therefore receive public support (Sahngan, 2012).
An industry cluster can be defined as a group of related firms, industries or suppliers and
various institutions located at a particular place. Alfred Marshall gave the first clear
description of industry clusters and conducted a study on the Lancashire Cutlery Industry and
Sheffield Steel Industry and noted that there was a tendency among the specialized companies
to cluster together in such a way that it produced geographic concentration of activities,
which he called ‘industrial districts’. Marshall observed how “great are the advantages which
people following the same skilled trade get from near neighboring to each other.” The
agglomeration of similar or related firms generates a number of external economies which lead
to decrease in the cost for cluster producers. Such economies include a group of specialized
workers, facile availability of suppliers and hasty transmission of new knowledge. The
concentration of similar firms attracts and obtains benefits from a group of labor possessing
common skills. The risk of individual worker is less by locating at a place where lots of
employment opportunities are procurable. Further, the group of firms present in the cluster
motivates the suppliers to locate at a place where readymade market is available. There is
quick dissemination of ideas and knowledge as the ideas can easily move from one firm to
another.
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