Clusters Built the Advantage. They Can Also Build the Trap.
In my last piece, I wrote about path dependence — the way an economy's history can quietly close off options for its future. This week I want to connect that idea to a concept most of us in economic development invoke constantly, often without examining it closely: the industry cluster.
Clusters are treated as an unambiguous good in this field. Recruit enough related firms, suppliers, and talent into one geography, the thinking goes, and you get a self-reinforcing engine of growth. That's true — up to a point. But the same mechanisms that make clusters powerful are, almost mechanically, the same mechanisms that produce lock-in. It's worth understanding both halves of that story before building a strategy around one.
Where the idea started
Long before "cluster" was a term of art, Alfred Marshall was describing the same phenomenon. Writing in his 1890 Principles of Economics, Marshall observed that specialized industries tend to concentrate in particular localities, and once an industry has settled into a place, it tends to stay there for a long time because of the advantages firms gain from close proximity to one another. He attributed this to what economists now call localization economies: skilled labor pooling in one place, specialized suppliers emerging to serve the concentration of firms, and technical knowledge spreading informally through the community rather than staying locked inside any one company. Marshall's famous phrase for this was that the trade's secrets become "in the air" — something workers absorb simply by being embedded in the place.
Porter reframes it for competitive strategy
A century later, Michael Porter formalized and modernized this into the cluster concept most economic developers know today. In his 1990 book on national competitive advantage, Porter argued that sustained competitiveness in an industry comes not from a firm's isolated resources but from the surrounding cluster: interconnected companies, suppliers, and institutions concentrated in a specific location, generating the local rivalry, sophisticated demand, and specialized inputs that push firms to keep improving. Where Marshall was describing an observed historical pattern, Porter turned clusters into a deliberate policy and strategy tool — something regions could identify, target, and actively build.
The other side of the same coin
Here's where it connects back to path dependence. Gernot Grabher's 1993 study of the Ruhr Valley — which I referenced in the last article — showed that the dense networks and specialized capabilities that build a cluster's strength are exactly what calcify into functional, cognitive, and political lock-in when conditions change. Robert Hassink made this connection explicit in a 2005 paper examining regional economies caught in path-dependent decline. He argued that cluster strategies, left alone, carry real lock-in risk: as a cluster matures, its firms specialize further into the same knowledge base, its networks become more insular, and its institutions calcify around defending the incumbent industry rather than sensing what comes next. His proposed corrective was what he called a "learning region" or "learning cluster" approach — one where deliberate openness to outside knowledge and a willingness to reassess the winning formula are built into the cluster's design from the start, rather than added later as crisis management.
What this means in practice
For those of us doing this work in smaller and mid-sized markets, the lesson isn't "don't build on your cluster." It's that a cluster strategy and a path-dependence risk strategy are the same document, not two separate ones. Deepening specialization in what a region already does well is often the right near-term move — but without a deliberate mechanism for importing outside knowledge, cultivating a next generation of related-but-different capabilities, and keeping local institutions honest about what's actually working, today's competitive cluster is tomorrow's Ruhr Valley.
I'll keep building out this series — next up, I want to dig into what "path creation" actually looks like on the ground, not just in theory. If your region has a dominant cluster, I'm curious how deliberately you've built in a way to outgrow it.
Works Cited
Grabher, G. (1993). The weakness of strong ties: The lock-in of regional development in the Ruhr area. In G. Grabher (Ed.), The embedded firm: On the socioeconomics of industrial networks (pp. 255–277). Routledge.
Hassink, R. (2005). How to unlock regional economies from path dependency? From learning region to learning cluster. European Planning Studies, 13(4), 521–535.
Marshall, A. (1890). Principles of economics. Macmillan.
Porter, M. E. (1990). The competitive advantage of nations. Free Press.
