Cluster

Cluster theory *
Governments and institutions have traditionally always focused on the importance of the role played by fiscal and monetary policies in the competitiveness of a region in spite ofthe fact that it is microeconomic policy that creates prosperity in a region.
A solid macro economic policy only paves the way for productivity, it does not improve it. This first diagram demonstrateshow, through the application of micro economic policys, productivity can be improved.(click on a title for more information)
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The theory progresses with the introduction of innovation and theimportance it has within an industry. The diagram depicts how the level of productivity of a region is mirrored in that regions standard of living, where a steady growth is required to maintain a highstandard. In advanced regions, prosperity is influenced by a continuous rate of innovation. (click on a title for more information)
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Prosperity in a region is created by the microeconomicfoundations of competitiveness, which is based in the sophistication of its companies and industries. However, as the business environment within which the firms operate determines this sophistication, itfollows therefore that the focus must be on improving the quality of a regions business environment.
The quality of a region´s business envirnoment is embodied in four broad attributes that affectboth current productivity and innovative capacity. Michael E. Porter created the diamond in order to present these four attributes.
The Diamond Approach
The four points of the diamond represent the 4basic attributes that affect regional productivity and innovation. Each of the four attributes is self-reinforcing, has a unique and important role to play in a regions business environment and theyall operate together as a system.
The role that each of the four attributes plays and the influence that each one exerts is explained in detail and can be accessed by clicking on the boxes.
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