Cluster policies aim to activate and sustain the competitive interaction of firms in local and regional business agglomerations. Policy instruments tend to augment market forces by providing distinct types of collective goods. As such, cluster policies differ markedly from traditional types of industrial policy that highlight the nationwide targeting of particular firms and industries by means of market intervention. Still, the logic of cluster policies is most convincingly derived from the persistent relevance of national institutional frameworks, most prominently involving nation states, and their ongoing transformation in the process of economic development. This line of reasoning is most appropriately exemplified by the East Asian development experience. Indeed, it may be argued that the increasing relevance of cluster policies in East Asia parallels the advent of a new model of government–business relations that may be labelled ‘entrepreneurial state’. This concept suggests that entrepreneurial aspects of state activity, which were already prevalent within the East Asian developmental states, currently turn out as dominant policy features, thus changing the dominant rationale of government towards an entrepreneurial direction, implying a shift from the developmental assimilation of technological novelties in catch-up growth to their entrepreneurial creation in a setting that allows for technological leadership. The related policy rationale promotes innovation as the source of international competitiveness, framed by a multi-level architecture of governance that strengthens a regionalized type of industrial policies, which points to the formation of cluster policies.
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