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Models for Sustainable Economic Development

The concept of “business clustering” has gained increased attention in recent years as public and private sector interests have attempted to identify strategic opportunities for economic development. Cluster development may also be strategically beneficial to emerging bioenergy, biochemicals and related industry development.

In the most general terms, a “cluster” is any instance of closely located (i.e., geographic proximity) and closely aligned operations (i.e., high frequency or number of transactions, or closely related product lines). For a cluster to be maintained, it is also necessary that the parties involved derive mutual benefit. Clusters can be formal (e.g., trade associations, buyer groups, cooperatives) or informal (e.g., friends, family, neighbors) and may or may not include traditional financial interactions (e.g., the cluster may be based upon barter of goods and/or services). One appealing characteristic of clusters is that they often appear to provide benefits of efficiency, enhanced productivity and greater resiliency due to synergies and relationships they support. On the other hand, clusters may also be viewed as creating conditions of co-dependence, which may limit any individual participant’s ability to innovate. Interdependence could also contribute to the quick demise of enterprises due to significant changes in economic, social, or environmental conditions.

In 2008, the U.S. Endowment for Forestry and Communities commissioned a study to examine the status of and opportunities for business clustering within the U.S. forest products sector and other closely aligned sectors.1 For the purposes of that study, the focus was on forest industry clusters. The study defined an industry cluster as “a group of firms and institutions located in close proximity whose businesses are interlinked through value and supply chains, labor, and use of similar inputs, technology, and complementary products.” 

This report discusses some of the findings from the recent study of U.S. forest sector clusters, highlights the conditions needed to increase the likelihood of success of any business cluster, and provides opportunities for new cluster development.

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