In the world of inward investment attraction, it sometimes seems as though everyone - from local authorities to regional and national agencies - is promoting their 'industry clusters', whether in financial services, advanced manufacturing, tech, logistics, or a multitude of other sectors.
But what, really, are industry clusters? Do all these local authorities and investment promotion agencies really have them within their territories? And, once we've understood what they are, and whether we can claim to have any, how can we promote them credibly and effectively to attract businesses in our target sectors?
What are industry clusters?
An industry cluster is a geographic concentration of businesses and institutions in a particular sector, characterised by extensive interconnections and specialisation. Research has shown that they add value for businesses by increasing productivity, driving innovation, and facilitating new business formation¹ - all of which can provide the basis for a powerful, sector-focused inward investment value proposition (not to mention huge potential for economic development).
In the UK, famous examples of industry clusters include:
The City of London financial services cluster - a geographical concentration of banks, insurers, and related professional services businesses (e.g. legal and accounting firms), characterised by a specialised pool of talent, strong interconnectedness, and the rapid exchange of valuable (e.g. market) information.
The Cambridge tech cluster - a geographical concentration of software, biotech, and other tech companies, venture capital firms, and the University of Cambridge (which contributes knowledge, talent and spin-outs), together creating a collaborative ecosystem that drives innovation and growth.
But what about the rest of us?
So much for the famous examples - but what about all the less-high-profile places that claim to be home to industry clusters? How real, and how value-adding, are they? To answer this, it helps to consider the key characteristics described above.
Firstly, we're talking about geographical concentrations of businesses. Secondly, we're talking about extensive interconnections between them. And, thirdly, we talking about specialisation. Let's consider each of these in turn:
Concentrations: a smattering of sector businesses doesn't make for a concentration. And a critical mass - of skilled people, knowledge, networks and supply chains - is at the heart of what makes industry clusters value-adding for investing businesses.
Interconnections: But even when we do have a concentration of businesses in the same sector, that doesn't necessarily make a value-adding industry cluster. Sometimes those businesses are only co-located for historical reasons, are reluctant to interact with each other, and therefore don't drive value through collaborative innovation and knowledge spillovers.
Specialisition: is a key characteristic of industry clusters - creating a depth of knowledge and expertise that provides businesses with niche capabilities and a competitive edge. In contrast, to cite one example we often come across, a few, co-located, generalist web design agencies doesn't represent a 'digital cluster' that can be promoted, credibly, in inward investment marketing campaigns.
Lessons for sector-focused inward investment marketers
So, now we've considered what industry clusters are, here are a few points to consider when developing sector-focused inward investment marketing strategies (and considering whether to promote 'industry clusters' within them):
- You don't have to use the word 'cluster' if, correctly used, it isn't accurate or credible. The key to a powerful inward investment proposition is demonstrating value that other locations can't. That's likely to be based on a distinctive combination of several location factors, creatively and expertly presented, but 'cluster' may not be the ideal word to describe your sector offer. And it may harm your credibility if your 'cluster' claim doesn't stand up to scrutiny.
- With regard to 'critical mass', and especially if your area is fairly small (e.g. a local authority district): while it may not be credible to say that your location is home to its own industry cluster, it may represent an important part of a larger one. To cite just one example, England's Motorsport Valley cluster can be said to extend from the West Midlands all the way down to Surrey, and no single location within it can even approach the value proposition represented by the whole.
(Here, it's worth pointing out that, in the UK, especially when we talk about local 'industry clusters', we seem to underestimate the sheer scale of the clusters we're competing against internationally. If you're in any doubt, take a good look at WIPO's global Innovation Cluster Ranking 2025).
- Perhaps, therefore, we should promote industry clusters that are bigger than we are. But this seems to present a conundrum for inward investment marketers: how can you promote an industry cluster that extends far beyond your own territory without doing your neighbours' work for them?
Our simple answer is this: Make sure your marketing is more effective than theirs. So you can associate the wider industry cluster closely with your specific location, leverage its identity and profile, and harness its value proposition to attract investing businesses to your agency and your sites.
- Finally, we recognise that industry clustering can be a work in progress - typically building on pre-existing capabilities or industry concentrations - facilitated through interventions by organisations including local authorities, universities, research organisations, skills providers and networking groups. These strategies and visions can form the basis of a value-added proposition to investing businesses. But, ultimately, real industry clusters emerge when concentrated, specialised organisations interact with each other - not because government or any other agencies have decided to create them.
In summary, if you're going to promote an industry cluster, either within your territory or extending beyond it, it's in your interests to make sure it's a credible one.
Contact Clarity to talk about your results-focused inward investment marketing strategy.
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[1] Sources include Harvard Business Review.
