What Qualifies as a Cluster Theory?

This paper investigates the theoretical backgrounds of the `cluster' and proposes a framework aiming at drawing the contour of cluster theory.The profundity of the notion of `clusters' is arguably conditional on the coherence of four fundamental issues associated with the concept: 1) the economic and social benefits that may accrue to firms when clustering or co-locating (the existence argument); 2) the diseconomiesencountered when clustering exceeds certain geographical and sectoral thresholds (the extension argument); 3) the advantages obtained by exploiting intra-cluster synergies rather engaging in external interaction (the exchange argument); and, finally, 4) the possible erosionof economies and onset of diseconomies over the lifecycle of the cluster (the exhaustion argument).Each of these four issues is examined in terms of three relevant major theoretical frameworks that can be brought to bear on the cluster concept. The paper considers approaches based on the idea of externalities (illustrated by the Marshall's work on `Industrial district'); oncompetitiveness issue (illustrated by Michael Porter's theory of cluster growth); on a territorial perspective (illustrated by the GREMI approach).The analysis acknowledges the general shift in explanatory emphasis from considerations of static cost efficiency towards more dynamic interpretations that highlight the creation and use of knowledge as their pivotal theoretical element. By placing these changes within a common conceptual framework the paper shows how different theoretical solutions provide distinct points of departure for subsequent policy recommendations. Three distinctive groups of solutions are identified focussing respectively on local spillovers, on competitiveness and on the region and its development. The paper concludes by identifying areas of particular ambiguity where further theoretical work is most urgently needed. Key words: Cluster, cluster theory, industrial district, innovative milieu, regional policyJEL Codes: L22, R10, R58