From job creation and development of intellectual property to the formation of new industries, economic clusters of almost all kinds help drive overall growth in multiple ways, according to new research.
Each cluster is composed of multiple related industries that offer complementary activities that give rise to increasing returns, the researchers noted.
"We see more innovation in strong clusters, and strong innovation clusters are also associated with stronger employment," said study co-author Scott Stern, professor at Massachusetts Institute of Technology's Sloan School of Management.
The study examined 41 industrial clusters, 589 subfields of industry, and 177 regions in the US spanning the years 1990 to 2005.
Increase in industry specialisation led to employment growth in the regions, the findings showed.
"To me, jobs are a really important outcome, and we have tied that back to economic structure," Stern said.
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The study suggests that a region can improve its economic performance by improving its existing assets, rather than attempting a transformation by chasing industries situated elsewhere.
"Very often, regions are given advice that they should become the next Silicon Valley, or be like some other region," he said.
"They are told that they are in a global war for talent, or they should try to put out very expensive incentives to attract a single plant.
"What our research suggests is that regions succeed by investing in and extending their comparative advantage," Stern added.
The findings appeared in the journal Research Policy.