---

In the UNIDO context, a cluster is understood to refer to a sectoral and geographical concentration of enterprises and/or individual producers that produce a similar range of goods or services and face similar threats and opportunities.
A cluster encompasses enterprises (MSMEs, but also larger firms) as well as their support institutions from the public and private sectors as well as civil society.

---

CLUSTER = FIRMS (PRODUCT + PLACE) + SUPPORT INSTITUTIONS

The definition thus highlights two essential features:

• Clusters consist of a critical mass of enterprises located in geographical proximity to each other; and
• Enterprises in a cluster share a number of common features

These enterprises and/or individual producers in the cluster are referred to as the principal firms. The principal firms are supported by a range of backward and forward linkages and service providers, including different technical, academic and financial institutions, business associations, and local authorities. In terms of location, the enterprises of a cluster can be spread out over a few villages, a town or a city and their surrounding areas.

The UNIDO Approach focuses on enhancing the performance of existing concentrations by managing the common threats and building on shared opportunities. The foundations for successful cluster developments lie in the creation of social capital and the achievement of collective efficiency.