Definition of Agro Industry Cluster

Cluster-based economic development, including agro industry cluster has received increasing attention from researchers and many organizations, including OECD, European Commission, the U.S. National Governors Association, and USAID. Also a large number of regions and nations have launched initiatives to develop or strengthen clusters.

The cluster concept is mainly motivated by the research work of Michael Porter. Porter (1990), clusters are groups of companies and institutions co-located in a specific geographic region and linked by interdependencies in providing a related group of products or services. "Because of the proximity, both in terms of geography and activities between them, voters take clustered economic benefits of various types of externalities of location.

Clusters arise because they increase productivity by allowing companies to compete. Development and improvement of the cluster is an important agenda for governments, businesses and other institutions. Cluster development initiatives are important new direction in economic policy, based on past actions and macroeconomic stabilization, privatization, open markets and reduce costs of doing business.