It’s commonly agreed that business innovation is a driver of economic competitiveness, and many concerns have been raised in recent years that the U.S. is falling behind in terms of innovation.

A new study from The Brookings Institute, The New "Cluster Moment": How Regional Innovation Clusters Can Foster the Next Economy, takes a look at how regional innovation clusters can be used to spur economic growth.

Clusters are defined as “geographic concentrations of interconnected firms and supporting or coordinating organizations.” In recent years, local, state and federal governments and economic development authorities have started to view “regional innovation clusters” (RICs) as a key tool for economic growth.

Clusters are appealing right now, authors Mark Muro and Bruce Katz note, because they can create a growth model that depends on creating lasting value—rather than a “bubble” economy based on ever-increasing consumption.

The authors cite some of the benefits of clusters that have been proven by research:

• They foster innovation.
  

• They strengthen entrepreneurship by boosting creation of new businesses and providing an environment where startups thrive.
  

• They enhance productivity, income and employment growth in the industries on which they focus.
  

• They improve regional economic performance.
  

Sounds great, doesn’t it? So how can communities create clusters? Well, we can’t. “Clusters can’t be created out of nothing and cluster initiatives should only be attempted where clusters already exist,” the authors caution. Instead, we need to pay attention to where clusters are naturally arising, and cultivate them. “The preexistence of a cluster means that an industry hotspot has passed the market test,” the report notes.

Once a cluster has been identified, federal programs like research and development tax credits, employee training programs, technology transfer programs and SBIC financing can all help to stimulate it. So can local factors like tax credits for venture capital, zoning and permitting laws, and banking regulations.

But as any innovative entrepreneur knows, you can’t rely on the government to get things going. “Let the private sector lead,” the authors write. They urge that government, rather than taking charge, should simply seek to fill in the gaps, support private sector efforts and remove obstacles to progress within innovation clusters.