With world-famous examples like Silicon Valley, clusters positioned themselves in world markets as early as the 1980s, and by the 1990s were widely recognized as settings that can stimulate productivity, innovation, and new business formation. Furthermore, Michael E. Porter's influential work on industrial and regional clusters, helped policymakers see that regional clusters can shape regional development policy suited to global competition. Thus, in the EU, clusters first became known in the context of regional innovation systems (RIS), however the conceptualisation of clusters shifted from regional competitiveness tools in the 2000s to industrial transition infrastructures in the 2020s.

This shift showed in how EU cluster policy is built. It is not one policy but several layers working together: multi-level, spanning all of EU, national, and regional authorities; multi-fund, drawing on ERDF, Horizon Europe, the Single Market Programme, Digital Europe, and LIFE; organised around industrial ecosystems rather than single sectors; oriented toward the green and digital transitions; centred on SMEs; and increasingly geopolitical, tied to strategic autonomy and resilient value chains.

So, in the article below we will review the key definitions and concepts that help us understand - what are clusters in the EU, and what is their role in regional and interregional ecosystems?

The material is developed by the Swiss–Ukrainian project UCORD, in cooperation with the European Association of Development Agencies (EURADA) and the Decentralization portal. The contents of this publication are the sole responsibility of the author(s) and do not necessarily reflect the views of the Swiss Agency for Development and Cooperation, or NIRAS Sweden AB.

The Strategic Role of Clusters in EU Policy

Based on the short history introduction, we can now settle into a working definition of clusters – they are «groups of firms, related economic actors, and institutions located near each other, with enough scale to develop specialised expertise, services, resources, suppliers, and skills» (definition by the European Commission). European Cluster Collaboration Platform, based on the definition of Delgado/Porter/Stern (2013), further defines clusters as «regional ecosystems of related industries and competences featuring a broad array of inter-industry interdependencies». What matters for EU policy is what such ecosystems are now asked to do.

Clusters have become platforms for industrial transformation. The European Green Deal – the strategy to make Europe climate-neutral by 2050 while transforming its economy and industry – needs a delivery mechanism at the level of real supply chains, and clusters are important and well placed to contribute. They also supply the shared infrastructure and skills base that digital transformation requires, and – in the context of strategic autonomy and resilient value chains have grown – «can play a role in reshoring and consolidating capacities in key technologies» within the EU (European Cluster Panorama Report 2024 based on A. Johnston and R. Huggins’ 2023 work «Europe’s semiconductor industry at a crossroads: Industrial policy and regional clusters»). They are also where SMEs, which rarely have the scale to enter global value chains alone, gain access through the cluster's collective opportunities.

This is reflected in the functions clusters now perform: governance intermediaries translating EU and national priorities into regional action; SME aggregators pooling firms into competitive scale; technology diffusion agents spreading innovation outward; and, together, industrial transition platforms connecting policy ambition to regional economic reality.

The EU Policy Framework Supporting Clusters

Four key documents anchor how the EU thinks about clusters at the strategic level.

The EU Industrial Strategy (2020, updated 2021) sets out the vision of industrial ecosystems (mobility, health, energy-intensive industries, digital, and others) that the EU wants to keep competitive and resilient. Clusters are the implementors, or «institutional interfaces» according to European Cluster Panorama Report 2024, as they link industrial ecosystems to policy efforts.

The Net-Zero Industry Act and the Critical Raw Materials Act turn that ambition into binding targets. The Net-Zero Industry Act, adopted in 2024, sets a binding target of producing 40% of the EU's annual net-zero technology needs domestically by 2030, and creates «Net-Zero Acceleration Valleys» – clusters of net-zero industrial activity built to attract manufacturing investment and streamline permitting for clean-tech projects. The Critical Raw Materials Act, a separate but complementary law from the same year, addresses the EU's dependence on imported materials, capping reliance on any single third country to no more than 65% of annual consumption of a given strategic raw material at any stage of processing.

Smart Specialisation Strategies (S3) are the regional planning tool that decides where each part of the EU should specialise, based on existing and or potential strengths in each region, rather than every territory chasing the same priorities. Clusters are an important delivery and intermediation mechanism for an S3 priority once it's chosen as they concentrate the firms, skills, and institutions the strategy is meant to support. Read more about S3 on Decentralization.

The European Research Area (ERA) refers to the EU’s vision of creating a «single market» for research and innovation. The idea is comparable to the EU single market for goods and services: researchers, scientific knowledge, technologies, and innovation should circulate freely across borders. Clusters plug regional SMEs and universities into that flow, acting as the local entry point to EU-wide knowledge networks.

Across all four, clusters do the same three jobs: supporting industrial ecosystems by organising economic actors around shared strategic goals, strengthening regional innovation systems by anchoring skills and specialisation locally, and facilitating knowledge transfer and cooperation between firms, research institutions, and government.

Funding and Governance Framework

No single fund pays for EU cluster policy – it draws on several, each covering a different piece of what clusters need. Cohesion Policy and the European Regional Development Fund (ERDF) fund the physical and institutional backbone: regional infrastructure, R&D capacity, and SME competitiveness, aimed at correcting economic disparities between regions. The ERDF aims to strengthen economic, social and territorial cohesion by correcting imbalances between EU regions, enabling investment in a smarter, greener, more connected Europe. The European Social Fund Plus (ESF+) funds the people side – skills and employment support – and is designed to be combined with ERDF through joint programmes. Programs can combine ERDF and ESF+ funding through multi-fund programmes, since a cluster's competitiveness depends as much on workforce skills as on infrastructure. Horizon Europe brings the research and innovation which clusters diffuse to their members. Digital Europe Programme funds the digital infrastructure, such as Digital Innovation Hubs, that clusters increasingly host. The Single Market Programme (SMP) targets SME competitiveness and cluster excellence directly.

Governance is what stitches these together: EU frameworks set priorities and rules (via regulations like the Common Provisions Regulation); Member States negotiate Partnership Agreements and co-fund programmes; and regional authorities implement the research-and-innovation-relevant share of that funding through Smart Specialisation Strategies, while other funds and programmes run through separate channels. The alignment of industrial, innovation, and cohesion policy is what lets a single cluster draw on multiple funding streams without contradicting itself.

Please read more about the logic of the EU Cohesion Policy and the funds of the EU cohesion policy in our relevant materials on Decentralization and following multiple links provided in the article.

Examples of Clusters at the Crossroads of EU Instruments

Founded in 2013, Transilvania IT Cluster in Cluj-Napoca, Romania, has over 180 members and works at the intersection of entrepreneurship, research, innovation, and public administration. It began by supporting member companies' employees in acquiring technical and soft skills and offering a platform for collaborative projects, and has since grown alongside Cluj-Napoca's tech sector into a driver of digital transformation and community development through digitisation.

Few clusters illustrate the multi-layer and multi-instrument model as clearly. Through the Transilvania Digital Innovation Hub (TDIH), the cluster draws on the Digital Europe Programme, holding a €2.5 million EU grant, matched by Romanian cohesion-fund co-financing for SME digitalisation. TDIH's specialisation in AI, Big Data, and high-performance computing is deliberately built around the North-West region's Smart Specialisation Strategy, aligning with its Health and Advanced Production Technologies priorities. Separately, the cluster contributes to Energenius, a €5.2 million Horizon Europe project applying AI-driven tools and gamification to help citizens and communities manage energy use more efficiently.

Governance of the Transilvania Digital Innovation Hub follows the quadruple-helix model: the Transilvania IT Cluster orchestrates 8 member clusters and associations, 3 universities, a national R&D institute, and the Cluj-Napoca municipality. This is a working model of the multi-fund, multi-level cooperation envisaged for EU clusters.

Another exemplary case is Business Upper Austria, the economic development agency of Upper Austria. It runs a regional cluster governance programme that Interreg Europe presents in its Good Practices section as a «compelling model» for other regions. The programme comprises eight public-private cluster organisations (Automotive, Building, Cleantech, IT, Plastics, Food, Mechatronics and Medical), each with a 70% competitively won self-financing rate. According to Werner Pamminger, CEO of Business Upper Austria, in his presentation at the 2024 Cluster Acceleration Conference, regional stakeholders used the Porter diamond model to facilitate the successive founding of the eight cluster initiatives. He adds that, under the motto «innovation through cooperation,» the region then created a long-lasting vision, mission and strategy that helps increase the competitiveness of cluster partners.

The programme shares EU cluster policy's focus on SMEs. According to the European Cluster Collaboration Platform, Upper Austria's economy consists of a few large lead companies and a large number of SMEs, and the cluster membership reflects this: 85% of the approximately 2,000 members are SMEs (2024 data from Pamminger's presentation).

The European Cluster Collaboration Platform also describes Upper Austrian cluster policy as combining top-down and bottom-up approaches. On the top-down side, strategic programming through the region's Smart Specialisation Strategy (RIS3) provides the overarching framework for technology and innovation policy and serves as the strategic basis for cluster support, while «innovation alliances» are to be formed, especially on topics relevant to all industries. Bottom-up, cluster management works in a quadruple-helix spirit, starting from companies' technical needs and developing solutions together with partners such as universities.

Governance holds this together. The clusters are guided by advisory boards with 130 representatives, which meet regularly to set the agenda. Together with the high share of self-financing, this makes the programme a working example of the multi-level cooperation that EU cluster policy envisages.

Future Role of Clusters in Europe

Looking ahead, there is an important and continued role for clusters in Europe’s economic and industrial development. Cluster organisations can contribute to the green and digital transitions by connecting businesses, research organisations and other stakeholders, facilitating collaboration, and supporting the adoption of new technologies. Strengthening SME competitiveness remains an important area for cluster policy, with cluster organisations providing services and opportunities for cooperation, internationalisation and cross-border collaboration. Clusters can also contribute to more resilient value chains by connecting regional industrial ecosystems with wider supply chains, supporting cooperation and helping firms and stakeholders respond to changing economic and geopolitical conditions. More broadly, cluster organisations can support industrial transition by bringing together relevant capabilities, knowledge and networks and by helping align regional strengths with wider European and national policy priorities.

The proposed European Competitiveness Fund, a flagship element of the 2028-2034 Multiannual Financial Framework, is the clearest signal of where this is heading: it consolidates diverse funding programmes into one strategic investment vehicle covering clean transition and industrial decarbonisation, digital leadership, health and bioeconomy, and resilience, defence, and space – with clusters expected to play an important role in achieving these objectives. As Magdalena Brussel-Jacaszek, Policy Officer at DG GROW, said during the European Cluster Collaboration Platform’s 2025 event, «Clusters are recognised as major intermediaries, though they are part of wider territorial ecosystems that include multiple local actors. The Commission is mindful that innovation is place-based and rooted in territories, requiring strong connections across regions and stakeholders».

Clusters and the Quadruple Helix

We see how EU clusters have grown into strategic infrastructures connecting regional development, industrial policy, and innovation – and their role is only becoming more central to Europe's competitiveness and transition agenda. This is, at its core, a shift in who is understood to drive economic development. The cluster model increasingly reflects what's known as the quadruple helix: government, industry, academia, and civil society working as interdependent partners rather than separate actors with separate mandates.

Michael E. Porter describes this shift in his original writing on clusters, well before quadruple helix became EU policy vocabulary: «clusters reveal the mutual dependence and collective responsibility of all these entities for creating the conditions for productive competition. This task will require fresh thinking on the part of leaders and the willingness to abandon the traditional categories that drive our thinking about who does what in the economy. The lines between public and private investment blur. Companies, no less than governments and universities, have a stake in education. Universities have a stake in the competitiveness of local businesses. By revealing the process by which wealth is actually created in an economy, clusters open new public-private avenues for constructive action».

Ultimately, clusters do not replace policy or institutions; they offer a collaborative setting where diverse actors can coordinate their capabilities. As intermediaries, they are essential for driving competitiveness, resilience, and the green and digital transitions. However, clusters are not a standalone solution. Their future effectiveness depends on how well they are integrated with industrial policy, Smart Specialisation Strategies and other measures supporting competitiveness, skills, innovation, internationalisation and the green and digital transitions.