Since the publication in 1990 of Michael Porter’s book, “The Competitive Advantage of Nations” (Macmillan, London), clusters have grasped the imagination of both policy makers and entrepreneurs. In a globalising world where small and medium-sized firms increasingly have to compete internationally, clusters play an important role in supporting firm competitiveness by increasing productivity, innovation and firm formation.

Local productive systems, industrial districts or clusters describe the tendency of firms in related lines of business and their supporting organisations to concentrate geographically. By clustering together, firms can achieve economies of scale and scope and lower their transaction costs. Various cluster types exist depending on their firm composition, industry sector, cluster raison-d’être and organisation. Recently, the cluster concept has attracted criticism drawing attention to the oft-neglected limitations of the cluster concept and consequently, cluster policies. The importance of clustering in the post-communist context is outlined, as well as cluster research methods and the methodology of the current publication.

This chapter explores the role of social capital in shaping inter-firms relations within local clusters and identifies whether a lack of social capital can be considered an impediment to cluster formation and development in post-communist countries. It is important to note that despite offering a definition, this chapter does not provide one model of social capital, nor define one type of impact on cluster performance. Social capital is one element among many other determinants and studying the link between social capital and cluster performance does not mean asserting that social capital is a positive value per se for clusters. However, attention is focused on some major features that characterise social capital and that positively impact on business clusters development: a sound base of trust among economic and institutional actors, together with valued and acknowledged co-operation. The chapter is structured as follows: First, parallel definitions of social capital and clusters are provided; second, the links between the two concepts are analysed (in particular the impact of social capital on cluster building and performance); third, specific issues to postcommunist countries are raised; and lastly, a policy debate is initiated.

This chapter presents cluster development in Slovenia in the period from 1999 to 2002 covering the process of identifying clusters in Slovenia and the formulation of Slovenian cluster policy. The institutional framework for SME support and for the development of local clusters is presented, as well as the challenges of internationalisation that Slovenian industry and its clusters face today.

The Slovak cluster chapter assesses whether the break-up of long-standing industrial structures has led to the rapid appearance of new industry clusters in Slovakia and whether a link exists between those new regional industry clusters and foreign direct investment. Four selected “sectoral clusters” (automotive, electronics, chemicals and clothing) are then introduced in more detail to understand the location and clustering behaviour of firms within their national and regional economies. Finally, Slovak clusters are assessed in an international perspective, with special attention paid to the Bratislava-Vienna border region.

This chapter presents evidence from four regional cluster studies and an overall cluster mapping project covering ten out of sixteen Polish administrative regions. The cluster mapping and regional cluster evidence show that there is potential for the development of competitive cluster structures fostering innovation in Polish industry. A brief overview of policy and institutions which support small and medium-sized enterprises in Poland are testimony to a quite well-developed support infrastructure, so far however without specific measures targeting clusters.

The Hungarian chapter presents cluster evidence from the country’s first mapping exercise, as well as data on government-sponsored clusters in Hungary in a great variety of economic branches. Foreign direct investment on the one hand and bottom-up responses to international competition on the other hand appear as the main driving forces of cluster development in Hungary. Current cluster policy with a cluster development, regional and SME approach is reviewed with a special emphasis on the necessity of using the cluster concept as a tool to bridge a growing economic development divide among Hungarian regions.

This chapter presents cluster evidence from the Czech Republic. Czech policy to foster small and medium-sized enterprises by encouraging enterprise clusters and networks is introduced. Special attention is paid to the potential of an emerging cross-border cluster in the northwestern border region of the Czech Republic with Poland and Slovakia.

The catchwords to describe the phenomenon of firm agglomeration and its associated benefits, be it local productive systems, industrial districts, regional or enterprise clusters, have only recently entered policy dialogue in Central and Eastern European countries. However, clusters have caught the imagination of both policy makers and entrepreneurs alike as instruments to promote higher productivity and competitiveness, boost innovation, strengthen SMEs and favour a more equal regional economic development. Increasingly, clusters are used as components of policy focused on achieving many economic and social goals. Policy makers, economic development practitioners and entrepreneurs from Central and Eastern Europe are looking for ways to share their individual experiences with countries around the world and exchange views on similarities and differences with the aim of identifying good cluster policy practice.