A Functionalist Framework for Identifying Business Clusters: Applications in Far North Queensland

The extant literature on industry-cluster identification recommends the use of both quantitative and qualitative data to uncover clusters. We argue for a functionalist approach to identifying clusters. The logic here is that since spatial proximity of firms is an observed fact, attempts to uncover business clusters should begin with a statistical test of the randomness of firm density in a region. Rejection of this hypothesis should lead to an inter-firm analysis that identifies the relationships among firms in the region. Data from a regional area in the state of Queensland, Australia, are employed to demonstrate the applicability of the proposed framework.