Economic development strategies and methods for identifying leading industries and industrial clusters

This paper reviews several popular economic development strategies and discusses the practical problem of identifying leading industries and innovation clusters for government regulatory and financial support. Although there is no substitute for in-depth industry-by-industry analysis, several statistical techniques are available that can assist in the identification process, including principal component analysis, k-means clustering, hierarchical clustering, medoid partitioning and fuzzy clustering. The Republic of Indonesia is used as a case study to illustrate the strengths and weakness of each of these procedures.