In recent years, "cluster strategies" have become a popular economic development approach among state and local policymakers and economic development practitioners. An industry cluster is a group of firms, and related economic actors and institutions, that are located near one another and that draw productive advantage from their mutual proximity and connections. Cluster analysis can help diagnose a region's economic strengths and challenges and identify realistic ways to shape the region's economic future. This discussion paper reviews the academic literature on industry clusters. It explains what clusters are, why they matter for regional economic development policy, and how to use cluster analysis as a guide to policy and practice.