December 6, 2006–Have cluster initiatives delivered sufficient benefits to justify foreign assistance? Do they promote economic development? Are particular types of cluster activities successful? Nathan Associates Chief Economist Bruce Bolnick attempted to answer these questions in his paper, The Economic Impact of Cluster Initiatives under The Competitiveness Initiative (TCI) Project.

His success in doing so was confirmed this week when the paper received honorable mention in a contest sponsored by USAID’s MicroLINKS activity and conducted by the Private Sector Development Impact Assessment Initiative (PSD IAI). Dr. Bolnick’s paper earned honorable mention for its innovative approach to impact assessment. The paper reflected a rare attempt to assess a cluster competitiveness program by considering costs as well as benefits in a net present value framework.

The paper defines economic impact as the expected present value of additional net income generated directly by TCI cluster initiatives. To be evaluated, cluster activities had to generate benefits that were quantifiable, highly probable, and attributable to the project. In other words, there had to be a sound basis for the impact calculations, a strong likelihood that the activities would be implemented, and a clear indication that the TCI project played a critical role in producing or accelerating the economic benefits.

The judges declared Dr. Bolnick’s approach a best practice that should be made available to private sector development planners and practitioners. In the near future, PSD IAI will host an award-presentation event and discussion of the usefulness of the impact assessments to the planning of private sector development programs.

The TCI project that Dr. Bolnick was evaluating (since renamed The Competitiveness Program, or TCP) is a private sector development project funded by USAID and managed by Nathan Associates.

Download The Economic Impact of Cluster Initiatives (PDF)