European Scientific Journal May 2017 edition Vol.13, No.13 ISSN: 1857 – 7881 (Print) e - ISSN 1857- 7431 323 Palestinian Clusters: From Agglomeration to Innovation Suhail S. Sultan, (PhD) Birzeit University, Palestine Meine Pieter van Dijk, (PhD) Maastricht School of Management, the Netherlands doi: 10.19044/esj.2017.v13n13p323 URL:http://dx.doi.org/10.19044/esj.2017.v13n13p323 Abstract This study identifies the advantages, the constraints, as well as the right promotion policies necessary to foster the development of clusters. After a literature review, data were collected through field visits on five important clusters. Fifty cluster firms were surveyed to assess their performance. Semi-structured interviews were held with ten key policy decision makers. Focus group discussions were held, discussing with a group of 10 participants an assessment of the five clusters. The research shows important differences between the five clusters studied. It points to constraining factors, such as a lack of closer collaboration between firms themselves and between firms and universities, which could lead to innovation. As the size of most of the Palestinian economic entities are micro to small and medium, clustering can help these entities to increase their productivity and thus help in reducing the high unemployment rate among Palestinian youth. Keywords: Clusters; Cluster Promotion Policies; Innovation; Palestine Introduction Clustering of economic activities (defined as a strong spatial concentration of similar or related economic activities) contributes to economic development (Pyke and Sengenberger, 1992). Clustering provides advantages for enterprises in the cluster, which are comparable to economies of scale for bigger companies (Martin and Sunley, 2003). The dynamics of clustering in Palestine has been studied to identify in which stage of development Palestinian clusters are and which factors contribute to the success of cluster promotion policies in Palestine. The following clusters have been studied: stone and marble, tourism and creative arts, leather and shoes, furniture, and palm trees and dates. After providing the background of