European Urban and Regional Studies 13(1): 25–39 Copyright © 2006 SAGE Publications 10.1177/0969776406059227 London, Thousand Oaks, CA and New Delhi, www.sagepublications.com BUSINESS SYSTEMS AND CLUSTER POLICIES IN THE BASQUE COUNTRY AND CATALONIA (1990–2004) Manu Ahedo Santisteban University of the Basque Country, Leioa (Bizkaia) Abstract ★ The governments of the Basque Country and Cata- lonia in Spain, the most industrialized regions in Spain and the most active in demanding political self- government, were among the first to develop indus- trial cluster policies. The concrete application and further evolution of these policies have been rather different. The main reason for this has been the particular social structures and dynamics of their respective regional industrial-business systems, composed of distinctive socio-business communities, industrial groupings, and industry associative systems. In the Basque case, the main policy result has been the constitution of 11 cluster-associations of the whole Basque Autonomous Community as long-term and broad public–private cooperation arrangements at industry level. In the Catalan case, the policy has resulted mainly in short-term and specific collabora- tive processes at local cluster or district level.Despite these differences, both cases of cluster policies exemplify the construction of ‘government–industry’ collaboration at the subnational-state regional level, within the emerging decentralized socio-institutional system in the Spanish industrial economy. KEY WORDS ★ cluster policies ★ industrial- business systems ★ regional government–industry collaboration Introduction Much has been published regarding the enabling role of public and private institutions in regional development: industrial district-supporting institutions (Pyke and Sengerberger, 1992), institutional thickness (Amin and Thrift, 1994), associational economy (Cooke and Morgan, 1998). The synergetic interface of public and private institutions and organizations is regarded as a key positive social capital for socio-economic development (Trigilia, 2001). Together with a minimum of public institutions, learning and adaptive semi-public and private institutions and organizations are argued to be the motors of regional development. In countries moving towards a liberal democratic system, as has been the case of Spain for the last 30 years, it is important to analyse how public–private and government–business relations have been constructed. Additionally, within the federalizing process in Spain, decentralization of industrial policies to the Autonomous Regions calls for an analysis of government–industry relations at the regional level. The cases of the Basque Country and Catalonia are rather special. Besides being the main foci of industrialization in Spain, over recent decades there has been a fluctuating majority in both regions which has regarded its society as a distinct nation, entitled to state-like powers. This ‘national’ question is very important in many respects in relation to their industrial economies, but it is not addressed in this article. In the two cases, the cluster policies are analysed as instruments which have directly or indirectly brought about various forms of public–private cooperation between the empowered regional governments and some key industrial fields. An important analytical focus is on how the organizational and institutional dynamics of their respective regional industrial-business systems have shaped the main outcome of the policy; that is, the development of a targeted and selective regional government–industry collaboration.