Identifying industrial clusters in Malaysia

Economic growth depends on strong industrial linkages. The economic growth is influenced by the industrial total output rate which depends on industrial linkages. Forward and Backward linkage indices deal with the performance of individual industries and it is also important to study linkages among industries. Cluster analysis of input and output coefficients can reveal important clusters which are group of industries that has strong supply and buyer relationship. Industrial clusters can provide more information on inter-industry dependence. This paper identifies the national industrial clusters in Malaysia by examining the inter-industry selling and purchasing relationship based on the Malaysia Input-Output Table 2005 using cluster analysis. The input and output coefficients were obtained from Input-Output table, 120 industries by 120 industries. Cluster analysis of the correlation matrix for pairwise linkage ratios was carried out using Ward´s hierarchical clustering algorithm. Hierarchical cluster analysis results twelve distinct industrial clusters.