During the past ten to fifteen years the creation and nourishment of creative clusters have been a new alternative source for the urban cultural development. Projects vary from single buildings or building complexes to entire quarter or networks of locations. Some of the clusters focus on artistic/cultural activities, although most also incorporate a large number of leisure and entertainment elements. Cultural clustering strategies continue to use culture and the arts as urban and regeneration resources (Mommaas, 2004). Evidence shows that many businesses benefit from being located in clusters, therefore policymakers give special attention to creative clusters, defining what they are, defining their advantages and disadvantages and assess the role of public policy when creating and formulating clusters (Gureshudze, 2016). Cultural clustering strategy initiatives developed in 70’s and 80’s creating cultural, art or entertainment districts – sources of urban regeneration in the US and Europe. For example, the case of downtown Manhatten in 70’s was alterations in public regulations which provided artists with lofts (combination of living and working space) in Soho and TriBeCa. Using the artistic community to make quarters attractive for middle-class consumers became a popular urban regeneration strategy taken by many cities and regions in Western Europe. Some strategies were purely promotional in order to raise the economic profile, while others focused on social and cultural values, preserved heritage and strengthened the civic identity of the cities. Urban regeneration through cultural district was initially aiming at cultural consumption, latter being instrumental to different sets of economic, social and cultural functions. Later clusters became more production orientated – stimulating small business networks, that are grouped together in industrial or harbor complexes, streets and quarters. Entrepreneurs involved not only share common lifestyle, but also stimulate each other’s creativity, professionalism, and reputation, using the cultural identity of the place as a common brand (Mommaas, 2009). Although, according to Evans (2009), most of the creative clusters are not conventional business clusters, and factors such as local area regeneration, conservation of heritage, cultural tourism and related visitor economies are critical to the development and form of the clusters. Clusters are either being created organically by the artists themselves (bottom-up) or more strategically by the local government (top-down) on basis of public-private collaborations. Nowadays creative clusters tend to include a wider field of industries, such as science, engineering, and technology, as well as wider variation of innovative ecosystems. Clusters now vary in wider spatial physical and non-physical forms, from buildings, streets and quarters to interrelated regional economies and organisationally interlinked global-local networks, from small firms to large conglomerates. Some clusters are government-led and rely more on public money (investment, exploitation of working spaces, etc.), others are more market-orientated, or are a part of a regional economic or industrial policy (ex.: design, technology, media, entertainment), taking into realm of science, engineering, real estate development and urban regeneration markets. Cultural cluster now is considered as a variation of industrial development logic, focusing less on the cultural field as such and in general is becoming a fuzzy concept (Mommaas, 2009). According to Mommaas (2004), cultural clusters function as a source/environment for the artistic/cultural/economic imagination and innovation. Clusters create the local climate favorable for the creative workers, therefore art and design graduates can stay in the city. The wider symbolic and infrastructural characteristics of the creative cluster also attract other creative workers (architects, musicians, communication and information specialists, etc.). The context for trust, socialization, knowledge, inspiration exchange and innovation is provided in the high uncertainty and risk product and service environment. As successful clusters might turn into a brand, their symbolic value as a place give a market advantage for those who work in it. Agglomeration also produces benefits, such as reduced transaction costs, accelerating the circulation of capital and information, therefore reinforcing social solidarity. However, most projects vary in composition of their activities, the way they are managed and financed. In case the cluster is more consumption and production orientated – the intracluster transactions or sharing information and markets have not (yet) been developed (Mommaas, 2004). In creative clusters, tacit knowledge (as opposed to formal, codified knowledge), social networks and trust relationships are valorized (Kong, 2009). Individuals and firms are more prepared to undertake risky ventures and support mutual goals. Such relationships are easier to maintain in close proximity, therefore geographical propinquity stimulates productivity. According to Lavanga (2013), cultural industries rely on local production networks and highly depend on proximity, therefore there is a natural tendency towards clustering. The latter provides with competitive advantages, flexible specialization and increasing return effects through creative exchange and networking and economies of scope. Branzanti (2015) also names that spatial proximity of firms located in the creative clusters an advantage, as specialized suppliers and labor force, local know-how and technical competences highly affect the productivity of the firms. Moreover, the coexisting competition and cooperation ensure stability in the system and injects allocative efficiency and innovation. According to the author, there are numerous positive triggers found in the creative clusters, that bring such externalities, as the reduction of production costs, transaction costs, increased efficiency of factors of product and dynamic efficiency (Branzanti, 2015). However, it is important to notice that the distance from the city center makes suburb-located firm clusters less appealing for the city center clients. The daily practical disadvantages also would arise from reaching the city center for meetings and to foster client relationships (Branzanti, 2015). In the case of visual art cluster Telok Kurau Studios in Singapore, artists admire the advantage of the atmosphere of the setting – quiet, isolation and solitude to concentrate on their work. Here the artists derive cultural capital from the location and are attracted by the affordable space rentals. Although, the same study in Singapore has received some negative responses from the artists regarding the cluster, as it was characterized having officious relationships rather than collaboration. Due to the rivalry within the cluster, beyond perceived personal jealousies, real conflicts of interest could be observed. Therefore, one can argue that proximity does not guarantee tacit knowledge and social networking, but has its own tensions and conflicts (Kong, 2009). According to Gurechudze (2016), recently the value of clusters was better identified as drivers of innovation, and policymakers use clusters as a strategy for economic prosperity and development. Creative clusters are acknowledged in regenerating urban economy. Recently the economic benefits of clustering are increasing as the competitiveness of the regions is more and more determined by the innovation factor (innovative firms grow faster and survive better during the recession). The European Commission states: ?”Clusters and networks improve industrial competitiveness and innovation by bringing together resources and expertise, promoting cooperation among business, public authorities and universities”. As barriers of entry are lower than elsewhere, more and more start-ups emerge in the creative industries concentrated in a cluster. The ‘welfare effect’ can be also observed when sectors such as marketing and design work within a production chain. In general, creative sectors create knowledge spillovers, product spillovers (demand of one company’s product increases due to the product development at another company), network spillovers, training spillovers (when labour trained in one industry moves to another industry) and artistic spillovers (innovative work of one artist advances the art form and benefits the other artists). Clusters also help to attract investments for growth and development of the creative sector. All in all, Gureshudze (2016) claims the main advantage of creative clusters is economic efficiency. However, according to the same author, while fostering innovation and competitiveness, clustering can also create risks, that reduce competitiveness. Such risks include vulnerability (vulnerability of the region can be raised by specialization), lock-in effect (when relying on tacit knowledge and neglecting external connections), self-sufficiency syndrome (clusters may fail to be aware of the changing trends) and inherent decline (effective clusters might cause property prices in the region to increase significantly) (Gureshudze, 2016).