In order to establish guidelines for technology policy and promotion a set of "clusters", i.e., inter-related industrial activities, each representing a combination of high technological and economic competitiveness has been elaborated for Austria. Generally speaking, such clusters are not easily identified for Austria. Exceptions are the timber – pulp and paper sector as well as the manufacturing of railroads and special railroad vehicles. The major reasons are that – some powerful clusters of the past today suffer from secular adjustment problems (e.g., steel, textile); – many successful sectors are part of transnational industries whose core activities and decision centers are located outside Austria (supply of vehicle components, consumer electronics). Technological clusters The assessment of the "density" of economic activities (cluster) is of particular interest if it is related to the performance of the firms involved. This is warranted by the fact that agglomeration effects are often determined by the phenomenon of rising returns to scale. Geographical concentration of production and regional specialization may be indicative of such rising returns to scale. Markets for specific categories of labor, supply of inputs or services of a particular kind, spill-overs of relevant know-how and the existence of adequate infrastructure play a major role in this context. Using statistical cluster analysis, groups of enterprises have been identified which over the period 1987-91 exhibited similar patent registration behavior. These clusters, supplemented by technological and demand side considerations, were regrouped into five categories, all characterized by above-average numbers of patent registrations. – electric/electronic equipment; telecommunication, – transportation, – construction and housing, – skis, skiboots and sports equipment, – chemicals and pharmaceuticals. Within each of these technological clusters there are potential horizontal spill-overs operating between enterprises of similar activity, such as flows of knowledge, common research and training infrastructure, technological division of labor, the pooling of labor resources, etc. Conclusions and consequences The idea of clusters and of activities fitting into a national output structure should – among other factors such as potential value added or sectoral market growth – be a major criterion for the granting of government subsidies or incentives to business location. The advantages of an efficient industrial network are crucial for the establishment of innovative enterprises in dynamic but high-risk market segments and thus for the build-up of new industries. Careful targeting of technology-related subsidies and the establishment of adequate institutions for the diffusion of specific knowledge and skills are thus major elements in a cluster-oriented industrial strategy. Examples are the creation of research and training centers oriented towards future industrial structures or support given for the cooperation between firms and across branches.