Innovation is the basic driver for sustainable competitiveness. In Australia, Small to Medium Enterprises (SMEs) account for over 50% of employment and a large share of innovative activity and growth. SMEs have benefits such as increased flexibility and low overheads, but also face problems such as lack of financing, limited access to markets, difficulties in obtaining or exploiting new technologies, and the need to upgrade managerial and technical skills. SMEs working in clusters can attain the advantages of large firms by addressing these issues as a group while retaining the benefits of specialisation and flexibility. Clusters play a vital role in enhancing innovation among their members. Industry clusters are receiving increased attention in Australia as a form of competitive strategy. This paper outlines the progressive cluster mapping and cluster development programs conducted by the Australian Electrical and Electronics Manufacturers’ Association (AEEMA). While the AEEMA cluster development programs are primarily industry-led, they are also supported by Australian government grants that are designed to enhance innovation among SMEs.