Clusters have increasingly gained attention in policy discourses at all levels ¿ regional, national, and at the level of the European Union (EU). In a 2008 declaration, the ex-EU Commissioner for Enterprise and Industry, Günter Verheugen, underlined the role of clusters for the EU economy: 'We need more world-class clusters in the EU. Clusters play a vital role in the much needed innovation of our businesses. They are powerhouses of job creation. Therefore we suggest that cluster policy efforts at all levels should aim to raise excellence and openness for cooperation, while respecting the competitive market-driven nature of clusters'. This is one of many recent signs of the growing attention to the subject on behalf of the European Commission which has also included the creation of the European Cluster Observatory, a repository of data on cluster locations, cluster policies and initiatives, at the end of 2007, and the European Cluster Memorandum, a document providing policy agenda for the promotion of European innovation through clusters, in 2008. The paper tests for the impact on firm performance of location within knowledge and technology-intensive (KTI) regional clusters in two Eastern European countries ¿Poland and Romania. Using newly available data on cluster location from the European Cluster Observatory and matching it with firm-level financial data from the Amadeus database, published by Bureau Van Dijk, the paper investigates for the presence of a cluster effect, perceived as higher efficiency of firms located within regional clusters in comparison with firms of the same sectors located outside. The choice of Eastern European countries is driven by two reasons. Clusters were nonexistent as the centrally-planned system decided on firm location from above and thus, any freedom of firms deciding on their locational choice was largely nonexistent. Furthermore, cluster policies have been a new approach to regional and local economic development with no precedents, and have been introduced mostly parallel to the integration into the EU. The choice of knowledge and technology-intensive sectors, which have a high tendency to cluster, for this study is due to the fact that they are sectors where a great part of innovative activities take place.