This paper questions the cluster literature from the perspective of vocational training and labor market regulation. Our case study of the aircraft industry ‘pôle’ in the PACA (Provence, Alpes Côte-d’Azur) region (France) provides original lessons for local economic development. It shows how public policies for building industrial clusters can stimulate important changes within local economic structures, as evidenced by the emergence of a dynamic group of independent SMEs that are better able to respond to changing competitive conditions than the more traditional enterprises within the region. The success of these SME is rooted in their ability to develop new industrial capacities through the recruitment and on-the-job training of a highly skilled and professional workforce. The paper underscores the importance of local market institutions and labor market regulations in promoting the development of these skills and capacities throughout the region.