Purpose: The purpose of this article is to characterize the process of knowledge management in business clusters in terms of the benefi ts for the cluster members. The paper examines which mechanisms within the clusters promote knowledge creation between companies and other institutions. Methodology: The literature review is based on databases of books and scientifi c articles, such as EBSCO, Elsevier, JSTOR, Springer, and the Oxford Library and Kingston University London Library. The analysis of the literaturę is focused around the concepts of business clusters, knowledge management in organizations, knowledge management in clusters. Findings: The literature presented in this paper shows that network forms of organization such as clusters are conducive to inter-fi rm knowledge and skill development. Clusters as a type of network turn out to be a highly structured model of knowledge development, transfer and diffusion, produced by the interaction of social and economic relations within cluster institutions. Research implications: The article constitutes a combination of two theoretical aspects – knowledge management and business clusters. The theoretical conclusions of the literature review, mostly foreign literature, provide a basis for research in that area. Practical implications: In the Polish literature on the subject the aspect of knowledge management in business clusters has not yet been discussed. The conclusions of the presented literature analysis provide a basis for research and the development of practical recommendations for cluster managers. Knowledge-based clusters can serve as an example for developing clusters in the world. They are often clustered around research centers, making it possible to improve the exchange of knowledge between the cluster members and also providing the opportunity to better connect the world of science and business. Originality: The author has presented a unique mix of theory, knowledge management and business clusters and has demonstrated that one of the benefi ts of business clusters is their ability to generate knowledge by combining existing information and data from internal databases of businesses within clusters with the infl ux of new information. Formal contacts between the employees of the cooperating institutions provide general knowledge and best practices based on collective knowledge. While informal contacts are important channels for the transfer of tacit knowledge, the so-called operational know-how.