02 ketels emerging industries_day 2_ecc 2012

New Industries and the Process of Regional Diversification – The Role of Clusters

Prof. Christian Ketels Harvard Business School, Stockholm School of Economics, and EBS

European CommissionEnterprise and Industry

A New Era for Cluster Policy

26.04.2012 2

• Creating winners? • Backing losers!

Old Industrial Policy

• Enabling new winners to emerge

The Challenge Ahead

FAILURE

• Backing winners!

Current Cluster Policy

PARTIAL SUCCESS


Sources of Cluster Emergence

POLICY

Location

Natural Resources

Context for competition across regions

Existing Clusters

Entrepreneurs

Business Environment


Clusters and Entrepreneurship

Source: Porter, The Economic Performance of Regions, Regional Studies, 2003; Delgado/Porter/Stern, Clusters and Entrepreneurship, Journal of Economic Geography, 2010; Delgado/Porter/Stern, Clusters, Convergence, and Economic Performance, mimeo., 2010.

New Industries (+) New Business Formation (+)

Survial Rates of New Businesses (+)

Job Growth In New Businesses (+)

The stronger the cluster, the more likely new industries within the cluster are to emerge

The stronger the cluster, the more dynamic is the process of new business formation

The stronger the cluster, the higher the job growth in new

businesses

The stronger the cluster , the higher the survial rate of

new businesses

CLUSTER


Textiles

Roller bearings

Vehicles

Vehicle safety

Telematics

1907

1924

1956

2001

Source: Sölvell, Lindqvist,,2011

Transformation of Clusters: Gothenburg Automotive Cluster

Source: Sölvell, 2009

http://www.autoliv.com/wps/wcm/connect/autoliv/Home

http://www.volvocars.com/se/


Related Clusters and Regional Diversification

Note: Clusters with borders or identical colors/shading except gray have at least 20% overlap of industries by number in both directions

Plastics

Oil and Gas

Chemical Products

Pharma-ceuticals

Power Generation

Aerospace Vehicles &

Defense

Lightning & Electrical

Equipment

Financial Services

Publishing and Printing

Entertainment

Hospitality and Tourism

Transportation and Logistics

Information Technology

Communi- cations

Equipment

Medical Devices

Analytical Instruments

Education and

Knowledge Creation

Apparel

Leather and

Sporting Goods

Agricultural Products

Processed Food

Furniture Building Fixtures,

Equipment and

Services

Sporting, Recreation

and Children’s Goods

Business Services

Distribution Services

Fishing & Fishing

Products

Footwear

Forest Products

Heavy Construction

Services

Jewelry & Precious Metals

Construction Materials

Prefabricated Enclosures

Textiles

Tobacco

Heavy Machinery

Aerospace Engines

Automotive

Production Technology

Motor Driven Products

Metal Manufacturing

Source: Porter, The Economic Performance of Regions, Regional Studies, 2003; Delgado/Porter/Stern, Clusters and Entrepreneurship, Journal of Economic Geography, 2010; Delgado/Porter/Stern, Clusters, Convergence, and Economic Performance, mimeo., 2010.


Transformation of Regional Economies: San Diego, California

U.S. Military

Communications Equipment

Sporting and Leather Goods

Analytical Instruments

Power Generation

Aerospace Vehicles and Defense

Transportation and Logistics

Information Technology

1910 1930 1950 1990 1970

Bioscience Research Centers

Climate and Geography

Hospitality and Tourism

Medical Devices

Biotech / Pharmaceuticals

Education and Knowledge Creation

• Existing cluster

portfolios have a

significant impact on the

evolutionary path of

regional economies

(Neffke et al, 2009;

Boschma et al. 2011)

• Clusters provide a

powerful analytical tool

to understand

diversification and the

emergence of new

economic activities

The San Diego Economy

Source: Porter, Monitor Company, Council on Competitiveness (2003)


Specialization Patterns and Economic Policy: Two Views

Economic

Complexity

(Hausmann et al.)

Structural

Transformation

(Lin)

“What you do”

• To get rich, do what rich locations do

Clusters

“How you do it”

• To get rich, do what you do best


The New (Smart Specialization) Answer:

• Identify your assets, including your existing cluster base

• Actively pursue opportunities in areas adjacent to current strengths and leading towards higher value added

• Longer-term development of sustainable competitive advantages

The Old Answer:

• Identify growing markets and try to enter them (bio, nano, eco, …)

• Failure to succeed in intensely competitive markets without unique assets

Specialization Patterns and Economic Policy: Smart Specialization in the EU

The Challenge: How to support structural change towards higher value-added activities?


Enabling Emergence: How Cluster Mapping Data can help

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In which regions is a new cluster category

likely to emerge?

• Identify regions with growing industries or firms in the emerging clusters

• Identify regions with existing strong clusters in related cluster categories

• Identify regions with relevant business environment strengths

…the EU and national governments

What new clusters are likely to emerge

in our region?

• Identify opportunities within existing regional clusters

• Identify clusters adjacent to existing regional clusters

• Identify growing industries and firms outside of existing regional clusters

• Identify regional business environment strengths not leveraged by current clusters

…regional governments


A New Type of Cluster Program

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Cluster effort success factors

• Strong cluster

• Strong cluster organization

• Clear strategy

Backing Winners Enabling Emergence

√

√

√

x

~

~

• Require funding for large scale investments

• Moderate risk; evaluation to keep implementation process on plan

• Require seed funding for exploration

• Require technical support for collaboration

• High risk; evaluation to weed out nonperforming efforts


Emerging Industries and Clusters

• This is hard

• Clusters are a powerful diagnostic and policy tool

• Effective policy needs to integrate three dimensions:

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Linkages Cluster

Mobilization

Supply Knowledge

Creation

Demand Market

Creation