Center for Economic Development Smart Policy for Innovative Regions Bowling for Clusters SSTI Annual

Center for Economic DevelopmentSmart Policy for Innovative Regions

Bowling for Clusterswww.andrew.cmu.edu/user/jp87/bowling4clusters.pdf

SSTI Annual Conference

Jerry Paytas, Ph.D.Director


Industry Clusters DefinedIndustry Clusters are collections of firms in related industries located in close proximity to one anotherIndustries can be connected in a cluster through a variety of relationships

Buy and sell Related technology Common infrastructure Common workforce

Competition and collaboration are sources of innovation


Cluster Process

Define Region

Define Cluster

Strategy& ActionIdentify

Partners

Analysis


The Cluster Compass

Cluster

Cluster businesses are embedded in

community

Cluster support services are located in

community

Cluster workers live in community

Cluster workers play in the community

Source: The Cluster Compass was developed by the H.J. Heinz III School of Public Policy, Systems Synthesis Project, Integrating Neighborhoods into Regional Clusters, ©May 2002

Communities and Regional Clusters

Regional Cluster

Regions or communities may be home to some, all, or none of the regional cluster elements.

Firm

Institution

Customer

Service Provider

Cluster Elements

Regional clusters are connected to each other in a variety of ways, including supply chains, business partnerships, institutional relationships, service provision, the transfer of new technologies, and relationships between workers and firms. Clusters are connected to others in the United States and around the world.


Cluster Process

Define Region

Define Cluster


Partners

Analysis

Structure

Core

Markets

Trends


Defining Your Clusters

Pro ConLocal Less time, cost

Explores interdependenciesFocus on critical needs

Obscures broader patterns and linkagesCluster interests may not align with regional onesConfuse cause & effect

Global Integrated with national/global trendsPortrait of a regionIdentifies regional gaps

Lengthy & expensiveKey sectors or critical exceptions may be obscured Data problems


Cluster Structures

Networked Silicon Valley

Hub and Spoke Detroit

Satellite Raleigh-Durham Albuquerque (State Satellite)


Networked Small, local firmsStrong internal linkages Internal labor marketSpecialized services and patient capitalInnovation is regional (vs. firm or external)

Region

Suppliers


Hub and SpokeLarge VIF and suppliersInternal / external linkages Less flexible labor marketFew trade associationsLocal decisions, global impact

Region


Region

SatelliteLarge external firms and local branchesDecisions are externalMinimal intra-district tradeExternal labor market, organized by firmHigher white collar migration


Cluster Process

Define Region

Define Cluster


Partners

Analysis

Dynamics

Drivers

Assets

Gaps


An Industry Cluster Analysis Contains…

A definition of key industries in a region An analysis of cluster dynamics Key relationships Cluster drivers

Identification of regional gaps, assets, and opportunities


Cluster Analysis Techniques

Technique Define Dynamics

Drivers

Assets

Gaps

Expert Opinion

Focus Groups

Surveys

Specialization

Innovation

Industry-Occupation Matrix

Input-Output Matrix

Graph/Network Analysis

Somewhat useful

Very useful


Techniques Critique

Pro ConObservations

FlexibilityCurrent

Difficult to generalize or compareIndividual or Firm perspective

Statistics ComprehensiveObjective

Industry data (vs. firm or product)Excludes supporting sectors


Location Quotients

Loc

atio

n Q

uot

ien

t

Employment Growth

Important industries that may require attention

High

High

Low

Low

Important growth industries

Industries of little promise to local economy

Potential emerging industries

Total

Total

Industry

Industry

Reg

ion

Natio

n

Formula Interpretation


Input-Output Matrix

Industry A Industry B Industry C Industry D …Total Final

UsesTotal Commodity

Output

Industry A 68,622$ 77$ 5,860$ 142,411$ 34,941$ 280,499$ Industry B 367$ 31,477$ 7,368$ 81,721$ (39,240)$ 137,176$ Industry C 3,368$ 4,693$ 895$ 28,745$ 787,207$ 1,006,175$ Industry D 49,395$ 14,512$ 299,428$ 1,371,573$ 1,611,517$ 3,871,801$ …Total Industry Output 282,422$ 147,816$ 1,006,174$ 3,964,771$ -$ 15,432,293$

Input-Output Data from the Bureau of Economic Analysis


Electro-Optics Cluster

University

Military

Elec. Equip

AnalyticalInstruments

Surgical -MedEquip

Comm.Equip

NavigationEquip

Sensors&

Controls

Non-FerrousWire

SpecializedServices

RiskCapital

Electro-Optics

Optoelectronics

Leading

Competing

Lagging

Strong

Weak

Moderate

Legend

Lines

Colors


Cluster “Map”

Rare Ties — Less than 50 % said sometimes or frequently influenced idea innovation

Occasional Ties — between 50%–80%said sometimes or frequently influenced idea innovation

Common Ties — Greater than 80% said sometimes or frequently influenced idea innovation

Regional Suppliers

Bus Assistance

Centers

TradeAssociations

BusinessIncubators

Community Colleges

Universities

Venture Capital

Research Centers

Other Firms

Customers

Cluster

Use to assess links or resource pools

Source: Clusters of Innovation Initiative, Regional Survey; Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School; Interviews


Cluster Confusion

Package &Containers

11,879 (-19%)

Chemicals3,570 (-22%)

Distribution5,400 (67%)

Consumer Goods Biological Products

Training Inst.101,849 (-2%)

Cluster Orgs143 (12%)

Pharmaceutical Products1,152 (-22%)

Research6,708 (-37%)Instr & Devices

5,000 (14%)

Core12,900 Employees

322 Firms-22%

Suppliers20,800 Employees

612 Firms-7%

Support102,000 Employees

3,800 Firms-2%


Cluster Process

Define Region

Define Cluster

Strategy& Action

IdentifyPartners

AnalysisNeeds

Links

Levers

Scale


Implications for Strategy

More than targeting Develop local resource baseFoster networks & collective actionFill gaps Infrastructure Supply chain

Identify competitive strengthConsider the market


Critical Questions

Specialization Promotes shared resources, infrastructure,

talent But, specialized knowledge may be

applicable to a narrow range and can be made obsolete by new innovations

Diversification Promotes cross-fertilization and adaptation But, diverse sectors require strong linkages

and too much diversity reduces strength and opportunity for linking


Implementation Roles

What do you do differently!Pro-active and responsiveFocus – identify needs, deliver servicesAggregate demandWholesale vs. Retail


Risks….

Where’s the beef?This town isn’t big enoughMissing the Next Big ThingDoes size matter?


Rewards…

All together nowSpreading the riskA penny saved…Speed to scale There’s always next time


Benefits of Cluster Strategy

Focus on relationships rather than the needs of individual firmsIdentify gaps and opportunities presented by the region’s economy Pro-active organization of resources/activities Financial programs and incentives Attraction targets Infrastructure and site development

investments Workforce programs


The End

Thank you

Documents

Center for Economic Development Smart Policy for Innovative Regions Bowling for Clusters SSTI Annual