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Clusters and Regional Competitiveness: What and Why KDI & World Knowledge Forum October 2003. Clusters and Regional Competitiveness What and Why. Introduction: The path to prosperity Why do regions matter? What is a cluster? What’s so good about clusters? - PowerPoint PPT Presentation
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Clusters and Regional Competitiveness: What and Why
KDI & World Knowledge Forum
October 2003
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Clusters and Regional Competitiveness
What and Why
Introduction: The path to prosperity
Why do regions matter?
What is a cluster?
What’s so good about clusters?
What are some potential difficulties with clusters?
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The (New) Path to Prosperity
InnovationInnovationInnovationInnovation
CompetitivenessCompetitiveness(Productivity)(Productivity)
CompetitivenessCompetitiveness(Productivity)(Productivity)
ProsperityProsperityProsperityProsperity
The most important sources of prosperity are created not inherited
Productivity does not depend on what industries a region competes in, but on how it competes
Technology is a means to an end, not an end in itself.
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Why Regions Matter for Economic Development?
Why is Regional (not State or National) the Primary Focus?
Seoul is not Daegu is not Busan…
National policies and state policies create the basic environment for competition and develop some shared assets for firms
– intellectual property laws– trade policy – physical and environmental security– business/financial standards and regulations– educational policies and funding
But its at the regional level that firms and support institutions interact most closely and at which conditions exist (or can be created) that significantly differentiate your competitive environment from other regions.
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Context for Firm
Strategy and Rivalry
Context for Firm
Strategy and Rivalry
Related and Supporting Industries
Related and Supporting Industries
Factor(Input)
Conditions
Factor(Input)
Conditions
• A core of sophisticated and demanding local customer(s)
• Unusual local demand in specialized segments that can be served nationally and globally
• Customer needs that anticipate those elsewhere
• A local context that encourages investment and sustained upgrading
• Open and vigorous competition among locally based rivals
Demand ConditionsDemand
Conditions
• High quality, specialized inputs available to firms:
– human resources– capital resources– physical infrastructure– administrative
infrastructure– information infrastructure– scientific and technological
infrastructure– natural resources
Enabling Innovation: The Regional Competitive Environment
• Availability of capable, locally based suppliers and firms in related fields
• Presence of CLUSTERS instead of isolated industriesSource: Professor Michael E. Porter, Harvard Business School,
GOVT
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Context for Firm
Strategy and Rivalry
Context for Firm
Strategy and Rivalry
Related and Supporting Industries
Related and Supporting Industries
Factor(Input)
Conditions
Factor(Input)
ConditionsDemand
Conditions
Demand Conditions
Enabling Innovation: The Regional Competitive Environment
Source: Professor Michael E. Porter, Harvard Business School, Council on Competitiveness
Networks, Linking Institutions
Formal and informal networks that generate key relationships and foster innovation: Associations, Chambers, Tech Transfer Offices
Attitudes that support innovation: willingness to partner, risk-taking, tolerance of diverse people and perspectives, openness to new ideas
Attitudes/Norms
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What is a Cluster?
A cluster is a geographically proximate group of interconnected companies and associated institutions
in a particular field
Source: Professor Michael E. Porter, Harvard Business School
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OmahaTelemarketingHotel ReservationsCredit Card Processing
Wisconsin / Iowa / IllinoisAgricultural Equipment
DetroitAuto Equipmentand Parts
RochesterImaging Equipment
Western MassachusettsPolymers
BostonMutual FundsMedical DevicesMgmt. ConsultingBiotechnologySoftware and NetworkingVenture CapitalHartfordInsurance
ProvidenceJewelryMarine Equipment
New York CityFinancial ServicesAdvertisingPublishingMultimedia
Pennsylvania / New JerseyPharmaceuticals
North CarolinaHousehold FurnitureSynthetic FibersHosiery
Dalton, GeorgiaCarpets
South FloridaHealth Technology Computers
Nashville / LouisvilleHospital Management
Baton Rouge / New OrleansSpecialty Foods
Southeast Texas / LouisianaChemicals
DallasReal Estate Development
WichitaLight AircraftFarm Equipment
Los Angeles AreaDefense AerospaceEntertainment
Silicon ValleyMicroelectronicsBiotechnologyVenture Capital
Cleveland / LouisvillePaints & Coatings
PittsburghAdvanced MaterialsEnergy
West MichiganOffice and Institutional Furniture
MichiganClocks
San DiegoGolf EquipmentBiotech/Pharma
MinneapolisCardio-vascularEquipmentand Services
Warsaw, IndianaOrthopedic Devices
ColoradoComputer Integrated Systems / ProgrammingEngineering ServicesMining / Oil and Gas Exploration
Las VegasAmusement / CasinosSmall Airlines
OregonElectrical Measuring EquipmentWoodworking EquipmentLogging / Lumber Supplies
SeattleAircraft Equipment and DesignSoftwareCoffee Retailers
BoiseInformation TechFarm Machinery
Where Are Clusters?
Everywhere...
Source: Adapted from Professor Michael E. Porter, Harvard Business School
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San Diego Pharmaceuticals / Biotech Cluster
National Leader Nationally Competitive Less Developed
Legal Services
Legal Services
Specialized Support Services
AccountingFirms
AccountingFirms
BanksBanks
Specialized Risk Capital
Venture Capital Firms
Venture Capital Firms
Angel Networks
Angel Networks
UCSDUCSD
Community CollegesCommunity Colleges
SDSUSDSU
Human Capital Providers
Cluster/University/
Government Relationship
Providers
Research
BIOCOMBIOCOM
UCSD CONNECT
UCSD CONNECT
Science and Technology
Council
Science and Technology
Council
Specialty Chemicals
Specialty Chemicals
Inputs Pharmaceuticals and Related Products
Pharmaceutical Products
(Manufacturing)
Pharmaceutical Products
(Manufacturing)
Equipment
Medical Devices
Medical Devices
Laboratory Instruments and Process Equipment
Laboratory Instruments and Process Equipment
Other Products
Consumer Goods
Consumer Goods
ContainersContainers
PackagingPackaging
UCSD Labs and Hospitals
UCSD Labs and Hospitals
SalkSalk
ScrippsScripps
BurnhamBurnham
KimmelKimmel
Private FirmsPrivate Firms
Source: Harvard Institute on Strategy & Competitiveness, Cluster Mapping Project , U. S. County Business Pattern Data; ontheFRONTIER interviews
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What’s So Good About Clusters?
Increase Efficiency Efficient access to information, specialized inputs and
employees, institutions, and “public goods” Easier to achieve complementarities across businesses
Spur Innovation Improved ability to perceive and respond to innovation
opportunities More rapid diffusion of improvements
Facilitate New Business Formation Easier to identify opportunities for new businesses Lowers barriers to entry (including perceived risk)
Source: Professor Michael E. Porter, Harvard Business School
A good way to organize firms for increased productivity A good way to organize economic development policy efforts
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What Are Some Potential Difficulties with Clusters?
As Analytical Tools Many different ways to measure clusters
– Need national benchmarks AND local measures to reflect regional conditions
– Sometimes regions get stuck in analysis paralysis
As Organizational Method for Economic Development Policy Initiatives What if you aren’t in a chosen cluster?
– Need to convince local businesses that traded clusters will benefit all
– May lead to lack of focus on fundamentals (education, quality of life)
As Indicators of Economic Growth Areas Much innovation takes place at the intersection of clusters
– You might miss it Bioinformatics, Agribusiness
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• Complement and build upon on-going regional economic development initiatives
• Assist region with an inventory and evaluation of their innovation assets and economic strengths and weaknesses
• Build consensus among regional leaders on priorities, policies and practices for strengthening the regional innovation platform
CATALYZE ACTION
Example COC-CRI Initiative:Wilmington Competitiveness Initiative
Objectives
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Identification of 3 Key Regional Issues
Analytical Phase Business Survey
Review of Previous Reports
Interviews/Focus Groups
Comparative Data Analysis
Example COC-CRI Initiative:Wilmington Competitiveness Initiative
Process
Regional Summit Regional StakeholdersCouncil Experts
Action Plans Regional Working GroupsOngoing efforts
Mission: to set an action agenda that drives economic growth and raises the standard of living for all Americans
Membership: corporate CEOs, university presidents and labor leaders
Focus: benchmarking U.S. competitiveness, supporting national and regional innovation, maintaining competitiveness and security, and succeeding in the global marketplace
Council Center for Regional Innovation A resource and advocate for regional economic development
efforts throughout the country Educate national and regional policymakers Conduct leading edge research & development Catalyze implementation of innovation-based ED
strategies
