TCI 2015 Clusters for Competitiveness: Mobilizing the Power of Modern Cluster Policy

Clusters for Competitiveness: Mobilizing the Power of Modern Cluster Policy

Christian Ketels

Opening Session: New Direction of Cluster Policy in a Creative Economy

2015 TCI Conference

Clusters for Competitiveness: Mobilizing the Power of Modern Cluster Policy

Dr Christian H. M. Ketels

Institute for Strategy and Competitiveness, Harvard Business SchoolPresident, TCI Network

[email protected]

3 Copyright 2015 © Christian Ketels

A Universal Ambition

PROSPERITY

INNOVATION

CREATIVITY

ENTREPRENEURSHIP

PRODUCTIVITY


…But Different Pathways

The “Western” Model

• Market-driven• Focus on framework

conditions

The “Asian” Model

• Government-led• Focus on targeting

specific industries

But in reality much more shades of gray...


How is this Reflected in Cluster Policies?A First Hypothesis

• Surprisingly little, because cluster programs are almost universally focused on enabling collaboration within a cluster– Key issue is whether an integrative cluster initiative exists

• Differences are more driven by a country’s stage of economic development– In more advanced economies cluster programs are the ‘lubricant’ for

existing assets and policies to work better– In emerging economies cluster programs help set priorities for necessary

investments in assets and infrastructure

• Differences in the role of government in the economy then effect how these programs are implemented, less so what they do– In western economies larger role of independent entities receiving public

funding– In Asia larger role of government agencies directly


Back to the Common Principles: What are Clusters?

Collaboration

Related Variety

Critical Mass

Proximity


Clusters in a New Economic Context

Rising Knowledge-Intensity

Lower Trade Barriers

Globalization of production sites

Falling Transportation/Communication Costs

Accelerated Technological Change

Clusters are a critical facet of modern economies

Clusters are becoming more specialized

Clusters are becoming more connected

Agglomeration Dispersion

Globalization of markets


Research About Clusters

Case Studies Cross-sectoral quantitative Studies

• Show nature of clusters

• Establish types of linkages that exist within clusters

• Identify patterns of cluster dynamics and their drivers

• Develop hypotheses on the impact of clusters on firms and regions

• Systematic comparison of clusters across sectors and locations

• Measurement of the overall importance of clusters

• Tracking of cluster evolution

• Empirical tests of the impact of cluster presence on regional and firm-level economic performance

“Cluster Mapping”


Research Findings:Clusters and the Nature of Competition

EMPLOYMENT

INCOME

PATENTS

36% 64%

51% 49%

91% 9%

Local Industries• Present everywhere at

similar levels• Serve exclusively the local

market• Little exposure to cross-

regional competition • Important for jobs, but

lower wages; growth potential limited by size of the local market

Traded Industries• ‘Spiky’ across space; 2/3s of all

traded industry employment is in strong clusters

• Serve national and global markets• Exposed to competition from other

regions and nations• Critical for prosperity through

higher wages, productivity, and innovation; growth potential set by the global market

Traded vs. Local Share of the U.S. Economy


Research Findings: Clusters and Economic Performance

Prosperity Entrepreneurship Structural Change

• Wages• Productivity• Job growth• Resilience• Patenting

• New business formation

• Survival of new firms• Job growth in new

firms

• Path of structural change(emergence of new clusters)

Presence of Strong Clusters


Putting Clusters into Context

(Creative) Skills

ComplexitySocial Capital

Innovation Systems

Entrepreneurial Ecosystems

Framework Conditions

Clusters

Urbanization

12

• Clusters emerge naturally • Clusters emerge and develop in a context deeply affected by policy choices

• Collaboration within clusters provides benefits but requires purposeful collective action

• Policies for upgrading business environment conditions can be more effective if they are cluster-specific but require information sharing and collective action

• Cluster-based policies enable informed decision making and collective action

What role for policy?


Two Opposing Approaches to Cluster Policy

MORE (Agglomeration)

BETTER (Competitiveness)

FINISH

• High risk• Traditional

‘industrial policy’

• Long-term impact• New model of public-

private collaboration


The Case for Cluster PolicyLevers

Path dependency

Information asymmetries

Coordination failures

Local Externalities

Create Platforms for Joint Action within Clusters

Organize Public Policy around

Clusters


Current Status of Cluster Policies and Programs

• Many countries and regions, especially within the OECD, have cluster-related policy programs

• Spending on cluster-related programs is meaningful, but only a modest percentage of total spending per policy area

• Funding is biased towards existing strengths, but many efforts exist without established critical mass

• Cluster programs are often run by a range of ministries or agencies; there is limited coordination between programs

• Funding for strengthening collaboration is always a part; other elements differ significantly

• Design principles differ widely across many dimensions


Cluster Initiatives: The Track Record So Far

• Large number of initiatives, many have shown sustainability over time

• Visible strengthening of networks and local capacity for collective action

• Significant engagement of companies, including private sector investment

• Positive impact on firm performance for participants in collaborative projects initiatited through cluster iniatives

• Significant heterogeneity of impact

• Benefits for broader regional economic performance hard to quantify

• Government remains dominant funder of the majority of cluster initiatives

• Tendency to strengthen existing structures; less successful in enabling structural change


Critical Success Factors of Cluster Efforts

Setting• Cluster with critical mass of existing

economic activities• Broader policy environment focused on

competitiveness upgrading

Organization

Activities

• Capabilities of the Cluster Initiative Manager and her/his staff

• Robust funding model• Governance structure that supports a private

sector logic driving the organization

• Strategic action agenda grounded in fact-driven analysis of the relevant market and the cluster’s competitive position

• Operational effectiveness in individual activities

ExternalInternal


Broadening Tasks for Cluster Programs

Encouraging Collaboration

Strengthening Local Buzz

Strengthening Strengths

Building Global Pipelines

Supporting Related Diversification

Upgrading Competitiveness


Implications for Cluster Program Authorities

• Leveraging cluster programs as an ‘organizational infrastructure’ to deliver a range of functional programs– Policy integration– Larger role for creating sufficient capacity in cluster initiatives!

• Differentiation of programs between existing vs emerging/potential strengths– Selection– Support – Exit

• Changing relationship between cluster initiatives and government agencies– ‘Two-way’ knowledge flows– From Principal-Agent to Stakeholder


Implications for Cluster Initiatives

A broader set of responsibilities• Trend and partner scouting• Strategy vs execution• Partner vs project manager

A broader set of partnerships• Other fields• Other locations/countries• Different government, academia, private sector

A broader set of capabilities• Process• Technologies, markets• Policy


Back to “Western” vs. “Asia”:Revisiting the Hypothesis

• Cluster-based economic development is about the way to organize collaboration

• Collaboration is a social process, not an administrative or technical one

• The most effective way to structure such a social process depends on a location’s context; it is unlikely to be the same everywhere

• Western and Asian approaches are more likely to differ in the way cluster efforts are implemented and structured than in their ambitions and fundamental economic logic

Economy & Finance

TCI 2015 Clusters for Competitiveness: Mobilizing the Power of Modern Cluster Policy