Where we have come from and where we are going in the cluster policy. christian ketels

Basque Cluster Day 2015

25 Years of Cluster Policy in the Basque Country:

Looking back, looking ahead

Dr Christian H. M. Ketels

Institute for Strategy and Competitiveness, Harvard Business SchoolChair of the Academic Advisory Council, Orkestra

President, TCI Network

2 Copyright 2015 © Christian Ketels

• What is special about the Basque Cluster Policy

approach?

• What has happened in cluster research and cluster

policy internationally since 1990?

• What are issues that the Basque Cluster Policy has to

face now?


What is Special about Basque Cluster Policy?

1. Choices at the Start

Strengthening

strengths:

A focus on

manufacturing

Finding an own model:

not just another Valley

Individual leadership:

the role of Jon Azua



2. The Approach Taken

Competitiveness Through Clusters(not the creation of clusters)

Public-Private Dialogue Through Clusters(not subsidies)



3. Sustaining the Effort

A cluster-based approach

to competitiveness as a

Basque priority, not a

party-political effort


Learning from the Basque Experience


How Research has Evolved: An Old Concept….


…with a Stable Set of Core Building Blocks…

Collaboration

Related Variety

Critical

Mass

Proximity


…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


What Has Changed in Cluster Research?

Understanding the nature of clusters

• From case studies to cluster mapping

• Traded vs local industries

• Systematically linking performance, competitiveness, and

cluster presence

• Research on clusters of emerging industries, linkages

across clusters

Understanding the dynamics of cluster-based efforts

• Framing the role of cluster policy

• Research on cluster initiatives


Research About Clusters

Case StudiesCross-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”


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


Clusters and Regional Specialization

Boston, MA-NH

Education and Knowledge Creation

Financial Services

IT and Analytical Instruments

Biopharmaceuticals

Los Angeles, CA

Video Production & Distribution

Apparel

Music & Sound Recording

Medical Devices

San Jose-San Francisco, CA


Biopharmaceuticals

Video Production & Distribution

Marketing, Design & Publishing

New York, NY-NJ-CT-PA

Financial Services

Marketing, Design and Publishing

Performing Arts

Music and Sound Recording

Seattle, WA

Aerospace Vehicles and Defense


Water Transportation

Fishing and Fishing Products

Chicago, IL-IN-WI

Distribution & E-Commerce

Transportation and Logistics

Financial Services

Upstream Metal Manufacturing

Denver, CO

Business Services

Medical Devices

Hospitality and Tourism

Oil and Gas Production

Raleigh-Durham, NC

Livestock Processing

Vulcanized and Fired Materials

Textile Manufacturing

Education and Knowledge Creation

Source: Prof. Michael E. Porter, Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School; Richard Bryden, Director.

Pittsburgh, PA

Upstream Metal Manufacturing

Coal Mining

Electric Power Generation

Vulcanized and Fired Materials

San Diego, CA

Recreational & Small Electric Goods

Biopharmaceuticals

Water Transportation

Marketing, Design & Publishing

Atlanta, GA

Textile Manufacturing

Apparel

Communications Equipment

Business Services

Dallas

Aerospace Vehicles and Defense


Communications Equipment

Transportation and Logistics

Houston, TX


Construction Products & Services

Upstream Chemical Products

Environmental Services

13


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


Linkages Across Clusters / Emerging New Clusters

Digital Industries

Computer consultancy activities

Computer programming activities

Other

information

technology and

computer service

activities

Manufacture of

communication

equipment

Other telecommunications activities

Satellite telecommunications activities

Wireless

telecommunications

activities

Wholesale of computers,

computer peripheral

equipment and software

Wholesale of electrical

household appliances

Wholesale of

electronic and

telecommunications

equipment and

partsWholesale of other

machinery and equipment

Wholesale of

other office

machinery and

equipment

Manufacture of

computers and

peripheral

equipmentManufacture

of consumer

electronics

Manufacture of

electronic

components

Manufacture of

instruments and

appliances for

measuring, testing

and navigation

Manufacture of

loaded electronic

boards

Manufacture of

optical instruments

and photographic

equipment

Other software

publishing

Publishing of

computer games

Manufacture of

electricity

distribution and

control apparatus

Manufacture of

other electrical

equipment

Book publishing

Market research

and public

opinion polling

Public

relations and

communication

activities

Manufacture of medical

and dental instruments

and supplies

Manufacture of tools

Treatment and

coating of metals

Manufacture of other

plastic products


general−purpose

machinery n.e.c.


special−purpose

machinery n.e.c.

Business Services

Com m unications

Equipm ent and Services

Distribution and Electronic Commerce

Inform ation Technology and

Analytical Instrum ents

Lighting and Electrical Equipm ent

Marketing, Design,

and PublishingMedical Devices

Metalworking TechnologyPlasticsProduction Technology

and Heavy Machinery

Digital Industries


Putting Clusters into Context

(Creative)

Skills

Complexity

Social Capital

Innovation

Systems

Entrepreneurial

Ecosystems

Framework

Conditions

Clusters

Urbanization

17

• 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

• The European Cluster Observatory lists more than 2000 cluster

initiatives and related organizations; many other countries and

international organizations, too, deploy significant efforts

• The highest number of cluster initiatives (absolute, per employee) is in

information technology and biotech

• Most OECD countries and many regions have cluster-related policy

programs

• Spending on cluster-related programs is meaningful, but only a

modest percentage of total spending per policy area


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


Cluster Initiatives: Organisational Models

Government

Agency

Existing

Economic Dev.

Organization

Cluster

Initative

Membership

Organization

Service

Provider


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

External

Internal


What is Different about

Cluster-Based Economic Development?

Cluster vs.Narrow

Industries

RegionalPerspective

Build on Strengths

Policy Designwith Firm

Involvement

Public-PrivateCollective

Action

Competitiveness

Focus


Work in Progress

• Evolution of clusters

• Clusters of emerging industries

• Impact assessment

• Clusters and competitiveness


What Has Changed in Cluster Policy Practice?

Strengthening local buzz Building global pipelines

Strengthening StrengthsSupporting Related

Diversification

Encouraging CollaborationUpgrading

Competitiveness


Issues Facing the Basque Cluster Policy

Competitiveness of existing clusters –

a task never over

Diversification into higher-value areas –

is the new model working?

From Clusters to Regional Strategy –

What is the Region’s Value Proposition?

How to

productively

engage with

the Spanish

innovation

system?


The TCI Network: A Global Community of Practice in

Cluster-Based Economic Development

28

www.tci2015.org

www.tci-network.org

http://www.tci2015.org/

Economy & Finance

Where we have come from and where we are going in the cluster policy. christian ketels