TCI2013 Clusters and Regional Competitiveness

1 Copyright 2013 © Christian Ketels

Regions, Competitiveness, and ClustersChristian Ketels

Business Summit: Strategic Innovation Partnerships

4 September 2013

Regions, Competitiveness, and Clusters

Dr Christian H. M. KetelsTCI, HBS

2013 TCI ConferenceKolding, Denmark



Why the Traditional Focus on Central Government?

Nation = Laws

Nation = Money

Nation = Markets


Supporting Economic Growth

MacroeconomicManagement

(DEMAND)

MicroeconomicUpgrading

(SUPPLY)

Sustainability

Stimulus

Policy Framework

Policy Action


What Action to Take – and Where

Capital

Knowledge

Institutions

Evolution ofClassical Approaches

Emerging New Insights

• A range of factors matters; there is no ‚silver bullet‘

• Individual factors are interdependent in their impact on prosperity

• The location-specific context is critical to identify key levers to enable growth


Why the New Focus on Regions?

Region = Linkages

Region = Local Knowledge

Region = Cluster


Why Regions Should Be Concerned about Clusters

9

Clusters Drive Regional Economic Performance

Prosperity Entrepreneurship Structural Change

Positive correlation between share of regional

employment in strong clusters (breadth of clusters; related cluster strength) and:

• Wages

• Productivity

• Job growth

Positive correlation between share of regional

employment in strong clusters (strength of related

cluster) and:

• New business formation in new/existing industries

• Survival of new firms

• Job growth in new firms

Path of structural change (emergence of new clusters)

in regional economies is driven by legacy of

composition (portfolio of existing clusters)

e.g. Porter (2003), Greenstone (2008). Delgado/Porter/Stern (2012),

e.g., Delgado/Porter/Stern (2011), Lindqvist/ Wennerberg (2008)

e.g., Neffke et al (2009); Boschma et al. (2013)


Clusters Enhance the Value of Good Business Environments

Industry Cluster Industry Cluster0%

2%

4%

6%

8%

10%WEAK

Business EnvironmentSTRONG

Business Environment

Specialization measured by employment LQ

Impact of higher employment LQ

on wages

Source: Ketels/Protsiv, 2013


Performance

FunctionalType/Density

Cluster Networks Provide Social Capital

Business Environment

Quality

GovernmentCapacity

Cluster

SizeGeographic

Location

NaturalAssets

Culture/Social Capital


In What Ways Can Regions Leverage Clusters?


The Role of Different Levels of GovernmentThe Old View

National Government

Regional Government

SETS THE LEGAL CONTEXT

MAKESINVESTMENTS

PROVIDESTOOLS

EXECUTES


The Role of Different Levels of GovernmentThe New View

National Government

Regional Government

SETS THE LEGAL CONTEXT

MAKESINVESTMENTS

PROVIDESTOOLS

EXECUTES

LEVERAGES

ATTRACTS MOBILIZES


How Regional Government Can Leverage Clusters

LEVERAGE• What dimensions of the business

environment to strengthen?• Use cluster data to identify critical mass• Use cluster groups to get insights

MOBILIZE• What networks to mobilize? How?

• Use cluster data to identify presence• Use clusters to define a scope that

matters to companies

ATTRACT• What skills, firms, investors to attract? How?

• Use clusters to identify targets• Use clusters to sharpen the message


Lessons

• For national government – acknowledge regional diversity

• For regional government – have a comprehensive strategy

• For companies – take the initiative

• For cluster initiatives – use and serve (also) the region

National Government: Align Cluster Policies With Regional Characteristics

Competitiveness• Business environment quality• Company Sophistication• Cluster presence

Capacity• Social capacity• Technical skills of the public

administration

Political power• Size• Legal competences

Profile• Geographic location• Sectoral specialization

Select objectives• Mobilize existing clusters• Test potential of emerging clusters• Channel to upgrade business

environment/companies• Strengthen trust

Create or use policies• Design regional policies• Draw on EU/national policies

Set the scope• Set number of clusters• Set financial budget

Characteristics of the Region

Characteristics of the Cluster Policy


Regions: Integrate Clusters into a Broader Strategy

BusinessEnvironment

ClusterPortfolio

Positioning

• Identifies, communicates, and strengthens the specific value proposition of the location

• Accelerates growth in those fields where the location has strengths

• Enables the emergence of new clusters from existing clusters

• Improves the economic platform for all clusters and companies


Companies: Drive Cluster Initiatives

• Initiate/ Convene

• Co-Finance• Participate in

activities

• Propose relevant clusters

• Define cluster actionpriorities

• Drive activities

Governmentmay

Firmsshould


Cluster Initiatives:See the Region Behind the Cluster

Context for Firm

Strategy and Rivalry

Related and Supporting Industries

Factor(Input)

Conditions

Demand Conditions

• Sophisticated and demanding local customers and needs– e.g., Strict quality, safety, and

environmental standards– Consumer protection laws

• Local rules and incentives that encourage investment and productivity

– e.g. incentives for capital investments, IP protection, corporate governance standards

• Open and vigorous local competition

− Openness to foreign competition− Strict competition laws

• Access to high quality business inputs– Human resources– Capital availability– Physical infrastructure– Administrative

infrastructure (e.g., business registration, permitting, transparency)

– Scientific and technological infrastructure

• Availability and depth of suppliers and supporting industries

• Presence of Institutions for Collaboration (IFCs) that support productive coordination and collaboration among actors

Plastics

Oil and Gas

Chemical

ProductsPharm

a-ceutica

ls

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 Service

s

Sporting,Recreation

and Children’s Goods

Business

Services

DistributionServices

Fishing &

Fishing Produc

ts

Footwear

Forest Produc

ts

Heavy Construction

Services

Jewelry &

Precious

Metals

Construction Materials

Prefabricated Enclosures

Textiles

Tobacco

Heavy Machinery

Aerospace Engines

Automotive

Production Technology

Motor Driven Products

Metal Manufacturing

Business Environment Qualities Regional Cluster Portfolio


• There is a new role for regions that gives them a central responsibility in upgrading competitiveness

• Clusters are a critical tool and organizing principle for regions to play this role

• National government, regional government, companies, and cluster initiatives have key tasks to make clusters work for regions