Diane Primont, PhDBruce Domazlicky, PhDCenter for Economic & Business Researchcebr@semo.eduhttp://www6.semo.edu/cebr

Nissan Manufacturing Facility, Smyrna, TN

M T Industrial Park

Region

R.O.W.

Global Economy Competitive Advantages are not Forever Develop Region Based on its Strengths

Political Boundaries Are Unimportant to Most Firms

Political Boundaries Not Very Important to People, Either

Access to Labor, Raw Materials, Inputs, Transportation, Markets Are the Keys

Counties Need to Cooperate, Not Compete with each Other

Geographic concentration of interconnected companies and institutions in a particular field

A cluster includes the core or driver industries upstream industries (suppliers) downstream industries (customers) other institutions (such as, agricultural extension,

research labs, trade associations, and so on)

Definitions are adopted from Indiana Business Research Center, work done with Center for Regional Development at Purdue

University and Strategic Development Group under grant from EDA

Industry Clusters Definitions1. Advanced Materials2. Agribusiness, Food Processing & Technology3. Apparel & Textiles4. Arts, Entertainment, Recreation & Visitor Industries5. Biomedical/Biotechnical (Life Sciences)6. Business & Financial Services 7. Chemicals & Chemical Based Products8. Defense & Security9. Education & Knowledge Creation

10. Energy (Fossil & Renewable)11. Forest & Wood Products12. Glass & Ceramics13. Information Technology & Telecommunications14. Transportation & Logistics15. Primary Metal Mfg16. Fabricated Metal Product Mfg17. Machinery Mfg18. Computer & Electronic Product Mfg19. Electrical Equipment, Appliance & Component Mfg20. Transportation Equipment Mfg21. Mining22. Printing & Publishing

Driver Industries:Pharmaceuticals and Medicines

MfgMedical Instruments/

Equipment/Supplies Mfg

Customers:

Health and personal

care stores;

Doctors’ offices;

Hospitals

Suppliers:

Laboratory

apparatus and

furniture Mfg

Support Industries:

Scientific R&D

Infrastructure:

Waste management

and remediation

Driver Industries:Window & Door Mfg

Furniture Mfg Container Mfg

Paper Products MfgMillwork

Customers:

Manufac. Homes;Mobile Homes;

Wholesale/Retail

Suppliers:

Logging; Sawmills; Sawmill

& Woodwor

k Machiner

y

Support Industries:

Forestry Support Services;Custom

Architectural Services

Industry clusters create a competitive advantage for the region.

The competitive advantage derives from four factors: Factor conditions Demand conditions Related and supporting industries Firm strategy, structure, and rivalry

Source: www.oseda.missouri.edu/modot/rpc/

Source: www.oseda.missouri.edu/modot/rpc/

Used to measure the extent of a region’s specialization or concentration in an industry cluster

The location quotient (LQ) is:

Employment data for 2001 and 2006 from Minnesota IMPLAN Group

LQ =Fraction of region’s employment in industry clusterFraction of nation’s employment in industry cluster

If the region employs 15% of its workforce in the industry cluster, while the nation employs 10% then

LQ = 0.15 / 0.10 = Since LQ exceeds one

the fraction of the workforce employed in the region’s cluster exceeds the fraction employed in the cluster at the national level

the region specializes in the cluster

1.5

Bubble chart is a three dimensional display LQ in 2006 (vertical axis) % Change in LQ 2001-2006 (horizontal

axis) Employment in 2006 (size of bubble)

LQ in

20

06

% chg in LQ 2001-2006

1

0

5

10-10

Star

EmergingTransforming

Mature

Hypothetical Data

Four Quadrants Northwest: Mature clusters

Specialization and slow or declining growth Northeast: Star clusters

Specialization and fast growth Southeast: Emerging clusters

Not specialized, but fast growth Southwest: Transforming clusters

Not specialized and slow or declining growth

Madison County, MissouriIndustry Clusters

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

-150 -100 -50 0 50 100 150 200

% chg in LQ 2001-2006

LQ

in 2

006

Energy

Agribusiness

Biomedical

Education & Knowledge

Apparel & Textiles

Forest & Wood

Transportation & Logistics

Arts, etc.

Mature Star

Transforming Emerging

Business & Financial

AgribusinessAdvanced Materials

Biomedical

Education & Knowledge

Transportation & Logistics

ITDefense &Security

MiningTransportation Equip Mfg

Mature Star

Transforming Emerging

Each county is unique in its industry cluster specialization.

Each county specializes in at least four industry clusters.

All counties share a cluster specialization with one or more other counties.

Southeast Missouri Regional Planning Commission: Industry Clusters

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

-200 -100 0 100 200 300 400 500 600 700

% chg in LQ 2001-2006

LQ

in 2

006 Electric. Equip. Mfg.

Mature Star

Transforming Emerging

Southeast Missouri Regional Planning Commission: Industry Clusters

(excluding Electrical Equipment Mfg.)

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

-60 -40 -20 0 20 40

% chg in LQ 2001-2006

LQ

in 2

006

Chemicals

Mining

Forest & Wood

Transp.Equip. Mfg.Energy

Transportation & Logistics

Fab. MetalMfg.

Education &Knowledge

Business & Financial

Mature Star

Transforming Emerging

LQ Analysis Summary Mature Clusters

Agribusiness, Food Processing, & Technology; Glass & Ceramics; Biomedical/Biotechnical

Star Clusters Mining; Chemicals & Chemical Based Products;

Electrical Equipment, Appliance & Component Manufacturing; Forest & Wood Products; Fabricated Metal Product Manufacturing; Transportation and Logistics

Emerging Clusters Transportation Equipment Manufacturing; Energy

Elec EquipMfg

Forest & Wood Transp.Equip. Mfg.

Energy

Transportation & Logistics

Prim MetalMfg.

Education &KnowledgeBusiness & Financial Defense & Security

Agribusiness

LQ Analysis Summary Mature Clusters

Electrical Equipment, Appliance & Component Manufacturing; Mining

Star Clusters Primary Metal Manufacturing; Agribusiness, Food

Processing, & Technology; Transportation Equipment Manufacturing; Forest & Wood Products; Transportation and Logistics

Emerging Clusters Advanced Materials; Education & Knowledge Creation;

Biomedical/Biotechnical; Fabricated Metal Product Manufacturing; Arts, Entertainment, Recreation & Visitor Industries; Defense & Security

A technique used by regional economists to study the growth /decline of a region. Growth is decomposed into its constituent parts.

National Growth Sector or Cluster Growth Share Component (Competitive Shift)

Employment, 2001: 80 Employment, 2006: 335 Increase: 255 National Growth Rate, 2001-2006: 3.5% Net Cluster Growth Rate, 2001-2006: 17.2%

(Cluster growth rate – national growth rate)

Growth Due to National Growth: 3 (0.035 x 80)

Net Growth Due to Cluster Growth: 14 (0.172 x 80)

Regional Component: 239 (255-3-14) Why such a large competitive shift?

Stars TE, 2006 Change, 2001-2006

National Cluster Region

Mining 1,506 95 50 -70 116

Chemicals 3,623 615 94 -294 815

Electrical Equipment

576 469 4 -25 491

Forest/Wood

3,513 94 121 -250 223

Fab. Metals 1,441 -3 51 -135 81

Trans./Logistics

3,928 331 127 9 194

Stars TE, 2006 Change, 2001-2006

National Cluster Region

Agribusiness 10,810 -210 391 -790 189

Forest/Wood

3,642 475 112 -232 595

PrimaryMetals

1,806 -151 69 -415 195

Transport./Logistics

4,240 1,091 112 8 971

Transport. Eq. Mfg.

2,440 920 54 -176 1,042

Thanks for Your Interest!