national governors association clusters and economic development

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Helping people and places innovate, collaborate, and prosper. www.rtsinc.org

National Governors AssociationClusters and Economic

Development

June 6-7, 2002

Stuart Rosenfeld

Regional Technology Strategies

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Clusters are economic ecosystems, not membership

organizations

Rule of Thumb 1: Select clusters based on systemic relationships that

provide market advantage

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Critical mass attracts externalities, cooperation

creates externalities

Rule of Thumb 2: The minimum firm density necessary is what will

produce external economies

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Hard externalities

• Externality > Benefit

• Supply chains > efficiency

• Specialized labor > productivity

• Specialized services > access

• More choice > costs, quality

• Range of firms > joint ventures

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Soft Externalities

• Externality > Benefit• Association > Vision, planning,

influence• Trust > Networking• Learning (1) > Tech transfer,

innovation• Learning (2) > Know how• Informal Labor

Markets > Career ladders

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Dynamics of Clusters

• Flows of: Lead to:• Information Greater knowledge of markets, labor

markets, technologies.• Ideas Diffusion of improvement, innovation• People Increased experience, career

ladders, • Goods More efficient value-added chains• Services Expanded expertise, choices• Capital Support for modernization, startups

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Boundaries of clusters are determined by members --and

are not constraining

Rule of Thumb 3: Boundaries are set by distances people will travel to work, associate, and network

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Clusters have life cycles

Rule of Thumb 4: Stages of Development of a cluster shape

its needs and interests- Embryonic

- Growth

- Mature

- Decaying

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Success Factors• Concepts

- Innovation - Imitation and competition - Entrepreneurship

• Connections - Networks and networking - Connections and Intermediaries

• Competencies - Specialized labor force - Industry leaders - Talent - Knowledge

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Common Concerns

• Can states create clusters?• Is there a risk of being too specialized?• Do clusters constitute favoritism?• Are firms too competitive to cooperate?• Is a rural cluster an oxymoron?• Will Internet negate proximity advantage?• Do clusters serve low income people/places?• Do decaying clusters have an afterlife?

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Origins of Clusters

•Cluster •Year

•Cluster/Origin •Reason

•Aalborg, DK •1948 •Telecom-SP Radio •Marine ind.

•Dalton, GA •1918 •Carpet-craft tufters •Chance

•Sausoulo, IT •1600 •Tiles-Rubbiani •Local clay

•Los Angeles •1968 •Toys-Immigrants •Costs, distr.

•San Diego •1950 •Biotech-Research •University

•Tupelo, MS •1948 •Furn.-Futorian •Labor,wood

•NC Mass. •1760 •Plastics-combs •Chance

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State Policies Levers

• For organizing its service delivery

• For targeting its investments

• For strengthening networking opportunities

• For developing its human resources

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Understanding Regional Economies

• Identify clusters- measures of scale & concentration- local views and intelligence

• Map systemic relationships- competitiveness factors- supply chains- knowledge chains

• Benchmark against competitors

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Cluster themes/advantagesProduct Carpets in Dalton, GA

Process Plastics in CT

Value chain Aerospace in Seattle

Technology Optics & imaging, Rochester

Skills/talent New media, Manhattan

Resources Wood, Arkansas

Distribution Ports, SE Louisiana

Other Software, Fairfield, IA

Other Prisons, Northern NY

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MAJOR 2-DIGIT MANUFACTURING SECTORS, 1996-1999

-60.0%

-40.0%

-20.0%

0.0%

20.0%

40.0%

0% 20% 40% 60% 80% 100% 120% 140% 160% 180% 200%

Fabricated Metals

Electronic & Other Electric Equipment

Industrial Machinery

Lumber & Wood Products

Furniture & Fixtures

Printing & Publishing

Food Products

Paper

Apparel

Chemicals

Rubber & Plastics Products

Textiles

Stone, Clay & Glass Products

Primary Metal Industries

JOB GROWTH, LOW WAGES

JOB GROWTH, HIGH WAGES

JOB LOSS, LOW WAGES

JOB LOSS, HIGH WAGES

WAGES, AS % OF NONRETAIL AVG.

JOB

GR

OW

TH

, 1996-99

size of bubble indicates number of employees

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RHODE ISLAND’S CLUSTERS

• JEWELRY• BOAT BUILDING• ELECTRONICS & INSTRUMENTS• SOFTWARE• TOURISM• PRECISION METAL WORKING• AQUACULTURE• FINANCIAL SERVICES• BIOMEDICAL

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ARIZONA’S CLUSTERSNOW AND THEN

• 1993• AEROSPACE

• AGRICULTURE, FORESTRY, FOOD

• BUSINESS SEVICES

• HEALTH/BIOMEDICINE

• INFORMATION

• MINING & MATERIALS

• OPTICS

• TOURISM

• TRANSPORTATION & DISTRIBUTION

• 2001• BIOINDUSTRY

• ENVIRONMENTAL TECH.

• FOOD FIBER & NATURAL PRODUCTS

• HIGH TECHNOLOGY

• MINING & MATERIALS

• OPTICS

• PLASTICS & COMPOSITES

• SENIOR INDUSTRIES

• SOFTWARE & INFORMATION

• TOURISM

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Cluster Benchmarks

• R&D capacity • Work force & skills• Education & training • Proximity to suppliers• Capital availability • Specialized services• Tool builders/software • Social capital• Entrepreneurship • Innovation/imitation• Market leaders • Specialized services• External connections • Vision and leadership

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Measures of Social Capital

• # of business, trade, professional associations

• Sector advisory board membership• Membership, meetings, attendance• Networks formed• Civic leadership by businesses

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Putnam’s Regional Survey Factors

• Social trust • Informal socializing• Interracial trust • Diversity of friends• Convent. Politics • Giving, volunteering• Protest politics • Faith based engage.• Civic leadership • Social cap equality• Associational involvement

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Policies for service delivery

• Aggregate,collect, sort information by cluster

• Form cross-agency quick response teams

• Encourage and support multi-firm activity

• Build incentives for multi-firm proposals into funding programs

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Forming Networks

• Publicize concepts

• Train brokers

• Identify multipliers

• Provide startup incentives

• Assessment

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USNet State Programs: Examples• Delaware DE Manufacturing Alliance• Florida Enterprise Florida• Illinois Dept of Com/Comm Affairs• Louisiana Depart of Economic Dev. • Massachusetts Bay State Skills• Minnesota Minnesota Technology• New York Empire State Development• Oklahoma Alliance for Mfg Excellence• Washington Dept of Comm. Development

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Broker Certification in Arkansas

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The Northeast Oklahoma Manufacturers’ Council, Inc.

• Formed in 1993 as a 501-C3. • Began with a few core members locally• Grew to around 40 members and held

steadily for several years• With growth in new economy has grown to

over 80+ active members today• The NEOMC, Inc. was the first organized

collaborative in Oklahoma, now there are over 25!

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Connecticut Plastics Council: From Network to Cluster

• 1993: Six companies in Naugatuck Valley approached by MTC

• 1994: $500,000 ConnSTEP grant• 1996: Hartford seminar • 1997: Growth to 48 members along Rte 8

corridor, become CPC• 1997: Incorporated as 501c3• 2001: Officially launched by state as “cluster”

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Target Investments to clusters

• Invest in cluster R&D

• Build cluster-based tech centers/parks

• Support cluster entrepreneurial activity

• Employ specialized expertise

• Market clusters

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Cluster Technology Centers

• PT-CAM (Greensboro)

• CITER (Carpi)

• TC2 (Raleigh)• Advanced Mfg Tech Center (Lynchburg)

• Candy Institute (Chicago)

• WIRENet (Cleveland)

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Strengthen Networking and build bridges

• Establish/recognize cluster organizations

• Facilitate external linkages

• Encourage cluster communications channels

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Strengthen Networking and build bridges

• Establish/recognize cluster organizations

• Facilitate external linkages

• Encourage cluster communications channels

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Cluster Organizations

• Arizona Optics Industry Assoc.• CIT.MS• Connecticut Plastics Council• Carolina Hosiery Assoc.• New York New Media Assoc.• Tri-State Manufacturers Assoc.• Rhode Island Plastics Partnership Council

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External Linkages are Crucial

• Prevent lock-in

• Source of inspiration, innovation

• Benchmarking

• Potential markets/customers

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Legsource Services

• Industry Communication Infrastructure• Maintain Mill Database• Assist Mills in Website Development• Search for New Ind. Business Opportunities• Government Procurement Assistance• Video Conferencing Technology• E-Commerce Assistance to Suppliers

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Develop human resources

• Develop a skilled and specialized labor force

• Qualify people for cluster employment

• Establish cluster skill centers

• Support regional skill alliances

• Engage CBO intermediaries

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Actions for Building a Cluster’s Workforce

• Develop specialized labor force• Contextualize curricula• Form industry cluster skills hubs• Build partnerships between education &

clusters• Form regional skills alliances• Work with non-profits

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Educational Advantages of Cluster Skills Centers

• Improves content and quality of E&T (codified knowledge)

• Increased rates of and means for informal learning (tacit knowledge)

• Increases access to employment information and opportunities (labor markets)

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Characteristics of Community College Cluster Hubs

• Staff experienced in cluster

• Develops & updates curricula, case studies

• Engages and works with cluster leaders

• Technology and market scanning

• Maintains contacts with other regions

• Brokers specialized services

• Conducts needs assessments, research

• Organizes forums, workshops, study tours

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Examples of College Hubs• Itawamba Community College, MS -

Upholstered Furniture Technology Center

• Catawba Valley Community College, NC - Hosiery Technology Center

• Northampton Community College , PA- Electrotechnology Applications Center

• Alabama Southern Community College - Chemical Processing Technology Center

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Intermediaries that raise incomes, build career ladders

• Garment Industry Development Corp.

• Jane Addams Resource Center

• Wisconsin Regional Training Partnership

• ACENet

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Achieving equity

• Qualify people for employment

• Include community based intermediaries in clusters

• Provide incentives and subsidies

• Support industry networks in distressed areas

• Encourage social responsibility

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Stuart A. RosenfeldRegional Technology Strategies, Inc.

Carrboro, NC 27510919-933-6699

[email protected]

WWW.RTSINC.ORG

national governors association clusters and economic development

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