Regional Innovation Clusters:

A Strategic Economic Development Approach

The World has Changed

• Convergence of Complex Challenges

• Loss of Jobs

• Growing US Trade Deficit

• Greater International Competition in manufacturing and service industries

• Competitive advantages are increasingly tied to human capital and innovation

• Economic growth is closely related to education/workforce, energy, climate change, environmental, natural resource and geopolitical issues

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Our Policy and Practice Must Change

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Unprecedented challenges require innovative solutions for creating jobs and promoting regional prosperity.

From Silos … … to Collaboration.

Economic and Industry Policy: maintaining a robust economy in which innovative activity thrives

and supporting industry development.

Education Policy:

identifying skill shortages and training needs for re-skilling or up-skilling and

investing in skill development

programs.

Science and technology policy: supporting collaborative research involving networks with industry

and stimulating the commercialization of research.

Regional Policy: building

competitive regions by

developing skills and initiatives

that boost local economic

activity

Regional Innovation Clusters

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RICs are a geographically-bounded, active network of similar, synergistic or complementary organizations which leverage their region’s unique competitive strengths to create jobs and broader prosperity.

Why do RICs Matter?

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• They create a transition path from unemployment or

underemployment to high-skill jobs.

• On average, jobs within clusters pay higher wages.

• Regional industries based on inherent place-based advantages are less

susceptible to off-shoring.

• Create many new job opportunities for American workers.

• They connect disenfranchised communities to new career and

educational opportunities.

• They stabilize communities by re-purposing idle manufacturing assets,

engaging underutilized human capital, and contributing to

improvements in the quality of life.

Regional Innovation Clusters

• Implies bounded area characterized by inherent social, environmental, economic, and cultural assets

• Transcends socio-political boundaries

• May include urban & rural

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Five Key Components to Consider When Defining Unique Regional Assets

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ECONOMIC

BASE

ENTRE-

PRENEURSHIP

TALENT

INNOVATION

& IDEAS

Location, Infrastructure, Amenities,

Factor Costs, Natural Resources

The basic conditions defining the

economic milieu of the region

Your capacity to create

companies wholly new or

from existing firms

Your capacity to innovate

and generate new ideas

What you make, including

your existing &

prospective industry

clusters

What you do: your

workforce skills &

human capital base

Regional Innovation Clusters

• Latin: To make new or renew

• The value-added commercialization of a new idea that produces new goods, services, and/or processes

• The recombination of existing goods, services and processes that results in new or renewed goods, services, and/or processes.

• Because innovation can be widely applied it can occur in both emerging and traditional industries

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Regional Innovation Clusters

• Presence of spatially proximate organizations that share active commercial interaction channels, specialized infrastructure, labor markets, and services

• Share a common goal to maximize regional prosperity

• Link to trans-regional and global networks

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Regional Innovation Clusters

Anatomy of a Cluster

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Support Industries

Suppliers:Customers:

Driver Industries:

Local &

State Gov’t

Federal

Agencies

Sources of

Capital

Workforce

Development

& Training

Universities

Community

& Technical

CollegesNonprofits

Public Infrastructure

Labor

Organizations

Federal Role

The Federal Government’s role is to help self-organizing, bottom-up RIC participants become all they can be.

• Identify existing – NOT creating new RICs

• Convener of relevant stakeholders

• Creator of overarching framework to support national networks of clusters

• Disseminator of information

• Provider of targeted capital investments

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• All parts of the nation

• Can be in wide array of industries

• Vary in size, shape, and reach

• Often cross local, county, and state boundaries

• Urban and rural

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RICs Are Diverse

Are All RICs Worthy of Investment?

RICs have different lifecycles – and different strategies are required depending on where a RIC is in

the lifecycle!

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Type of Cluster Type of Strategy

Declining Define transformation

Restructuring

Assist businesses in cluster in establishing methods for improving

efficiency (i.e. Six Sigma, management and financial processes,

etc.)

Growing Assist businesses in cluster in identifying new markets

Mature

Provide businesses in cluster with resources to help spin-off new

firms; Help firms identify new opportunities where they can

expand

Best Practices in RIC Management

• Regionally-Led from existing networks & assets – bottom-up

approach

• Involve partnerships between private and public at all levels

(i.e. local, regional, state, and Federal)

• Unique strengths of region are built upon rather than trying to

copy other regions (i.e. everyone can’t support a biotech cluster)

• Different strategies are developed for different clusters

• Well-funded initially and self-sustaining over the long-term

• Linked with relevant external efforts, including regional

economic development partnerships and cluster initiatives in

other locations

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Evidence of RIC Results

• Higher wages for employees

• Increased numbers of business spin-offs

• Labor less likely to be outsourced

• Increase Regional prosperity

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RIC Case Studies

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NC Biotech RIC

• Located in Research Triangle:

Raleigh, Durham, Chapel Hill

• Centered around RTP, which is

comprised of

– 145 organizations

– 39000 employees

– Of which 93% engaged in R&D,

average salary $56K

• BLS: Average salary of region

$39,056 vs. $32,869 for state

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NC Biotech RIC (cont.)

• Unique assets:

--NC State (agriculture, engineering)

--Duke (engineering; biomed; medical center with hospital,

clinical, training, research programs)

--UNC-Chapel Hill (biomed research, computer science)

--111,000 students in region (out of 1.3M population)

-- Strong public-private leadership and commitment to

infrastructure investment

--Raleigh-Durham Airport

--Marketing campaign

--Financing and building labs

--Attracting HHS National Institute for Environmental

Health Sciences)

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MN Medical Devices RIC

• Concentrated in seven-county Twin Cities metro area

• 455 firms; 29,351 workers

• Firms in RIC research, develop, and produce everything from catheters

& pacemakers to dental instruments, eyeglass lenses, and hearing aids

• Exported $2.1 billion in 2007

• Region accounted for 10.5% of medical device patents between 2002

and 2006

• Unique assets:

--U of MN (15th in R&D)

--Mayo Clinic

--Related clusters (HBS cluster ranking: 11th in IT, 12th in health

services, 13th in pharmacy

--Venture capital (87% of area total; $33.4M Q1 2008)

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MN Medical Devices RIC (cont.)

Source: MN Dept. of Employment and Economic Development

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Midwest Renewable Energy RIC

• Covers a broad region, including Industrial Mid-west, Great Plains, Dakotas, and northern Texas

• High growth industry—42% of new generating capacity in 2008

• Extra source of income for farmers

• Jobs created range from production workers in the wind turbine plants with limited education to PhDs designing next generation of wind turbines

• Unique assets:

--Vast, windy open spaces in the Great Plains ideal for wind power generation

(all top 10 states for wind capacity in Midwest)

--Large pool of workers with required skills (skills similar to those employed in

auto manufacturing, metal manufacturing, and machining)

--Community college and university programs, certification programs for wind

turbine technicians, etc.

--Logistical networks in place due to historical manufacturing activity

--In Ohio alone, 120 companies in supply chain

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RIC Tools

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From Overview to Implementation: Tools for Developing your RIC Proposal

• Funding Opportunity requires applicants to provide:

– Definition of Region

– Information on Regional Industries

– Data on Regional Competitive Advantages & Assets

– SWOT Analysis

– Proposed Performance Measures

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Tools to Assist in Defining the Region

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• County-to-County Worker Flow Files (Census)

http://www.census.gov/population/www/cen2000/commuting/index.html

-Provides data on commuting patterns; useful for identifying economic region

• Know Your Region (EDA)

http://www.knowyourregion.org

-Module 3 of curriculum has section on various ways region can be considered;

useful for reference when deciding whether region has been appropriately defined

Tools to Assist in Measuring Industries

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• Industry Clusters Tool (EDA)

-Provides data on number of firms, number of employees, and total wages

earned by industry clusters

• Occupational Clusters Tool (EDA)

-Provides information on the number of employees working in a given

occupational classification

Both Resources available at: http://www.statsamerica.org/innovation/

Tools to Assist in Identifying Competitive

Advantage and Regional Assets

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•Illuminate: Guide to Asset Mapping (Council on Competitiveness)

http://www.compete.org/publications/detail/33/asset-mapping-roadmap-

a-guide-to-assessing-regional-development-resources/

-Resource provides step-by-step overview of process of asset mapping

•Innovation Index (EDA)

http://www.statsamerica.org/innovation/

-Provides information on various inputs that affect innovation potential of

a region, including educational attainment, venture capital, patents, etc.

•Data Browser (EDA)

http://www.statsamerica.org/innovation/

-Provides searchable data for user-defined regions

Tools to Assist in Conducting a SWOT

Analysis

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•Know Your Region (EDA)

http://www.knowyourregion.org

-Module 4 of curriculum has section on SWOT analysis and important

points to consider through this analysis

•RICs can take many years to mature, so important to have:

– Short-term measures

– Mid-term measures

– Long-term measures

•Also need to benchmark current status to allow for effective

measurement against outcome measures

Process

Measures efficiency of program

against goals outlined at program

Outset.

Outcome

Measures effectiveness of program

against outlined at program outset.

Points to Consider for RIC Measurement

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