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Industry Cluster Approach to Workforce and Economic Development RCCI Annual Conference October 7, 2003 Industry Cluster Approach to Workforce and Economic Development RCCI Annual Conference October 7, 2003 Lee W. Munnich, Jr. State and Local Policy Program With Liz Templin Extension Educ. - Community Economics University of Minnesota

Why this presentation? Link between workforce development and economic development A trained workforce is Why this presentation? Link between workforce development and economic development A trained workforce is critical for success Articulating the regions industry clusters can focus community economic development efforts

Objectives Definition of industry clusters Adaptation to rural communities How industry clusters start (case Objectives Definition of industry clusters Adaptation to rural communities How industry clusters start (case studies) Role of higher education

Michael Porter’s “Diamond of Advantage” Chance Government Michael Porter’s “Diamond of Advantage” Chance Government

“The Knowledge Economy” In today’s economy, innovation is survival, no matter what your product “The Knowledge Economy” In today’s economy, innovation is survival, no matter what your product or service line is. Any innovation requires knowledge about the technologies, processes, markets, etc. , that make it work The economic development challenge: providing a fertile environment for innovation

Rural knowledge clusters defined Innovative, interrelated groups of firms Located outside metropolitan areas Deriving Rural knowledge clusters defined Innovative, interrelated groups of firms Located outside metropolitan areas Deriving competitive advantages through accumulated, embedded, and imported knowledge among local actors and institutions.

Rural Knowledge Clusters: What Matters? Competitive advantage – e. g. a rich base of Rural Knowledge Clusters: What Matters? Competitive advantage – e. g. a rich base of skilled workers, access to proximate market opportunities, local entrepreneurial culture Historical development and evolution of local knowledge base – rarely appears out of thin air Institutions – formal and informal; foster the creation, diffusion, and renewal of the local knowledge base

State and Local Policy Program Industry Cluster Studies Twin Cities Printing and Publishing Computers State and Local Policy Program Industry Cluster Studies Twin Cities Printing and Publishing Computers and Software Medical Devices Machinery and Metalworking Financial Services Southeast Minnesota Southwest Minnesota Northwest Minnesota Composites Computer and Recreation and Electrical Transportation Food Processing Components Equipment Manufacturing Printing, Publishing, and Value-Added Software Agricultural Agricultural Cooperatives Processing Industrial Machinery and Agricultural Wood Products Computer Equipment Manufacturing Tourism Dairy Processing Northeast Minnesota Forest Products Information Technology Health Services Tourism

Industry Clusters Research Steps 1. Economic data on region’s industries 2. Local leaders determine Industry Clusters Research Steps 1. Economic data on region’s industries 2. Local leaders determine industries to study 3. Focus groups of industry to identify: A. Competitive advantage B. History C. Institutional support / needs 4. Policy recommendations

Identifying Clusters: Location Quotient v Measures employment concentration in a particular industry in a Identifying Clusters: Location Quotient v Measures employment concentration in a particular industry in a particular region v Measure of specialization v LQ is calculated as a ratio of the industry’s share of employment in the region to the industry’s share of employment in the nation v. LQ > 1 means that concentration of employment in the industry in the region is higher than concentration of employment in same industry in the nation; i. e. the region specializes in that industry

Case Study Evidence of Rural Knowledge Clusters in Minnesota Recreational transportation equipment (Northwest Minnesota) Case Study Evidence of Rural Knowledge Clusters in Minnesota Recreational transportation equipment (Northwest Minnesota) Automation and motion control technologies (Alexandria) Advanced composite materials (Winona) Precision Agricultural Machinery (Southwest Minnesota)

Case Example 1: Competitive advantage Factors that give local firms a market advantage: Supply Case Example 1: Competitive advantage Factors that give local firms a market advantage: Supply or demand in the marketplace Related industries Local rivalry

Northwest Minnesota: Key Facts Population (2000): 88, 472* Major Cities: Crookston: 8, 192 East Northwest Minnesota: Key Facts Population (2000): 88, 472* Major Cities: Crookston: 8, 192 East Grand Forks: 7, 501 Roseau: 2, 756 Thief River Falls: 8, 410 Population Density (pop/sq mi): 11 (Twin Cities: 601; MN state: 62) Population Growth (1990 -2000): -2% (MN non-metro: 4%; US non-metro: 9%) Job Growth (1990 -2000): 16% (MN non-metro: 25%; US non-metro: 18%) *Kittson, Marshall, Norman, Pennington, Polk, Red Lake, Roseau counties (Region 1) Source: Census Bureau; Bureau of Economic Analysis

Northwest Minnesota: Recreational Transportation Equipment Key Industries Other transportation equipment manufacturing (NAICS: 3369/SIC: 3799) Northwest Minnesota: Recreational Transportation Equipment Key Industries Other transportation equipment manufacturing (NAICS: 3369/SIC: 3799) 2000 Employment: 2, 197, 20, 500% more concentrated than U. S. overall Source: County Business Patterns

Competitive Advantage: Recreational Transportation Equipment Key Employers Arctic Cat (Thief River Falls) 1, 500 Competitive Advantage: Recreational Transportation Equipment Key Employers Arctic Cat (Thief River Falls) 1, 500 employees Machinewell (Grygla) 110 employees Polaris Industries (Roseau) 2, 100 employees TEAM Industries (Bagley) 250 employees Source: MN Dept of Trade and Economic Development

Northland Community and Technical College Customized training for engineers Certificate programs Continuous quality improvement Northland Community and Technical College Customized training for engineers Certificate programs Continuous quality improvement training

NW Minnesota: Rural Knowledge Cluster Profile Competitive Advantages ·Demanding local customers ·Intense interfirm rivalry NW Minnesota: Rural Knowledge Cluster Profile Competitive Advantages ·Demanding local customers ·Intense interfirm rivalry ·Diffusion to new products and industries History ·Farm equipment mfg base ·Need for transportation in snow ·Heteen et al develop first modern snowmobile, start Polaris ·Spins off, starts Arctic Cat Firms and Industries Recreational transportation equipment Institutions ·Northland Community & Technical College ·Minnesota Job Skills Partnership · “Racing culture” – snowmobile racing circuit ·Snowmobile manufacturing ·All-terrain vehicles ·Equipment suppliers and machine shops

Case Example Two: History An historical base of knowledge about an industry or technology Case Example Two: History An historical base of knowledge about an industry or technology that is used to create new products or services

Alexandria: Key Facts Population (2000): 210, 059* Major Cities: Alexandria: 8, 820 Fergus Falls: Alexandria: Key Facts Population (2000): 210, 059* Major Cities: Alexandria: 8, 820 Fergus Falls: 13, 471 Moorhead: 32, 177 Population Density (pop/sq mi): 26 (Twin Cities: 601; MN state: 62) Population Growth (1990 -2000): 6% (MN non-metro: 4%; US non-metro: 9%) Job Growth (1990 -2000): 25% (MN non-metro: 25%; US non-metro: 18%) *Becker, Clay, Douglas, Grant, Otter Tail, Pope, Stevens, Traverse, and Wilkin counties (Region 4). Source: Census Bureau; Bureau of Economic Analysis

Alexandria: Automation and Motion Control Technologies Key Industries Packaging Machinery (NAICS: 3339/SIC: 3565) 2000 Alexandria: Automation and Motion Control Technologies Key Industries Packaging Machinery (NAICS: 3339/SIC: 3565) 2000 Employment: 1, 209, 446% more concentrated than U. S. overall Machine Shops and Related (NAICS: 3327/SIC: 3599, 3451, 3452) 2000 Employment: 844, 210% more concentrated than U. S. overall Source: County Business Patterns

Alexandria: Automation and Motion Control Technologies Key Employers 3 M (Alexandria) 317 employees Alexandria Alexandria: Automation and Motion Control Technologies Key Employers 3 M (Alexandria) 317 employees Alexandria Extrusion (Alexandria) 274 employees Brenton Engineering (Alexandria) 127 employees Douglas Machine (Alexandria) 492 employees Minnesota Automation (Crosby) 120 employees Massman Automation (Villard) 100 employees Schott Automation (Garfield) 35 employees Thiele Engineering (Fergus Falls) 81 employees Source: MN Dept of Trade and Econ Development

Alexandria Technical College: Fluid Power Technology major Center for Automation and Motion Control (CAMC) Alexandria Technical College: Fluid Power Technology major Center for Automation and Motion Control (CAMC) Manufacturing Automation Research Laboratory (MARL) Customized training

Alexandria: Rural Knowledge Cluster Profile Competitive Advantages ·Industry collective action around shared needs ·Shortage Alexandria: Rural Knowledge Cluster Profile Competitive Advantages ·Industry collective action around shared needs ·Shortage of skilled labor in related industries History ·Ag region, craft-like machine shops and equipment mfg ·Proximity to markets for packaging equipment Firms and Industries Automation and motion control technologies Institutions ·Alexandria Technical College, Ctr for Automation & Motion Control ·MN Mfg Automation Coalition ·Tri-State Manufacturer’s Assoc. ·Minnesota Technology Inc. ·West Central Initiative ·Industry packaging and material handling machinery ·Other light manufacturing industries

Case Example Three: Institutions formal and informal; foster the creation, diffusion, and renewal of Case Example Three: Institutions formal and informal; foster the creation, diffusion, and renewal of the local knowledge base

Winona: Key Facts Population (2000): 112, 517* Major Cities: Winona: 27, 069 Lake City: Winona: Key Facts Population (2000): 112, 517* Major Cities: Winona: 27, 069 Lake City: 5, 054 Population Density (pop/sq mi): 44 (Twin Cities: 601; MN state: 62) Population Growth (1990 -2000): 5% (MN non-metro: 4%; US non-metro: 9%) Job Growth (1990 -2000): 21% (MN non-metro: 25%; US non-metro: 17%) *Blue Earth, Nicollet and Waseca counties Source: Census Bureau; Bureau of Economic Analysis Winona

Winona: Advanced Composite Materials Key Industries Custom compounding of purchased resin (NAICS: 325991/SIC: 3087) Winona: Advanced Composite Materials Key Industries Custom compounding of purchased resin (NAICS: 325991/SIC: 3087) 2000 Employment: 517, 537% more concentrated than U. S. overall All other plastics products manufacturing (NAICS: 326199/SIC: 3089) 2000 Employment: 241, 30% more concentrated than U. S. overall Source: County Business Patterns Winona

Winona: Advanced Composite Materials Key Employers RTP Company (Winona) 407 employees Cytec Engineering (Winona) Winona: Advanced Composite Materials Key Employers RTP Company (Winona) 407 employees Cytec Engineering (Winona) 175 employees Ticona Celstran (Goodview) 69 employees We-no-nah Canoe (Winona) 75 employees Watlow Polymer Technologies (Winona) 24 employees AFC Strongwell (Chatfield) 200 employees Composite Products Inc. (Winona) 50 employees Coda. Bow Composites (Winona) 15 employees Miken Composites (Caledonia) 15 employees Geotek (Stewartville) 35 employees Source: MN Dept of Trade and Economic Development Winona

Higher Education: Winona State University The only composites engineering undergraduate program in U. S. Higher Education: Winona State University The only composites engineering undergraduate program in U. S. Composite Materials Technology Center (COMTEC) Southeast Technical College Customized training in process and quality improvement

Winona: Rural Knowledge Cluster Profile Competitive Advantages ·Diverse local industry base ·Skilled worker base Winona: Rural Knowledge Cluster Profile Competitive Advantages ·Diverse local industry base ·Skilled worker base around composite engineering ·Cooperative relationships Firms and Industries History • Miller Brothers – formed Fiberite after WWII • Initial growth in aerospace, military applications • Spin-off/startup activity to new firms Advanced composite materials mfg Institutions • SAMPE – professional society • Winona St – composite eng • COMTEC – applied R&D/testing • Winona Composites Consortium • Technical college – custom training, technical education • Composite materials producers • Existing products improved through use of composite materials (i. e. canoes, heated plastics, automotive products, violin bows)

Case Study Four: Industry Cluster at Risk Southwestern Minnesota: Precision Agricultural Equipment Case Study Four: Industry Cluster at Risk Southwestern Minnesota: Precision Agricultural Equipment

Southwestern Minnesota: Precision Agricultural Equipment Agricultural sprayer technology Pitfall -- companies doing the same Southwestern Minnesota: Precision Agricultural Equipment Agricultural sprayer technology Pitfall -- companies doing the same thing, rather than diverse activities around the same technology Vulnerability from non-local ownership Needed: New products using existing knowledge

RTS Snapshots of Rural Innovation: Rural Cluster Vignettes Auto Industry Supply Chain Automotive Carpet RTS Snapshots of Rural Innovation: Rural Cluster Vignettes Auto Industry Supply Chain Automotive Carpet Manufacturing Crafts Furniture (Household) Gaming Hosiery Houseboat Manufacturing Oil and Gas Pottery Central Tennessee Northwestern South Carolina Dalton, Georgia Western North Carolina Northeastern, Mississippi Tunica County, Mississippi Catawba Valley, North Carolina Fort Payne, Alabama Somerset, Kentucky Southern Louisiana Seagrove, North Carolina Source: Stu Rosenfeld, RTS http: //www. rtsinc. org/rc/rc_home. html

Key Findings of Case Studies History and context are important Core knowledge base can Key Findings of Case Studies History and context are important Core knowledge base can drive multiple industries and applications. Difficulty developing comparable quantitative indicators Non-local ownership risky if production-only “Institutional” and “entrepreneurial” strategies boost rural knowledge clusters

Implications for Economic Development 1. Understand your local knowledge base. A. Identify specialized knowledge Implications for Economic Development 1. Understand your local knowledge base. A. Identify specialized knowledge (job classifications) B. Note firms in similar industry C. Note underlying technology D. Consider cluster industry study or Business Retention and Expansion program

2. Foster linkages between firms and local institutions A. Map linkages and stakeholder relationships; 2. Foster linkages between firms and local institutions A. Map linkages and stakeholder relationships; note gaps B. Emerging workforce training: school-towork, apprenticeships C. Incumbent workforce training: customized job training, continuing education, training partnerships

3. Develop strategies for promoting innovation around rural knowledge clusters A. Research centers B. 3. Develop strategies for promoting innovation around rural knowledge clusters A. Research centers B. Technical assistance to entrepreneurs C. Risk capital

4. Don’t try to go it alone – promote a regional vision to guide 4. Don’t try to go it alone – promote a regional vision to guide local strategies A. Labor market is regional

For further information: Go to http: //www. ruralvitality. org http: //www. hhh. umn. edu/centers/slp/ For further information: Go to http: //www. ruralvitality. org http: //www. hhh. umn. edu/centers/slp/

For further information contact: Lee W. Munnich, Jr. Senior Fellow and Director, State and For further information contact: Lee W. Munnich, Jr. Senior Fellow and Director, State and Local Policy Program Humphrey Institute of Public Affairs University of Minnesota [email protected] umn. edu http: //www. ruralvitality. org http: //www. hhh. umn. edu/centers/slp/ (612) 625 -7357