Center for Economic Development Smart Policy for Innovative

Center for Economic Development Smart Policy for Innovative Regions Bowling for Clusters www. andrew. cmu. edu/user/jp 87/bowling 4 clusters. pdf SSTI Annual Conference Jerry Paytas, Ph. D. Director

Industry Clusters Defined Industry Clusters are collections of firms in related industries located in close proximity to one another Industries can be connected in a cluster through a variety of relationships n n Buy and sell Related technology Common infrastructure Common workforce Competition and collaboration are sources of innovation Center for Economic Development Smart Policy for Innovative Regions

Cluster Process Define Cluster Define Region Analysis Identify Partners Center for Economic Development Smart Policy for Innovative Regions Strategy & Action

The Cluster Compass Cluster businesses are embedded in community Cluster workers live in community Center for Economic Development Smart Policy for Innovative Regions Cluster support services are located in community Cluster workers play in the community Source: The Cluster Compass was developed by the H. J. Heinz III School of Public Policy, Systems Synthesis Project, Integrating Neighborhoods into Regional Clusters, ©May 2002

Communities and Regional Clusters Regional clusters are connected to each other in a variety of ways, including supply chains, business partnerships, institutional relationships, service provision, the transfer of new technologies, and relationships between workers and firms. Clusters are connected to others in the United States and around the world. Regional Cluster Regions or communities may be home to some, all, or none of the regional cluster elements. Cluster Elements Firm Institution Customer Service Provider

Cluster Process Structure Core Markets Define Cluster Define Region Trends Analysis Identify Partners Center for Economic Development Smart Policy for Innovative Regions Strategy & Action

Defining Your Clusters Pro Con Local Less time, cost Explores interdependencies Focus on critical needs Obscures broader patterns and linkages Cluster interests may not align with regional ones Confuse cause & effect Global Integrated with national/global trends Portrait of a region Identifies regional gaps Lengthy & expensive Key sectors or critical exceptions may be obscured Data problems Center for Economic Development Smart Policy for Innovative Regions

Cluster Structures Networked n Silicon Valley Hub and Spoke n Detroit Satellite n n Raleigh-Durham Albuquerque (State Satellite) Center for Economic Development Smart Policy for Innovative Regions

Networked Region Suppliers Center for Economic Development Smart Policy for Innovative Regions Small, local firms Strong internal linkages Internal labor market Specialized services and patient capital Innovation is regional (vs. firm or external)

Hub and Spoke Region Center for Economic Development Smart Policy for Innovative Regions Large VIF and suppliers Internal / external linkages Less flexible labor market Few trade associations Local decisions, global impact

Satellite Region Center for Economic Development Smart Policy for Innovative Regions Large external firms and local branches Decisions are external Minimal intra-district trade External labor market, organized by firm Higher white collar migration

Cluster Process Dynamics Define Cluster Drivers Assets Gaps Define Region Analysis Identify Partners Center for Economic Development Smart Policy for Innovative Regions Strategy & Action

An Industry Cluster Analysis Contains… A definition of key industries in a region An analysis of cluster dynamics n n Key relationships Cluster drivers Identification of regional gaps, assets, and opportunities Center for Economic Development Smart Policy for Innovative Regions

Cluster Analysis Technique Define Dynamics Drivers Assets Gaps Expert Opinion Focus Groups Surveys Specialization Innovation Industry-Occupation Matrix Input-Output Matrix Graph/Network Analysis Center for Economic Development Smart Policy for Innovative Regions Somewhat useful Very useful

Techniques Critique Pro Con Observations Flexibility Current Difficult to generalize or compare Individual or Firm perspective Statistics Comprehensive Objective Industry data (vs. firm or product) Excludes supporting sectors Center for Economic Development Smart Policy for Innovative Regions

Location Quotients Formula Region Industry Total Nation Industry Total Center for Economic Development Smart Policy for Innovative Regions Interpretation

Input-Output Matrix Input-Output Data from the Bureau of Economic Analysis Center for Economic Development Smart Policy for Innovative Regions

Electro-Optics Cluster Analytical Instruments University Sensors & Controls Legend Elec. Equip Electro-Optics Military Optoelectronics Surgical -Med Equip Comm. Equip Risk Capital Specialized Services Center for Economic Development Strong Moderate Weak Colors Non-Ferrous Wire Smart Policy for Innovative Regions Lines Navigation Equip Leading Competing Lagging

Cluster “Map” Use to assess links or resource pools Trade Associations Other Firms Business Incubators Bus Assistance Centers Customers Cluster Rare Ties — Less than 50 % said sometimes or frequently influenced idea innovation Regional Suppliers Universities Occasional Ties — between 50%– 80%said sometimes or frequently influenced idea innovation Common Ties — Greater than 80% said sometimes or frequently influenced idea innovation Center for Economic Development Smart Policy for Innovative Regions Community Colleges Venture Capital Research Centers Source: Clusters of Innovation Initiative, Regional Survey; Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School; Interviews

Cluster Confusion Package & Containers 11, 879 (-19%) Consumer Goods Chemicals 3, 570 (-22%) Instr & Devices 5, 000 (14%) Biological Products Pharmaceutical Products 1, 152 (-22%) Research 6, 708 (-37%) Training Inst. 101, 849 (-2%) Center for Economic Development Suppliers 20, 800 Employees 612 Firms -7% Support 102, 000 Employees 3, 800 Firms -2% Distribution 5, 400 (67%) Smart Policy for Innovative Regions Core 12, 900 Employees 322 Firms -22% Cluster Orgs 143 (12%)

Cluster Process Define Cluster Define Region Analysis Identify Partners Center for Economic Development Smart Policy for Innovative Regions Strategy & Action Needs Links Levers Scale

Implications for Strategy More than targeting Develop local resource base Foster networks & collective action Fill gaps n n Infrastructure Supply chain Identify competitive strength Consider the market Center for Economic Development Smart Policy for Innovative Regions

Critical Questions Specialization n n Promotes shared resources, infrastructure, talent But, specialized knowledge may be applicable to a narrow range and can be made obsolete by new innovations Diversification n n Promotes cross-fertilization and adaptation But, diverse sectors require strong linkages and too much diversity reduces strength and opportunity for linking Center for Economic Development Smart Policy for Innovative Regions

Implementation Roles What do you do differently! Pro-active and responsive Focus – identify needs, deliver services Aggregate demand Wholesale vs. Retail Center for Economic Development Smart Policy for Innovative Regions

Risks…. Where’s the beef? This town isn’t big enough Missing the Next Big Thing Does size matter? Center for Economic Development Smart Policy for Innovative Regions

Rewards… All together now Spreading the risk A penny saved… Speed to scale There’s always next time Center for Economic Development Smart Policy for Innovative Regions

Benefits of Cluster Strategy Focus on relationships rather than the needs of individual firms Identify gaps and opportunities presented by the region’s economy Pro-active organization of resources/activities n n Financial programs and incentives Attraction targets Infrastructure and site development investments Workforce programs Center for Economic Development Smart Policy for Innovative Regions

The End Thank you Center for Economic Development Smart Policy for Innovative Regions