Industry Clusters in Appalachia: Key Sectors, Trends and Development Potential

Transcription

1 Industry Clusters in Appalachia: Key Sectors, Trends and Development Potential Presented by Lisa Petraglia, EDR Group, Inc. and Greg Bischak, ARC ARC Fall Conference October 6 th, 2005 What is an Industry Cluster? Industry clusters are geographic concentrations of interconnected businesses and institutions that enhance the productivity of the core industries through the growth of: Complementary goods and services; Supplier & buyer networks; Specialized local labor markets; Exchange of information and technical knowledge; Competitive and collaborative relationships among firms and institutions.

2 Alfred Marshall s Industrial Districts First Framed Cluster Idea When an industry has thus chosen a locality for itself, it is likely to stay there long: so great are the advantages which people following the same skilled trade get from near neighborhood to one another Principles of Economics, 1890 Common Cluster Examples Auto industry and related products and services: Detroit, MI; Turin, Italy; Nagoya, Japan. Information and computer technologies: Silicone Valley, CA; Austin, Texas, Route 128, MA; Motion picture industry: Hollywood, CA; Rome Italy, Paris, France.

3 Professional Services Technical Services Education & Training Customers Generic Industry Cluster Kernel of Core Industries Marketing & Distribution Raw Materials & Semi-finished Goods Process & Production Machinery Exports The Cluster Advantage Clusters affect the competitive potential of core industries by: Enhancing productivity; Spurring innovation; Increasing export potential; Stimulating business formation. Businesses enjoy economies of scale from region s shared assets and relationships. Growth in business income and demand for subsidiary services reinforces cluster assets.

4 Appalachia s Cluster s Automobiles, Auto-parts and Related Products Industries (AL, SC, NC, TN, KY, GA, OH, PA, MS, and WV). The Furniture and Related Products Industries (MS, NC, AL and TN). The Wood Products Industry (MS, KY, NC, PA, TN, WV, OH, NY, and others). The Textiles and Related Products Industries (GA, NC, and SC). The Apparel and Related Products Industries (widely distributed throughout region).

5 Other Regional Clusters Industrial machinery (PA and SC). Medical devices in Pittsburgh, Pennsylvania. Electronic components in Binghamton, New York. Chemicals & Plastics (PA, OH, and WV). Environmental technologies (widely distributed). (Sources: Exports, Competitiveness, and Synergy in Appalachian Industry Clusters, Rosenfeld, Ed. ARC, 1997; and Economic Development Role of Business Associations Serving Appalachian Industries, Lynn McCormick, ARC, Industrial Clustering in the Appalachian Region - Forestry Potter County, PA Randolph County, WV Location Quotients Calhoun County, MS

6 Industrial Clustering in the Appalachian Region - Logging Potter County, PA Randolph County, WV Location Quotients Calhoun County, MS Industrial Clustering in the Appalachian Region - Potter County, PA Sawmills & Planing Mills Randolph County, WV Location Quotients Calhoun County, MS

7 Industrial Clustering in the Appalachian Region - Dimension Hardwood & Flooring Mills Potter County, PA Randolph County, WV Location Quotients Calhoun County, MS Industrial Clustering in the Appalachian Region - Upholstered Household Furniture Location Quotients Calhoun County, MS

8 Industrial Clustering in the Appalachian Region - Wood Office Furniture Location Quotients Calhoun County, MS Industrial Clustering in the Appalachian Region - Furniture and Fixtures, NEC Location Quotients

9 Appalachia s Key Industries & Trends Appalachia s economy is specialized in manufacturing and mining: Appalachian jobs comprise 10.3% of US manufacturing jobs; 13.7% of US mining jobs; Growing jobs in durable goods; Declining jobs in most non-durables and mining sectors. Appalachian Job Changes Farm Federal Mil Federal State & Local Agri&For&Fish Services Wholesale Retail Trade Fin&Ins&Real Trans&Pub Util Construction Mining Non-Durables Durables Thousands

10 Producer Services in Appalachia A key component of cluster development is the growth of producer services supplied to goods producing sectors. Producer Services include: finance, insurance and real estate. professional services such as: legal, engineering and architectural services, research & testing, management and public relations, and accounting, auditing and other services. business services include advertising, computer and data processing, services to buildings, rental & leasing. Importance of Producer Services Producer services are vital for the retention and expansion of manufacturing in a region. Appalachia has a job gap in producer services, but the gap has narrowed over the last 15 years. In 1997 there were 1 million jobs in 88,000 establishments in the producer services sectors. Up from a half million jobs in (draft study by Center for Economic Studies, U.S. Bureau of the Census, March 3, 2003)

11 The Knowledge-Based Economy of Appalachia Appalachia has 100 major science & technology clusters of businesses, universities & colleges and labs in related fields. Science & technology-related employment stood at 1.07 million workers in (Regional Technology Assets and Opportunities by Ed Feser & Harvey Goldstein, ARC, 2002) Appalachia s High-Tech Industry Clusters Chemicals and plastics; Motor vehicles and related products; Industrial machinery; Information technology and instruments; Aerospace; Communications services and software; and Pharmaceuticals and medical technologies.

12 Figure 38 Technology clusters: Industrial machinery Cincinnati, Middleton Nashville- Davidson Starkville, Columbus Buffalo, Rochester Erie Pittsburgh Cleveland, Canton, Akron, Youngstown Mansfield U. of Alabama, Huntsville U. of Tennessee, Knoxville GA Tech Huntsville Penn State Cornell Albany-Schenectady State College Binghamton Reading, Allentown Altoona Harrisburg Concentrations of both production (value-chain Johnstown or S&T occ. employment) and innovation (patents, ranked universities, or federal innovation grants) are labeled. All indicators Lynchburg are specific to technology area. Map Legend Greensboro ARC boundary Analysis buffer Statesville =1-2 SBIR/STTR/ATP awards (scaled) Charlotte Research universities, 1 st Tier Research universities, 2 nd Tier Asheville Metro area, S&T workers LQ >1.25 Greenville-Spartanburg Sig. emp. Gi or LQ> 1.1, counties Atlanta Sig. patent Gi or LQ > 1.25, counties Two-year college completions, 1997/ > 750 Figure 36 Technology clusters: Chemicals & plastics Pittsburgh Buffalo, Rochester Binghamton Erie, Cleveland, Akron Wheeling Cornell Penn State Albany-Schenectady Newburgh Parkersburg Reading, Allentown Charleston State College Cincinnati Washington, DC Concentrations of both production (value-chain or S&T occ. employment) and innovation (patents, ranked universities, or federal innovation grants) are labeled. All indicators are specific to technology area. Map Legend Huntsville, Decatur Auburn GA Tech Atlanta Johnson City Asheville Greenville, Spartanburg Chattanooga ARC boundary Analysis buffer =1-3 SBIR/STTR/ATP awards (scaled) Research universities, 1 st Tier Research universities, 2 nd Tier Metro area, S&T workers LQ >1.25 Sig. emp. Gi or LQ> 1.1, counties Sig. patent Gi or LQ > 1.25, counties Two-year college completions, 1997/ > 750

13 Research Strengths of Appalachian Universities & Colleges Competitive strengths in engineering, physical sciences and increasingly life sciences. Grants proportionately more degrees in: Basic medical sciences, environmental engineering, mathematics, materials engineering, biochemistry and biomedical engineering; Rising national rankings of research programs at: Carnegie Mellon, Georgia Tech, Penn State, University of Kentucky, Virginia Tech, Mississippi State, Ohio State and West Virginia University. Economic Development Roles of Higher Education Two-year community and vocational colleges provide the capabilities to integrate advanced education with occupational training (120 in the Region). Four-year comprehensive and land grant colleges can focus technology transfer activities on local economic development to help foster entrepreneurial efforts (32). Over 100 four-year liberal arts colleges provide very good access to higher education throughout the region, especially in counties with higher poverty rates. There are 15 Research Universities located in the Region, and double that number adjacent to the Region.

14 Development Opportunities for Higher Educational Institutions Expand the institutional, curricular, and telecommunications linkages among the different tiers of higher education institutions to provide access to the high-tech assets and research of the research universities. Forge public-private partnerships with private, sciencebased corporations, federal labs, universities and private foundations to advance knowledge-based economic development projects. Appalachia s Challenges in Promoting Cluster Development Job gap in creation of high-wage jobs, particularly in information services, producer services and high-tech industries. More pronounced effects of global competition & trade adjustment. Shrinkage (out-migration) of prime-age workforce. Unleashing growth in Appalachian metro counties to neighboring rural counties in distress or at-risk.

15 Cluster Strategies for Appalachia Business formation in producer services. Exploit entrepreneurial opportunities in producer services related to branch plants. Promote technological, supplier & customer links among industries nearby in region. Strategic investment to improve educational attainment rates at all levels. Focused diversification strategies for distressed and atrisk counties. Investments in IT-services and training. Visit to obtain an electronic copy of this presentation