Industry Clusters and Economic Development: A Learning Resource

Transcription

1 Industry Clusters and Economic Development: A Learning Resource Prepared for the Community and Economic Development Toolbox, Edward Feser Associate Professor Department of Urban and Regional Planning & Regional Economics Applications Laboratory University of Illinois at Urbana-Champaign September 2004

2 How to use this resource Light blue, underlined text indicates a hyperlink to the Web Install the latest version of Acrobat Reader if you haven t already (available free here) Have your Web browser open so you can use the hyperlinks Scroll over the key icons to learn more about a particular bullet or point 2

3 What this resource covers Conceptual background Definitions Policy approaches to clusters Overview of analytical approaches to understanding clusters Some pitfalls communities can fall into Literature 3

4 Conceptual background

5 Basics Interest in clusters coincides with focus on competitiveness Erosion of traditional sources of comparative advantage Innovation as growth engine Michael Porter s framework Macroeconomic, political, legal context Productivity growth Company operations & strategy Internal Microeconomic foundations Micro business environment External From Porter (May, 2000) 5

6 Porter s model Four major determinants of competitive advantage Clusters as one element Clusters are not necessarily regional in scope Other important concepts and antecedents Related Related and and supporting industries Clusters, not industries Firm Firm strategy, structure and and rivalry rivalry Factor Factor conditions Local context encourages investment and sustained upgrading Demand conditions Sophisticated and demanding local customers Factor quantity, quality, cost From Porter (May, 2000; 1990) 6

7 Why care about them? Q: Why does success seem to breed success? Q: What do growing knowledgeintensive and high tech sectors need to survive? Q: What do traditional sectors need to survive? Q: What are you overlooking with standard industry analysis alone? Q: What can you gain by targeting efforts? A: The benefits of being the first mover. A: Opportunities and incentives to learn, create, upgrade. A: Same thing, as historical sources of advantage are ceded to competitors. A: Potential strengths, underlying weaknesses, latent opportunities. A: Efficient, effective use of scarce development resources. 7

8 Definitions

9 Clusters are Trading sectors Related sectors Supporting institutions Intermediate suppliers Capital good suppliers Producer services Consultants Contract R&D Similar technologies Share pool of labor Similar strategies Education (univ, colleges) Training (cc s) R&D (univ, fed labs) Development agencies Regulatory agencies The key is interdependence: Each member firm s competitive position depends on one, some, or all other members of the group. Business is the core. 9

10 Three dimensions Linkage Value chain Labor needs Existing Emerging Potential Time Statewide Geography Regional 10

11 Clusters and policy

12 Four implications for policy Approach Clusters as allocation strategy Explanation Focus development attention and resources on identified competitive clusters in a limited number of select regions and industries. Clusters as unique development strategy Networking Portfolio of strategies Promote networking among clustered firms in a given region. Coordinate a set of strategies to boost competitiveness of regional industry clusters of particular type and vintage, as identified via applied cluster analysis. Clusters as organizing device Clusters as means of implementation Use of cluster concepts to facilitate and motivate strategic economic development planning efforts, especially with respect to inclusion of private sector leadership. Redesign and deliver development initiatives, using knowledge of business interdependencies and clustering dynamics as revealed in applied cluster analysis, as a guide. 12

13 Example of the portfolio approach The cluster itself: Support supply Users: Build demand University-industry linkages, tech transfer, commercialization Training and trade schools Buyer-supplier conferences, networking, trade shows Environmental Equipment Sustainable goods Intermediate suppliers Public sector Industry Regulation/enforcement Resource pricing Purchasing Compliance assistance Credits and incentives Venture capital Incubators Recruitment Environmental services Resources management Consumers Education Marketing Recycling services 13

14 Industry cluster analysis

15 Approaching cluster analysis Common view: A precise method of detecting future regional growth engine(s) Development goals implicit Heavy application of quantitative methods Supplementation with qualitative methods Use of single best definitions and rigid indicator thresholds Use of best measures, approaches Alternative view: A flexible mode of inquiry: of intelligence interactive strategic planning Development goals explicit Balanced application of quantitative and qualitative methods Engagement of public and private sectors, and citizens in interpreting results Use of multiple approaches, methods, measures: Triangulation 15

16 Common analytical applications Identify competitive strengths Reveal weaknesses Industrial targeting Location assessment Identify strategic partners Comprehensive development strategy Clusters as information 16

17 Two general types of analyses General cluster analysis Assessment of linkages and relationships across all regional industries Comprehensive and detailed Application of generalized cluster definition or use of multiple definitions Focused cluster analysis Investigation of one dimension of cluster concept -and/or- Investigation of one or a few key industry segments 17

18 Framing influences approach Identify and frame the policy problem first, i.e., KNOW WHAT YOU WANT Policy problem: What will you use the study for? Helps determine: Cluster definition Existing? Potential or emerging? Spatial or non-spatial? Type of linkage? Methodology Comprehensive? Generalizable? Qualitative? Quantitative? Implementation Industry buy-in? Analysis only? Marketing only? 18

19 Example cluster studies Regional Clusters of Innovation Project, Council on Competitiveness Study of clusters and innovation in five U.S. regions, with effort to develop best practices Regional Technology Assets and Opportunities, Appalachian Regional Commission Comprehensive study of technology-based clusters in the 406 county Appalachian region Connecticut Industry Clusters, Connecticut Department of Economic and Community Development A sustained effort to build economic development strategies around the concepts and analysis of industry clusters in the state Pennsylvania s Targeted Industry Clusters, Pennsylvania Department of Labor and Industry Detailed analysis of Pennsylvania clusters 19

20 Potential pitfalls

21 Two major pitfalls to avoid Undertaking a cluster initiative without a clear sense of why it is needed or what a cluster study will be used for Think hard about how the findings of a study could be/will be implemented BEFORE proceeding Commissioning an expensive cluster study without sufficient knowledge of purposes, available methods, subsequent uses 21

22 How to commission a study Know what is possible Available methods, data, and cost Know what you need What is the policy problem? Do you merely want an overview of your state or regional economy? Remember: Problem formulation dictates cluster definition and methodology Know what you intend to do with the findings If you don t know what you would do the results other than post them on your web site and hold a press conference, you don t need it 22

23 Reject proposals that Fail to define clusters clearly Fail to provide a solid economic rationale for examining clusters Fail to outline clear avenues for policy action based on findings Tip-offs: Did the consultant research policy issues facing your state or region? Did he/she ask you? Fail to offer new information about your economy Tip-offs: Simplistic, descriptive methods; standard datasets; focus on specialization rather than interdependence Fail to include an implementation element Deliver too little for too much Tip-offs: Could one of your own staff replicate the study easily? 23

24 Available guides

25 Some handy guides Clusters and Cluster Development, Harvard Institute for Strategy and Competitiveness A Governor s Guide to Cluster-Based Economic Development, NGA Center for Best Practices Industry and Regional Clusters: Concepts and Comparative Applications, Web Book in Regional Science Industry Clusters: An Internet Resource for Economic Developers, Jessica LeVeen 25

26 Heavier stuff Best, M H The New Competition. Cambridge, MA: Polity Press. Enright, Michael J "The Globalization of Competition and the Localization of Competitive Advantage: Policies toward Regional Clustering,"in N. Hood and S. Young (eds.), The Globalization of Multinational Enterprise Activity and Economic Development. London: Macmillan Feser, Edward J "Enterprises, Externalities and Economic Development," Journal of Planning Literature, 12, Feser, Edward and Michael Luger "Cluster Analysis as a Mode of Inquiry: Its Use in Science and Technology Policymaking in North Carolina," European Planning Studies, 11, Hertog, Pim den, Edward M Bergman and David Charles, eds Innovative Clusters: Drivers of National Innovation Systems. Paris: Organisation for Economic Cooperation and Development. Jacobs, Dany and Ard-Pieter de Man "Clusters, Industrial Policy and Firm Strategy: A Menu Approach," Technology Analysis and Strategic Management, 8, Markusen, Ann "Sticky Places in Slippery Space: A Typology of Industrial Districts," Economic Geography, 72, Martin, Ron and Peter Sunley "Deconstructing Clusters: Chaotic Concept or Policy Panacea?," Journal of Economic Geography, 3, Porter, Michael E The Competitive Advantage of Nations. New York: Free Press. Porter, Michael E "Clusters and the New Economics of Competition," Harvard Business Review, Porter, Michael E "Location, Competition, and Economic Development: Local Clusters in a Global Economy," Economic Development Quarterly, 14, Raines, Philip. 2001b. Local or National Competitive Advantage? The Tensions in Cluster Development Policy. Glasgow, UK, European Policies Research Center, University of Strathclyde: 31. Rosenfeld, Stuart A "Bringing Business Clusters into the Mainstream of Economic Development," European Planning Studies, 5, Schmitz, Hubert and Bernard Musyck "Industrial Districts in Europe: Policy Lessons for Developing Countries?," World Development, 22, Swann, G M Peter, Martha Prevezer and David Stout, eds The Dynamics of Industrial Clustering. Oxford, UK: Oxford University Press. Tendler, Judith and Mônica Alves Amorim "Small Firms and Their Helpers: Lessons on Demand," World Development, 24,