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National Governors Association Clusters and Economic Development

National Governors Association Clusters and Economic Development. June 6-7, 2002 Stuart Rosenfeld Regional Technology Strategies. Clusters are economic ecosystems, not membership organizations. Rule of Thumb 1 : Select clusters based on systemic relationships that provide market advantage.

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National Governors Association Clusters and Economic Development

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  1. National Governors AssociationClusters and Economic Development June 6-7, 2002 Stuart Rosenfeld Regional Technology Strategies

  2. Clusters are economic ecosystems, not membership organizations Rule of Thumb 1: Select clusters based on systemic relationships that provide market advantage

  3. Critical mass attracts externalities, cooperation creates externalities Rule of Thumb 2: The minimum firm density necessary is what will produce external economies

  4. Hard externalities • Externality > Benefit • Supply chains > efficiency • Specialized labor > productivity • Specialized services > access • More choice > costs, quality • Range of firms > joint ventures

  5. Soft Externalities • Externality > Benefit • Association > Vision, planning, influence • Trust > Networking • Learning (1) > Tech transfer, innovation • Learning (2) > Know how • Informal LaborMarkets > Career ladders

  6. Dynamics of Clusters • Flows of: Lead to: • Information Greater knowledge of markets, labor markets, technologies. • Ideas Diffusion of improvement, innovation • People Increased experience, career ladders, • Goods More efficient value-added chains • Services Expanded expertise, choices • Capital Support for modernization, startups

  7. Boundaries of clusters are determined by members --and are not constraining Rule of Thumb 3: Boundaries are set by distances people will travel to work, associate, and network

  8. Clusters have life cycles Rule of Thumb 4: Stages of Development of a cluster shape its needs and interests - Embryonic - Growth - Mature - Decaying

  9. Success Factors • Concepts - Innovation - Imitation and competition - Entrepreneurship • Connections - Networks and networking - Connections and Intermediaries • Competencies - Specialized labor force - Industry leaders - Talent - Knowledge

  10. Common Concerns • Can states create clusters? • Is there a risk of being too specialized? • Do clusters constitute favoritism? • Are firms too competitive to cooperate? • Is a rural cluster an oxymoron? • Will Internet negate proximity advantage? • Do clusters serve low income people/places? • Do decaying clusters have an afterlife?

  11. Origins of Clusters

  12. State Policies Levers • For organizing its service delivery • For targeting its investments • For strengthening networking opportunities • For developing its human resources

  13. Understanding Regional Economies • Identify clusters- measures of scale & concentration- local views and intelligence • Map systemic relationships- competitiveness factors- supply chains- knowledge chains • Benchmark against competitors

  14. Cluster themes/advantages

  15. MAJOR 2-DIGIT MANUFACTURING SECTORS, 1996-1999 JOB GROWTH, LOW WAGES JOB GROWTH, HIGH WAGES Stone, Clay & Glass Products Chemicals Paper Lumber & Wood Products Rubber & Plastics Products Industrial Machinery Fabricated Metals WAGES, AS % OF NONRETAIL AVG. Textiles Electronic & Other Electric Equipment Furniture & Fixtures Primary Metal Industries Food Products JOB LOSS, LOW WAGES Printing & Publishing JOB LOSS, HIGH WAGES Apparel JOB GROWTH, 1996-99 size of bubble indicates number of employees

  16. RHODE ISLAND’S CLUSTERS • JEWELRY • BOAT BUILDING • ELECTRONICS & INSTRUMENTS • SOFTWARE • TOURISM • PRECISION METAL WORKING • AQUACULTURE • FINANCIAL SERVICES • BIOMEDICAL

  17. 1993 AEROSPACE AGRICULTURE, FORESTRY, FOOD BUSINESS SEVICES HEALTH/BIOMEDICINE INFORMATION MINING & MATERIALS OPTICS TOURISM TRANSPORTATION & DISTRIBUTION 2001 BIOINDUSTRY ENVIRONMENTAL TECH. FOOD FIBER & NATURAL PRODUCTS HIGH TECHNOLOGY MINING & MATERIALS OPTICS PLASTICS & COMPOSITES SENIOR INDUSTRIES SOFTWARE & INFORMATION TOURISM ARIZONA’S CLUSTERSNOW AND THEN

  18. Cluster Benchmarks • R&D capacity • Work force & skills • Education & training • Proximity to suppliers • Capital availability • Specialized services • Tool builders/software • Social capital • Entrepreneurship • Innovation/imitation • Market leaders • Specialized services • External connections • Vision and leadership

  19. Measures of Social Capital • # of business, trade, professional associations • Sector advisory board membership • Membership, meetings, attendance • Networks formed • Civic leadership by businesses

  20. Putnam’s Regional Survey Factors • Social trust • Informal socializing • Interracial trust • Diversity of friends • Convent. Politics • Giving, volunteering • Protest politics • Faith based engage. • Civic leadership • Social cap equality • Associational involvement

  21. Policies for service delivery • Aggregate,collect, sort information by cluster • Form cross-agency quick response teams • Encourage and support multi-firm activity • Build incentives for multi-firm proposals into funding programs

  22. Forming Networks • Publicize concepts • Train brokers • Identify multipliers • Provide startup incentives • Assessment

  23. USNet State Programs: Examples • Delaware DE Manufacturing Alliance • Florida Enterprise Florida • Illinois Dept of Com/Comm Affairs • Louisiana Depart of Economic Dev. • Massachusetts Bay State Skills • Minnesota Minnesota Technology • New York Empire State Development • Oklahoma Alliance for Mfg Excellence • Washington Dept of Comm. Development

  24. Broker Certification in Arkansas

  25. The Northeast Oklahoma Manufacturers’ Council, Inc. • Formed in 1993 as a 501-C3. • Began with a few core members locally • Grew to around 40 members and held steadily for several years • With growth in new economy has grown to over 80+ active members today • The NEOMC, Inc. was the first organized collaborative in Oklahoma, now there are over 25!

  26. Connecticut Plastics Council: From Network to Cluster • 1993: Six companies in Naugatuck Valley approached by MTC • 1994: $500,000 ConnSTEP grant • 1996: Hartford seminar • 1997: Growth to 48 members along Rte 8 corridor, become CPC • 1997: Incorporated as 501c3 • 2001: Officially launched by state as “cluster”

  27. Target Investments to clusters • Invest in cluster R&D • Build cluster-based tech centers/parks • Support cluster entrepreneurial activity • Employ specialized expertise • Market clusters

  28. Cluster Technology Centers • PT-CAM (Greensboro) • CITER (Carpi) • TC2 (Raleigh) • Advanced Mfg Tech Center (Lynchburg) • Candy Institute (Chicago) • WIRENet (Cleveland)

  29. Strengthen Networking and build bridges • Establish/recognize cluster organizations • Facilitate external linkages • Encourage cluster communications channels

  30. Strengthen Networking and build bridges • Establish/recognize cluster organizations • Facilitate external linkages • Encourage cluster communications channels

  31. Cluster Organizations • Arizona Optics Industry Assoc. • CIT.MS • Connecticut Plastics Council • Carolina Hosiery Assoc. • New York New Media Assoc. • Tri-State Manufacturers Assoc. • Rhode Island Plastics Partnership Council

  32. External Linkages are Crucial • Prevent lock-in • Source of inspiration, innovation • Benchmarking • Potential markets/customers

  33. Legsource Services • Industry Communication Infrastructure • Maintain Mill Database • Assist Mills in Website Development • Search for New Ind. Business Opportunities • Government Procurement Assistance • Video Conferencing Technology • E-Commerce Assistance to Suppliers

  34. Develop human resources • Develop a skilled and specialized labor force • Qualify people for cluster employment • Establish cluster skill centers • Support regional skill alliances • Engage CBO intermediaries

  35. Actions for Building a Cluster’s Workforce • Develop specialized labor force • Contextualize curricula • Form industry cluster skills hubs • Build partnerships between education & clusters • Form regional skills alliances • Work with non-profits

  36. Educational Advantages of Cluster Skills Centers • Improves content and quality of E&T (codified knowledge) • Increased rates of and means for informal learning (tacit knowledge) • Increases access to employment information and opportunities (labor markets)

  37. Characteristics of Community College Cluster Hubs • Staff experienced in cluster • Develops & updates curricula, case studies • Engages and works with cluster leaders • Technology and market scanning • Maintains contacts with other regions • Brokers specialized services • Conducts needs assessments, research • Organizes forums, workshops, study tours

  38. Examples of College Hubs • Itawamba Community College, MS - Upholstered Furniture Technology Center • Catawba Valley Community College, NC - Hosiery Technology Center • Northampton Community College , PA- Electrotechnology Applications Center • Alabama Southern Community College - Chemical Processing Technology Center

  39. Intermediaries that raise incomes, build career ladders • Garment Industry Development Corp. • Jane Addams Resource Center • Wisconsin Regional Training Partnership • ACENet

  40. Achieving equity • Qualify people for employment • Include community based intermediaries in clusters • Provide incentives and subsidies • Support industry networks in distressed areas • Encourage social responsibility

  41. Stuart A. RosenfeldRegional Technology Strategies, Inc.Carrboro, NC 27510919-933-6699rosenfeld@rtsinc.org WWW.RTSINC.ORG

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