Webinar January 13, Copyright 2010 Michael E. Porter

(1)

2011

Know

Your

Region

Webinar

Series

2011

Know

Your

Region

Webinar

Series

P t 1 M

i

th N ti

’ R i

l I

ti

Cl t

P t 1 M

i

th N ti

’ R i

l I

ti

Cl t

Part

1:

Mapping

the

Nation’s

Regional

Innovation

Clusters

Part

1:

Mapping

the

Nation’s

Regional

Innovation

Clusters

(2)

(3)

Mapping the Nation’s Regional Innovation Clusters

Mapping the Nation s Regional Innovation Clusters

Web-Cast

KYR 2011 Webinar Series

NADO

Dr Christian Ketels

Dr. Christian Ketels

Harvard Business School

January 13

th

, 2011

Further material on clusters:

(4)

Mapping Regional Innovation Clusters:

Six Questions

•

Why the growing interest in clusters?

•

What is the role of clusters in regional economies?

•

What does cluster mapping mean?

•

How can the understanding of clusters and cluster

mapping data inform economic development efforts?

pp g

p

•

What will happen in the EDA-sponsored Cluster Mapping

Project?

j

•

How can you get involved?

(5)

U.S. Economic Policy

Speed up recovery

Create Jobs

Increase Competitiveness

(6)

Dimensions of Competitiveness

Microeconomic Competitiveness

Quality of the

National

Sophistication

of Company

State of Cluster

National

Business

Environment

of Company

Operations and

Strategy

State of Cluster

Development

Macroeconomic Competitiveness

Quality of

Social

Quality of

Macroeconomic

Policy

Infrastructure

and Political

Institutions

Endowments

Size

Natural

Resources

Geographic

Location

6

(7)

Cluster Research, Publications and Projects

Recent History

“Competitiveness

“European

“Cluster and

Economic Policy”

White Paper

“Clusters and

Competitiveness

in Rural Regions”

“EU-10

Cluster

“The Economic

Performance of

Access to Census

Center for

European

Cluster

Memorandum”

“Clusters,

Convergence

Clusters and

Entrepreneurship”

Cluster

Mapping”

Performance of

Regions”

Center for

Economic Studies

Convergence

and Economic

Performance”

2001 2003 2004 2005 2006 2007 2008 2009 2010

Clusters of

Innovation

International

Cluster

Competitiveness

European

Cluster Policy

h f h

Innovation

Initiative

U.S. Cluster

Mapping Project

Canadian

Cluster Data

European

Cluster

Observatory

Competitiveness

Profiles

Cluster Policy

Group

EDA-sponsored

Launch of the

National Cluster

Mapping Project

Observatory

European

Cluster

Observatory v2.0

(8)

New Momentum in Federal Policy

2009-2010

White House

Interagency working group

on regional innovation clusters

Interagency working group

on regional innovation clusters

Economic Development Agency

Small Business Administration

Economic Development Agency

• Regional Innovation Clusters

framework

and

launch of pilot program with DOE (

E-RIC

)

Small Business Administration

•

Regional Innovation Clusters

program

•

Advanced Defense Technology

program

D

t

t f A

i

lt

•

I6 Challenge

with NIH and NSF

Advanced Defense Technology

program

with DOD

N ti

l S i

F

d ti

Department of Agriculture



Rural Innovation Initiative

National Science Foundation



Innovation Ecosystems

8

(9)

Clusters and Economic Performance

A geographic concentration of related companies and

associated institutions in a particular field, linked by

spillovers and complementarities

C

titi

i d i

b th

t

th f th

l

t

l th

• Competitiveness is driven by the

strength of the cluster

, not only the

strength of

individual companies

Local Externalities

Productivity

• Specialized skill pool

• Specialized suppliers

• Specialized infrastructure

S

Innovation

• Specialized institutions

• Knowledge spillovers

• Competitive pressure

New Business

Formation

(10)

Cluster Mapping

Industries

Broad Sectors

Cluster categories

Cluster

-Industries

Broad Sectors

Cluster categories

Concentrated in

specific regions,

competing across

regions

-2

g

Local

1

Present in similar

proportion in all regions,

Competing within

i

1

regions

Natural resource

All

ti

f i d

t i

t

b

d

All

ti

f i d

t i

i th

l

t

10

1

2

•

Allocation of industries to sectors based on

actual patterns of geographic concentration

by employment (revealed cluster effects)

•

Allocation of industries in the cluster

sector to specific cluster categories

based on co-location and linkages

(11)

The Composition of Regional Economies

United States, 2008

Traded

Natural

Local

Traded

Resource

Resource--Based

Based

Local

27.4%

0.9%

71.7%

Share of Employment

0.3%

$57,706

0.6%

$40,142

1.6%

$36,911

Employment Growth Rate,

1998 to 2008

Average Wage

135.2%

3.9%

94.1%

2.9%

86.5%

3.3%

Relative Wage

Wage Growth Rate,

1998 to 2007

144.1

21.5

140.1

1.6

79.3

0.3

Relative Productivity

Patents per 10,000

Employees

590

677

48

43

241

352

Employees

Number of SIC Industries

Number of NAICS Industries

(12)

O

N

SUBCLUSTERS (16)

SIC

LABEL

Motor Vehicles

3711

Motor vehicles and car bodies

A t

ti

P t

2396

A t

ti

d

l t i

i

Automotive Cluster

R

DEFINITI

O

Automotive Parts

2396

Automotive and apparel trimmings

3230

Products of purchased glass

3592

Carburetors, pistons, rings, valves

3714

Motor vehicle parts and accessories

3824

Fluid meters and counting devices

W

CLUSTE

R

Automotive Components

3052

Rubber and plastics hose and belting

g

3061

Mechanical rubber goods

Forgings and Stampings

3322

Malleable iron foundries

3465

Automotive stampings

Flat Glass

3210

Flat glass

O

N

NARRO

W

Flat Glass

3210

Flat glass

Production Equipment

3544

Special dies, tools, jigs and fixtures

3549

Metalworking machinery, n.e.c.

Small Vehicles and Trailers

3799

Transportation equipment, n.e.c.

Marine, Tank & Stationary Engines

3519

Internal combustion engines, n.e.c.

R l t d P t

3364

N

f

di

ti

t l

i

DEFINITI

O

Related Parts

3364

Nonferrous die-casting, except aluminum

3452

Bolts, nuts, rivets, and washers

3493

Steel springs, except wire

3495

Wire springs

3562

Ball and roller bearings

D

CLUSTER

g

3566

Speed changers, drives, and gears

3641

Electric lamps

Motors and Generators

3621

Motors and generators

Related Vehicles

3795

Tanks and tank components

Metal Processing

3316

Cold finishing of steel shapes

BROA

D

Metal Processing

3316

Cold finishing of steel shapes

3398

Metal heat treating

Machine Tools

3541

Machine tools, metal cutting types

3542

Machine tools, metal forming types

3545

Machine tool accessories

Related Process Machinery

3543

Industrial patterns

12

Related Process Machinery

3543

Industrial patterns

3548

Welding apparatus

Industrial Trucks and Tractors

3537

Industrial trucks and tractors

(13)

Fishing &

Cluster Categories

Fishing &

Fishing

Products

Hospitality

& Tourism

Agricultural

Products

Entertainment

Prefabricated

Enclosures

Textiles

Furniture

Building

Fixtures,

Equipment &

Products

Transportation & Logistics

Aerospace

Vehicles &

I f

ti

Construction

Materials

Processed

Food

q p

Services

P

Defense

Lightning &

Electrical

Equipment

Information

Tech.

Business

Services

Distribution

Services

Forest

Heavy

Construction

Services

a e a s

Jewelry &

Precious

Metals

Analytical

Instruments

Education &

K

l d

Biopharma-Power

Generation

Financial

Services

Publishing

& Printing

Communi-cations

Equipment

Forest

Products

Heavy

Medical

Devices

Knowledge

Creation

Oil &

Chemical

Products

ceuticals

Services

y

Machinery

Production

Technology

Motor Driven

Products

Tobacco

Plastics

Oil &

Gas

Aerospace

Engines

S

ti

Automotive

Mining & Metal

Manufacturing

Footwear

Apparel

Leather &

& Recreation

Goods

Note: Clusters with overlapping borders or identical shading have at least 20% overlap

(by number of industries) in both directions.

The Core Cluster Mapping Database

Conceptual Structure

Cluster Categories

Regions

14

Indicator (employment, average

wage, etc.) by regional cluster

(15)

Specialization of Regional Economies

Leading Clusters by U.S. Economic Area, 2008

Boston, MA-NH Analytical Instruments

Education and Knowledge Creation Chicago, IL-IN-WI

Metal Manufacturing

Lighting and Electrical Equipment Production Technology Plastics Denver, CO Business Services Medical Devices Entertainment

Oil and Gas Products and S i

Pittsburgh, PA

Education and Knowledge Creation Metal Manufacturing

Chemical Products Power Generation and

T i i Education and Knowledge Creation Medical Devices

Financial Services Seattle, WA

Aerospace Vehicles and Defense Information Technology

Entertainment

Services _Transmission

San Jose-San Francisco, CA Business Services

Information Technology

New York, NY-NJ-CT-PA Financial Services Biopharmaceuticals

Jewelry and Precious Metals P bli hi d P i i

Fishing and Fishing Products

Los Angeles, CA Information Technology Agricultural Products Communications Equipment Biopharmaceuticals

Publishing and Printing

Raleigh-Durham NC Entertainment

Apparel

Distribution Services Hospitality and Tourism

Raleigh Durham, NC

Education and Knowledge Creation Biopharmaceuticals Communications Equipment Textiles San Diego, CA Medical Devices Analytical Instruments Hospitality and Tourism

Atlanta, GA

Transportation and Logistics Textiles

Motor Driven Products Dallas

Aerospace Vehicles and Defense Oil and Gas Products and

Services

Houston, TX

Oil and Gas Products and Services

Chemical Products

p y

Education and Knowledge Creation Information Technology Construction Materials Transportation and Logistics

Source: Prof. Michael E. Porter, Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School; Richard Bryden, Project Director.

Heavy Construction Services Transportation and Logistics

(16)

Geographic Profile of Cluster Employment

Leading Regions by Life Sciences Subclusters

Boston, MA

Minneapolis, St. Paul, MN

NY ND MT OR MN WA ME MI VT

Research Organizations

7%

Medical Equipment

12%

Surgical Instruments

6%

Medical Equipment

8%

NY PA IA IN NV WY ID OR SD NE MN WI _MI MI _{VT NH} MA CTRI

Newark, NJ

Pharmaceutical Products 12%

Oakland, CA

Biological Products

14%

NC VA WV TN OH IL IN CA CO UT KS MO KY

Chicago, IL

Diagnostic Substances

42%

Los Angeles, CA

Middlesex – Somerset, NJ

Health/Beauty Products

9%

Philadelphia, PA

NC FL GA SC AL AR LA MS TX OK AZ NM

g

,

Health/Beauty Products 11%

p

,

Pharmaceutical Products

6%

FL TX

Washington, D.C.

Research Organizations 10%

Research

Production

Devices and Substances

16

Note: All 318 Metropolitan Areas are shown as shaded; includes subclusters in which the MA has employment rank 1 or 2 nationally, 1999 data Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School

(17)

Economic Performance of Select Life Science Clusters

Average Wage and Changes in Average Wage

$100 000

$120,000

Middlesex-Somerset-San Jose, CA

San Francisco, CA

National cluster wage

growth: 5.6%

S F Bay Area

$80,000

$100,000

O Philadelphia , PA _DC-MD-VA-WVWashington, Oakland, CA Middlesex Somerset Hunterdon, NJ

San Diego, CA _Newark

Boston-Worcester- Lawrence-Lowell-Brockton, MA-NH S. F. Bay Area

$40 000

$60,000

Average

Wage,

2000

N S ff lk NY Orange County, CA Chicago, IL Los Angeles-Long Beach, CA Baltimore, MD Raleigh-Durham-Chapel Hill, NC New York, NY g Seattle-Newark, NJ

Cluster

average

wage:

$56,390

$20,000

$40,000

Nassau-Suffolk, NY

Salt Lake City-Ogden, UT Minneapolis-St. Paul, MN-WI

New Haven-Bridgeport- Stamford-Danbury-Waterbury, CT Bellevue-Everett, WA

$0

3%

4%

5%

6%

7%

8%

9%

10%

Percent Change in Wage Growth, 1990–2000

Note: S. F. Bay Area — San Francisco, San Jose, Oakland

Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School

(18)

Clusters and Regional Prosperity

Recent Findings

Drivers of Regional Job Growth, Wages, Patenting, New

Business Formation, and Success of Startups

•

Specialization in

strong clusters

•

Specialization in

strong clusters

•

Breadth

of position within each cluster

•

Positions in

related clusters

•

Presence of a region‘s clusters in

neighboring regions

•

Presence of a region s clusters in

neighboring regions

Not significant

•

Positions in “high-tech“ versus other clusters

18

Source: Porter, The Economic Performance of Regions, Regional Studies, 2003; Delgado/Porter/Stern, Clusters and Entrepreneurship, Journal of Economic Geography, 2010; Delgado/Porter/Stern, Clusters, Convergence, and Economic Performance, mimeo., 2010.

(19)

Clusters and Economic Performance

Pharmaceutical Clusters

Cluster-driven Agglomeration

Industry Growth

Region

High

Industry

Specialization

High

Cluster

Specialization

High

Neighboring

Cluster

High

Growth

Employment

Growth

1998-2008

Specialization

Raleigh-Durham-Cary, NC

Yes

+29%

Greenville, NC

Yes

No

Yes

No

-52%

(20)

Strengths in Related Clusters

Pharmaceuticals in Raleigh-Durham-Cary, NC

Hospitality

& Tourism

Agricultural

Products

Entertainment

Prefabricated

Enclosures

Textiles

Furniture

Building

Fixtures,

Equipment &

Products

Transportation & Logistics

Aerospace

Vehicles &

I f

ti

Construction

Materials

Processed

Food

q p

Services

P

Defense

Lightning &

Electrical

Equipment

Information

Tech.

Business

Services

Distribution

Services

Forest

Heavy

Construction

Services

a e a s

Jewelry &

Precious

Metals

Analytical

Instruments

Education &

K

l d

Biopharma-Power

Generation

Financial

Services

Publishing

& Printing

Communi-cations

Equipment

Forest

Products

Heavy

Medical

Devices

Knowledge

Creation

Oil &

Chemical

Products

ceuticals

Services

y

Machinery

Production

Technology

Motor Driven

Products

Tobacco

Plastics

Oil &

Gas

Aerospace

Engines

S

ti

Automotive

Mining & Metal

Manufacturing

Footwear

Apparel

Leather &

Sporting

& Recreation

Goods

Note: Clusters with overlapping borders or identical shading have at least 20% overlap (by number of industries) in both directions.

The Composition of Regional Economies

•

Traded clusters

drive regional prosperity

– Higher wages in traded clusters tend to pull up wages in local clusters

•

The

cluster composition

of regional economies differs greatly

•

The

strength of clusters

affects regional performance

•

“

High-tech

”

clusters

account for a small percentage of jobs and wages in

most regional economies

•

Regions with a

portfolio of related clusters

register higher levels of

prosperity

•

Regions exhibit specialization patterns that are linked to clusters in

neighboring

e g bo

g

regions

eg o s

•

Clusters often have a

different/wider geographic focus

than the usual

political boundaries

22

(23)

The Nature of Cluster-Oriented Government Policy

BETTER (Competitiveness)

FINISH

MORE (Agglomeration)

(24)

The Economic Case for Cluster Policy

Create Platforms

Organize Public

Path

for Joint Action

Policy around

Clusters

dependency

Local

Externalities

Information

asymmetries

Coordination

failures

(25)

Organize Public Policy around Clusters

Science and Technology

Education and Workforce Training

Business Attraction

Science and Technology

Infrastructure

(e.g., centers, university

departments, technology

Export Promotion

Clusters

p

gy

transfer)

Setting standards

Market Information

S

i li

d Ph

i

l

E

i

t l St

d hi

Setting standards

Market Information

and Disclosure

Specialized Physical

Infrastructure

Natural Resource Protection

Environmental Stewardship

• Clusters provide a framework for

organizing the implementation

of many public

policies and public investments directed at economic development

(26)

What are Cluster Initiatives?

Cluster initiatives are

collaborative activities

by a

group

of companies, public sector

entities, and other related institutions with the objective to improve the competitiveness of a

group of

interlinked economic activities

in a

specific geographic region

group of

interlinked economic activities

in a

specific geographic region

•

Upgrading of

company operations

and strategies across

f

i

•

Upgrading of

cluster-specific business

environment

diti

a group of companies

conditions

•

Strengthening of

networks to enhance

spill-overs and other

26

economic benefits of

clusters

(27)

The Role of Government in Cluster Initiatives

Government

/

S

ll

i i

f

Government

should

Government

may

Government

should not

•

Initiate/

Convene

•

Co-Finance

•

Support all existing

and emerging

clusters

•

Pick favored

clusters

•

Pick favored

•

Participate

•

Enable data

collection and

companies

•

Subsidize or

distort

dissemination at the

cluster level

•

Be ready to

d sto t

competition

•

Define cluster

action

Be ready to

implement

recommendations

action

priorities

(28)

What is Different about Cluster-Based Economic Policy?

Cluster vs.

Narrow

Industries

Regional

Perspective

Public-Private

Collaboration

Focus on

upgrading

productivity

Build on

Regional

Strengths

Demand-driven

Policy

Priorities

28

(29)

Clusters and Economic Strategy

Positioning

• Identifies, communicates, and strengthens the

specific value proposition of the location

B

i

Cl

t

specific value proposition of the location

Business

Environment

Cluster

Portfolio

• Accelerates growth in

those fields where the

• Improves the

economic platform for

country has some

strengths

• New clusters emerge

p

all clusters and

companies

New clusters emerge

from established clusters

(30)

Applying Cluster Mapping Data

•

Part of the

assessment

of a regional economy

– Composition of the regional economy

Composition of the regional economy

– Cross-regional benchmarking of strong clusters

– Matching of regional clusters with regional business environment

t

th

strengths

•

Identification of potential for

new clusters

– Emerging clusters

– Opportunities at the boundaries/intersections of clusters

•

Part of the

regional strategy

development

Clusters as signals of the regional value proposition

– Clusters as signals of the regional value proposition

– Clusters as bridges to neighbors and other regions

30

(31)

EDA-Sponsored Cluster Mapping Project

Objectives

• Provide

a robust cluster mapping database

grounded in the best

available academic research

• Develop

an inventory of cluster programs

and a platform for economic

development professionals to share their best practices

• Provide

economic performance data

at the level of regions and regional

clusters in a framework for impact assessment

• Enable a range of new analyses that will help us better

understand the

• Enable a range of new analyses that will help us better

understand the

combined impact

of clusters and cluster programs on economic

outcomes

• Provide easy access to the data, analysis, and information through a

user-friendly website

interface

(32)

Project Modules

1.

Cl

t

M

i

• Creation of the core

cluster mapping

database

Cluster Mapping

• In depth-analysis of the data

f

2.

Cluster Initiatives

and Programs

• Identification of

user needs

for the interface

• Collection of data on

cluster initiatives and

program

• Development of

toolkit

for use of cluster data

3.

• Development of

toolkit

for use of cluster data

Development of the

website

Website

Development

• Development of the

website

• Roll-out

4.

Project Management

• Project Management

• Communication

32

Project Management

(33)

Project Partners

• Lead partner of the

consortium

• Co-lead for work

• Co-leads for work

package 1

• Lead for work

packages 3 and 4

package 1

• Contributors to

work package 4

• Lead for work

package 2

• Contributor to work

package 4

(34)

Key Project Milestones

Cluster

Definitions

Pilot

Website

Toolkit/

Metrics

Report on

User Needs

Policy

Cases

Full Website

Launch

Mapping

Database

Year 1

Year 2

Year 3

Year 4

Year 1

Year 2

Year 3

Year 4

Data collection and

concept design

Data analysis

and pilot tools

Improvement

and deepening

Toolkit and

findings

(35)

7.0%

Composition of the Boston-Cambridge Metro Economy

Specialization by Traded Cluster, 1998 to 2008

Overall change in Boston’s Share

L

i

Sh

G i i

Sh

6.0%

Overall change in Boston s Share

of US Employment: -0.12%

Losing Share

Gaining Share

Education and Knowledge Creation Analytical Instruments Footwear

5.0%

share, 2008

Aerospace Engines

4.0%

employ

ment

_Medical Devices Information Technology Financial

Services Fishing and

Fishing Products

3.0%

o

n’

s national

Distribution Services Business

Services Leather and Related Products Communications Equipment Publishing and Printing

2.0%

Bost

o

Boston’s Overall Share

of US Employment:

1.94%

Se ces Co u cat o s qu p e t

(2.31%, -2.82%)

Jewelry and Precious Metals

Biopharmaceuticals

Power Generation and Transmission Hospitality and Tourism

Textiles Entertainment Processed Food Production Technology

%

1.0%

Entertainment Added Jobs Lost Jobs Transportation and Logistics

Sporting, Recreational and Children's Goods

Prefabricated Enclosures Motor Driven Products

Processed Food

Agricultural Products Lighting and

Electrical Equipment Chemical Products

Heavy Construction Services

0.0%

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

Change in Boston’s share of national employment, 1998 to 2008

_{Employees 35,000 =}

Source: Prof. Michael E. Porter, Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School; Richard Bryden, Project Director.

(36)

Cluster Mapping: Selected Data Cuts

Regional Perspective

Cluster Perspective

Decomposition of

Employment/wages of

total regional wages

by cluster and employees

specific clusters vs.

competing US regions

Employment changes across

Specialization level and

Employment changes across

all clusters in a region

p

changes in sub-clusters of

specific clusters

(37)

Selected Project Themes

Enhance quality of and access to cluster mapping data

q

y

pp g

•

Publication of core cluster definitions

•

Flexibility of geographical boundaries

M

i

f E

i

Cl

t

•

Mapping of Emerging Clusters

Support use of cluster mapping data

pp

pp g

•

Interface

•

Tools

Increase understanding of clusters and cluster policy

•

Cluster and Entrepreneurship

p

•

Related diversification

•

Relations of cluster presence, cluster programs, business environment

conditions and economic outcomes

(38)

EDA Cluster Mapping Project: Objectives

Research

• Better cluster data

• New regional data

• New cluster initiative data

EDA Cl

t

Research

•

Next phase of comprehensive,

action-oriented analysis

EDA Cluster

Mapping

Project

oriented analysis

Action

• New interface

• New tools

•

Step change in scope and quality of

public and private efforts

(39)

The EDA Cluster Mapping Project:

How Can You Get Involved?

•

Receive

regular updates

about project progress

•

Participate in

interviews about user needs

for the Cluster Mapping

Website

•

Test user

of Cluster Mapping Website 1.0

•

Participate in

interviews about experiences

in the use of cluster data

and cluster-oriented programs

Email us at

[email protected]