2. Center for Economic Development Smart Policy for Innovative Regions Bowling for Clusters www.andrew.cmu.edu/user/jp87/bowling4clusters.pdf SSTI Annual Conference Jerry Paytas, Ph.D. Director

3. Center for Economic Development Smart Policy for Innovative Regions 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 Buy and sell Related technology Common infrastructure Common workforce Competition and collaboration are sources of innovation

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

5. Center for Economic Development Smart Policy for Innovative Regions The Cluster Compass Cluster Cluster businesses are embedded in community Cluster support services are located in community Cluster workers live 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

6. Communities and Regional Clusters Regional Cluster Regions or communities may be home to some, all, or none of the regional cluster elements. Firm Institution Customer Service Provider Cluster Elements 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.

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

8. Center for Economic Development Smart Policy for Innovative Regions Defining Your Clusters ProCon 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

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

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

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

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

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

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

15. Center for Economic Development Smart Policy for Innovative Regions Cluster Analysis Techniques TechniqueDefineDynamicsDriversAssetsGaps Expert Opinion Focus Groups Surveys Specialization Innovation Industry-Occupation Matrix Input-Output Matrix Graph/Network Analysis Somewhat usefulVery useful

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

17. Center for Economic Development Smart Policy for Innovative Regions Location Quotients Total Industry Region Nation FormulaInterpretation

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

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

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

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

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

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

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

26. 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

27. 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?

28. 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

29. 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 Financial programs and incentives Attraction targets Infrastructure and site development investments Workforce programs

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