National Governors Association Clusters and Economic Development
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National Governors AssociationClusters and Economic
Development
April 4-5, 2002
Stuart Rosenfeld
Regional Technology Strategies
QuickTime™ and aTIFF (Uncompressed) decompressor
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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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Wood Products Mini-Cluster
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Critical mass attracts externalities, cooperation
creates externalities
Rule of Thumb 2: The minimum firm density necessary is what will
produce external economies
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Hard externalities
• Externality > Benefit
• Supply chains > efficiency
• Specialized labor > productivity
• Specialized services > access
• More choice > costs, quality
• Range of firms > joint ventures
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Soft Externalities
• Externality > Benefit• Association> Vision, planning, influence• Trust > Networking• Learning (1) > Tech transfer, innovation• Learning (2) > Know how• Informal Labor
Markets > Career ladders
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Boundaries of clusters are self-selecting--and are not
constraining
Rule of Thumb 3: Boundaries are set by distances people will travel to work, associate, and network
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Clusters have life cycles
Rule of Thumb 4: Stages of Development of a cluster shape
its needs and interests- Embryonic
- Growth
- Mature
- Decaying
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Success Factors• Concepts
- Innovation - Imitation and competition - Entrepreneurship
• Connections - Networks and networking - Connections and Intermediaries
• Competencies - Specialized labor force - Industry leaders - Talent - Knowledge
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Common Concerns
• Can states create clusters?• Is there a risk of being too specialized?• Do clusters constitute favoritism?• Are firms too competitive to compete?• Is a rural cluster an oxymoron?• Will Internet negate proximity advantage?• Do clusters serve low income people/places?• Do decaying clusters have an afterlife?
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Origins of Clusters
•Cluster •Year
•Cluster/Origin •Reason
•Aalborg, DK •1948 •Telecom-SP Radio •Marine ind.
•Dalton, GA •1918 •Carpet-craft tufters •Chance
•Sausoulo, IT •1600 •Tiles-Rubbiani •Local clay
•Los Angeles •1968 •Toys-Immigrants •Costs, distr.
•San Diego •1950 •Biotech-Research •University
•Tupelo, MS •1948 •Furn.-Futorian •Labor,wood
•NC Mass. •1760 •Plastics-combs •Chance
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Does proximity matter?
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Actions for states
• For understanding economies
• For engaging industry
• For organizing and delivering services
• For investing and allocating resources
• For marketing the region an state
• For preparing the work force
• For achieving social goals
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Actions for understanding economies
• Identify clusters- measures of scale & concentration- local views and intelligence
• Map systemic relationships- competitiveness factors- supply chains- knowledge chains
• Benchmark against competitors
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Identifying Clusters
•Aggregating criteria
•Measures of scale
•Measures of innovation
•Products•Processes•Value chains•Technologies•Skills•Resources
•# employees•# firms•Growth employ.•Growth firms.•Loc. quotients•Average wages
•# of patents•$ in equipment•$ in R&D•# know. workers•# scientists, eng, technicians
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Furniture in Alabama and Mississippi
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MAJOR 2-DIGIT MANUFACTURING SECTORS, 1996-1999
-60.0%
-40.0%
-20.0%
0.0%
20.0%
40.0%
0% 20% 40% 60% 80% 100% 120% 140% 160% 180% 200%
Fabricated Metals
Electronic & Other Electric Equipment
Industrial Machinery
Lumber & Wood Products
Furniture & Fixtures
Printing & Publishing
Food Products
Paper
Apparel
Chemicals
Rubber & Plastics Products
Textiles
Stone, Clay & Glass Products
Primary Metal Industries
JOB GROWTH, LOW WAGES
JOB GROWTH, HIGH WAGES
JOB LOSS, LOW WAGES
JOB LOSS, HIGH WAGES
WAGES, AS % OF NONRETAIL AVG.
JOB
GR
OW
TH
, 1996-99
size of bubble indicates number of employees
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Supply Chain Clusters
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RHODE ISLAND’S CLUSTERS
• JEWELRY
• BOAT BUILDING
• ELECTRONICS & INSTRUMENTS
• SOFTWARE
• TOURISM
• PRECISION METAL WORKING
• AQUACULTURE
• FINANCIAL SERVICES
• BIOMEDICAL
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ARIZONA’S CLUSTERSNOW AND THEN
• 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
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ILLINOIS’ CLUSTERS
• AGRICULTURE & FOOD PROCESSING
• COAL MINING
• TRANSPORTATION & DISTRIBUTION
• EXPORT SERVICES
• HEALTH & BIOMEDICAL
• BUSINESS AND PERSONAL TRAVEL
• MANUFACTURED INPUTS
• INDUSTRIAL MACHINERY
• TRANSPORTATION EQUIPMENT
• TELECOMMUNICATIONS EQUIPMENT
• CONSUMER PPLIANCES AND ELECTRONICS
• ELECTRICAL EQUIPMENT
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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
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Actions for engagement
• Inventory social capital
• Establish, recognize cluster organizations
• Formalize communications channels
• Facilitate networks
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Measures of Social Capital
• # of business, trade, professional associations
• Sector advisory board membership• Membership, meetings, attendance• Networks formed• Civic leadership by businesses
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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
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Forming Networks
• Publicize concepts
• Train brokers
• Identify multipliers
• Provide startup incentives
• Assessment
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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
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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!
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MISSION Statement
The Northeast Oklahoma Manufacturers’ Council, Inc will provide leadership to form partnerships to continuously improve manufacturing operations, address manufacturing issues and concerns, foster employee development, modernize technology, support industrial education, and promote corporate citizenship.
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OutcomesNetworked expertise to solve
manufacturing problems, share costs Increased opportunities to bid on
projects via joint bidding and procurement assistance
Cultivation of local vendors/suppliersAdvocacy voice for multiple companies,
political leverageExpand skilled labor pool
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Metal Workers Mfg & Training Alliance (META)
• 12 Companies
• 1,700 Employees
• Over $235 million in annual sales
• 821,800 square feet of manufacturing space
• Core competencies include:– Engineering Design (CAD & CAM)– CNC & Lathe Turning– Grinding, Milling,Welding, Machining– Process Development– Assembly
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Genesis of the META “Cluster”• BERC / Housatonic Community College
Employer Surveys
• Manufacturing Committee
• Initiative for a Competitive Inner City (ICIC) Cluster Research- Michael Porter
• CT Economic Resource Center/Connecticut Business and Industry Association Business Workforce development $10,000 grant
• State of CT Cluster Funding $125,000
• DOL Grant $1.7 million
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META Logic Model Problems Activity Outcome
Intermediate Final
CentralizedFacilities
Continuous assessment
Low unemployment(2.4%- 7/00)
Perception of the Manufacturing
Industry
Sustainabilitytechniques
Metrics for ROI
Create business alliances
Training
Lack of Educational Programs
Customized job training
program designed to build on the resources of
industry partners Resume Database
Lean Manufacturing
Database for tracking Outcome
Measurements
Competitive,TrainedWork-force
Value added
organization
Model for Cluster
Development
Retiring Workforce
Low-population Growth
Incorporate Lean
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Actions for organizing and delivering services
• Collect and disseminate by cluster
• Establish one-stop cluster shops
• Form cross agency cluster teams
• Employ cluster expertise
• Facilitate external connections
• Work with intermediaries
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Cluster Hubs
• PT-CAM (Greensboro)
• CITER (Carpi)
• TC2 (Raleigh)
• Advanced Mfg Tech Center (Lynchburg)
• Candy Institute (Chicago)
• WIRENet (Cleveland)
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Actions for Allocating Resources, Making Investments
• New business startups
• Set-asides or incentives for collective applications
• Invest in cluster R&D needs
• Fund critical foundation factors
• Cluster technology and science parks
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Examples of Technology Centers
• CITER (Carpi)• NC Biotechnology Center (RTP)• Ellison Miles Geotechnology Center
(Dallas)• TC2 (Raleigh)• Ceramics Corridor Innovation Center
(Alfred)
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Actions for marketing clusters
• Focus inward investment
• Promote clusters
• Support regional branding
• Form export networks
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A method of bringing the hosiery industry together
Legsource will provide the tools for you to do business more efficiently.
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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
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Everyone is linked by:
• Manufacturer’s database (information about mills they can update themselves via internet)
• Supplier’s database (information about suppliers they can update themselves via internet)
• Retail/consumer “hosiery terms” search engine ( “keyword” search capabilities to match mills with retail or consumer searches)
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Example Report for a Vertical Mill Production Planning Person
Report For Sally @ Big Mill
1. Top Gun Hosiery has 200 needle double cylinder production available, email [email protected] for details
2. ABC Hosiery has excess inventory of 1000 dozen 108 needle women’s ½ cushion cotton 9-11 crew socks, email [email protected] for details
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Response to Technical Knitting Question (From Glenn @Top Gun Hosiery)
Question: We are having yarn tails protruding from the sock where the yarn feeder changes take place our KnitBetter knitting machines. Does anyone have a solution for this problem?
Response from Tim @ Big Mill:Machine Supplier has a new 2 feed tail attachment that
we have used to help with the problem. [email protected]
Response from Eric @ Machine Supplier:We offer a 2 feed tail attachment that can be added to
the 2nd feed to address the yarn tail ends. Please contact me at [email protected] for more details
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Actions for building a work force• Develop specialized labor force• Contextualize curricula• Form industry cluster skills hubs• Build partnerships between education &
clusters• Create work force information portals• Form regional skills alliances• Work with non-profits QuickTime™ and a
TIFF (Uncompressed) decompressorare needed to see this picture.
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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
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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
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Actions for 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
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Intermediaries that raise incomes, build career ladders
• Garment Industry Development Corp.
• Jane Addams Resource Center
• Wisconsin Regional Training Partnership
• ACENet