Industry Cluster Approach to Workforce and Economic Development

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Industry Cluster Approach to Workforce and
Economic Development

• RCCI Annual Conference
• October 7, 2003
• Lee W. Munnich, Jr.
• State and Local Policy Program
• With
• Liz Templin
• Extension Educ. - Community Economics
• University of Minnesota

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Why this presentation?

• Link between workforce development and economic
  development
• A trained workforce is critical for success
• Articulating the regions industry clusters can
  focus community economic development efforts

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Objectives

• Definition of industry clusters
• Adaptation to rural communities
• How industry clusters start (case studies)
• Role of higher education

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Michael PortersDiamond of Advantage
Chance

Government

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The Knowledge Economy

• In todays economy, innovation is survival, no
  matter what your product or service line is.
• Any innovation requires knowledge about the
  technologies, processes, markets, etc., that make
  it work
• The economic development challengeproviding a
  fertile environment for innovation

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Rural knowledge clusters defined

• Innovative, interrelated groups of firms
• Located outside metropolitan areas
• Deriving competitive advantages through
  accumulated, embedded, and imported knowledge
  among local actors and institutions.

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Rural Knowledge Clusters What Matters?

• Competitive advantage e.g. a rich base of
  skilled workers, access to proximate market
  opportunities, local entrepreneurial culture
• Historical development and evolution of local
  knowledge base rarely appears out of thin air
• Institutions formal and informal foster the
  creation, diffusion, and renewal of the local
  knowledge base

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State and Local Policy ProgramIndustry Cluster
Studies
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Industry Clusters Research Steps

• 1. Economic data on regions industries
• 2. Local leaders determine industries to study
• 3. Focus groups of industry to identify
• Competitive advantage
• History
• Institutional support / needs
• 4. Policy recommendations

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Identifying ClustersLocation Quotient

• Measures employment concentration in a particular
  industry in a particular region
• Measure of specialization
• LQ is calculated as a ratio of the industrys
  share of employment in the region to the
  industrys share of employment in the nation
• LQ 1 means that concentration of employment in
  the industry in the region is higher than
  concentration of employment in same industry in
  the nation i.e. the region specializes in that
  industry

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Case Study Evidence of Rural Knowledge
Clusters in Minnesota

• Recreational transportation equipment (Northwest
  Minnesota)
• Automation and motion control technologies
  (Alexandria)
• Advanced composite materials (Winona)
• Precision Agricultural Machinery (Southwest
  Minnesota)

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Case Example 1Competitive advantage

• Factors that give local firms a market advantage
• Supply or demand in the marketplace
• Related industries
• Local rivalry

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Northwest Minnesota Key Facts

• Population (2000) 88,472
• Major Cities
• Crookston 8,192
• East Grand Forks 7,501
• Roseau 2,756
• Thief River Falls 8,410
• Population Density (pop/sq mi) 11
• (Twin Cities 601 MN state 62)
• Population Growth (1990-2000) -2
• (MN non-metro 4 US non-metro 9)
• Job Growth (1990-2000) 16
• (MN non-metro 25 US non-metro 18)
•  
• Kittson, Marshall, Norman, Pennington, Polk, Red
  Lake, Roseau counties (Region 1)
• Source Census Bureau Bureau of Economic Analysis

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Northwest Minnesota Recreational Transportation
Equipment

• Key Industries
• Other transportation equipment
  manufacturing (NAICS 3369/SIC 3799)
• 2000 Employment 2,197, 20,500 more concentrated
  than U.S. overall
• Source County Business Patterns

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Competitive AdvantageRecreational
Transportation Equipment

• Key Employers
• Arctic Cat (Thief River Falls) 1,500 employees
• Machinewell (Grygla) 110 employees
• Polaris Industries (Roseau) 2,100 employees
• TEAM Industries (Bagley) 250 employees
• Source MN Dept of Trade and Economic Development

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Northland Community and Technical College

• Customized training for engineers
• Certificate programs
• Continuous quality improvement training

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• Competitive Advantages
• Demanding local customers
• Intense interfirm rivalry
• Diffusion to new products and industries

• Firms and Industries
• Snowmobile manufacturing
• All-terrain vehicles
• Equipment suppliers and machine shops

• Institutions
• Northland Community Technical College
• Minnesota Job Skills Partnership
• Racing culture snowmobile racing circuit

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Case Example TwoHistory

• An historical base of knowledge about an industry
  or technology that is used to create new products
  or services

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Alexandria Key Facts

• Population (2000) 210,059
• Major Cities
• Alexandria 8,820
• Fergus Falls 13,471
• Moorhead 32,177
• Population Density (pop/sq mi) 26
• (Twin Cities 601 MN state 62)
• Population Growth (1990-2000) 6
• (MN non-metro 4 US non-metro 9)
• Job Growth (1990-2000) 25
• (MN non-metro 25 US non-metro 18)
• Becker, Clay, Douglas, Grant, Otter Tail, Pope,
  Stevens, Traverse, and Wilkin counties (Region
  4).
• Source Census Bureau Bureau of Economic
  Analysis

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Alexandria Automation and Motion Control
Technologies

• Key Industries
• Packaging Machinery (NAICS 3339/SIC 3565)
• 2000 Employment 1,209, 446 more concentrated
  than U.S. overall
• Machine Shops and Related (NAICS 3327/SIC
  3599, 3451, 3452)
•  2000 Employment 844, 210 more concentrated
  than U.S. overall
•  
• Source County Business Patterns

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Alexandria Automation and Motion Control
Technologies

• Key Employers
• 3M (Alexandria) 317 employees
• Alexandria Extrusion (Alexandria) 274 employees
• Brenton Engineering (Alexandria) 127 employees
• Douglas Machine (Alexandria) 492 employees
• Minnesota Automation (Crosby) 120 employees
• Massman Automation (Villard) 100 employees
• Schott Automation (Garfield) 35 employees
• Thiele Engineering (Fergus Falls) 81 employees
•  Source MN Dept of Trade and Econ Development

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Alexandria Technical College

• Fluid Power Technology major
• Center for Automation and Motion Control (CAMC)
• Manufacturing Automation Research Laboratory
  (MARL)
• Customized training

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• Competitive Advantages
• Industry collective action around shared needs
• Shortage of skilled labor in related industries

• Firms and Industries
• Industry packaging and material handling
  machinery
• Other light manufacturing industries

• Institutions
• Alexandria Technical College, Ctr for Automation
  Motion Control
• MN Mfg Automation Coalition
• Tri-State Manufacturers Assoc.
• Minnesota Technology Inc.
• West Central Initiative

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Case Example ThreeInstitutions

• formal and informal foster the creation,
  diffusion, and renewal of the local knowledge
  base

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Winona Key Facts

• Population (2000) 112,517
• Major Cities
• Winona 27,069
• Lake City 5,054
• Population Density (pop/sq mi) 44
• (Twin Cities 601 MN state 62)
• Population Growth (1990-2000) 5
• (MN non-metro 4 US non-metro 9)
•  Job Growth (1990-2000) 21
• (MN non-metro 25 US non-metro 17)
• Blue Earth, Nicollet and Waseca counties
• Source Census Bureau Bureau of Economic Analysis

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Winona Advanced Composite Materials

• Key Industries
• Custom compounding of purchased resin (NAICS
  325991/SIC 3087)
•  2000 Employment 517, 537 more concentrated
  than U.S. overall
• All other plastics products manufacturing
  (NAICS 326199/SIC 3089)
•  2000 Employment 241, 30 more concentrated than
  U.S. overall
•  
• Source County Business Patterns

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Winona Advanced Composite Materials

• Key Employers
• RTP Company (Winona) 407 employees
• Cytec Engineering (Winona) 175 employees
• Ticona Celstran (Goodview) 69 employees
• We-no-nah Canoe (Winona) 75 employees
• Watlow Polymer Technologies (Winona) 24 employees
• AFC Strongwell (Chatfield) 200 employees
• Composite Products Inc. (Winona) 50 employees
• CodaBow Composites (Winona) 15 employees
• Miken Composites (Caledonia) 15 employees
• Geotek (Stewartville) 35 employees
•  Source MN Dept of Trade and Economic
  Development

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Higher Education

• Winona State University
• The only composites engineering undergraduate
  program in U.S.
• Composite Materials Technology Center (COMTEC)
• Southeast Technical College
• Customized training in process and quality
  improvement

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• Competitive Advantages
• Diverse local industry base
• Skilled worker base around composite engineering
• Cooperative relationships

• Firms and Industries
• Composite materials producers
• Existing products improved through use of
  composite materials (i.e. canoes, heated
  plastics, automotive products, violin bows)

• History
• Miller Brothers formed Fiberite after WWII
• Initial growth in aerospace, military
  applications
• Spin-off/startup activity to new firms

• Institutions
• SAMPE professional society
• Winona St composite eng
• COMTEC applied RD/testing
• Winona Composites Consortium
• Technical college custom training, technical
  education

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Case Study FourIndustry Cluster at Risk

• Southwestern MinnesotaPrecision Agricultural
  Equipment

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Southwestern MinnesotaPrecision Agricultural
Equipment

• Agricultural sprayer technology
• Pitfall -- companies doing the same thing, rather
  than diverse activities around the same
  technology
• Vulnerability from non-local ownership
• Needed New products using existing knowledge

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RTS Snapshots of Rural Innovation Rural Cluster
Vignettes

• Auto Industry Supply Chain
• Automotive
• Carpet Manufacturing
• Crafts
• Furniture (Household)
• Gaming
• Hosiery
• Hosiery
• Houseboat Manufacturing
• Oil and Gas
• Pottery

• Central Tennessee
• Northwestern South Carolina
• Dalton, Georgia
• Western North Carolina
• Northeastern, Mississippi
• Tunica County, Mississippi
• Catawba Valley, North Carolina
• Fort Payne, Alabama
• Somerset, Kentucky
• Southern Louisiana
• Seagrove, North Carolina

Source Stu Rosenfeld, RTS http//www.rtsinc.org/
rc/rc_home.html
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Key Findings of Case Studies

• History and context are important
• Core knowledge base can drive multiple industries
  and applications.
• Difficulty developing comparable quantitative
  indicators
• Non-local ownership risky if production-only
• Institutional and entrepreneurial strategies
  boost rural knowledge clusters

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Implications for Economic Development

• Understand your local knowledge base.
• Identify specialized knowledge (job
  classifications)
• Note firms in similar industry
• Note underlying technology
• Consider cluster industry study or Business
  Retention and Expansion program

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• 2. Foster linkages between firms and local
  institutions
• Map linkages and stakeholder relationships note
  gaps
• Emerging workforce training school-to-work,
  apprenticeships
• Incumbent workforce training customized job
  training, continuing education, training
  partnerships

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• 3. Develop strategies for promoting innovation
  around rural knowledge clusters
• Research centers
• Technical assistance to entrepreneurs
• Risk capital

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• 4. Dont try to go it alone promote a regional
  vision to guide local strategies
• A. Labor market is regional

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For further information

• Go to
• http//www.ruralvitality.org
• http//www.hhh.umn.edu/centers/slp/

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For further information contact Lee W.
Munnich, Jr. Senior Fellow and Director,
State and Local Policy Program Humphrey
Institute of Public Affairs University of
Minnesota

• Lmunnich_at_hhh.umn.edu
• http//www.ruralvitality.org
• http//www.hhh.umn.edu/centers/slp/
• [phone]