National Governors Association Clusters and Economic Development

1
National Governors AssociationClusters and
Economic Development

• April 4-5, 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
Wood Products Mini-Cluster
4
Critical mass attracts externalities, cooperation
creates externalities

• Rule of Thumb 2 The minimum firm density
  necessary is what will produce external economies

5
Hard externalities

• Externality gt Benefit
• Supply chains gt efficiency
• Specialized labor gt productivity
• Specialized services gt access
• More choice gt costs, quality
• Range of firms gt joint ventures

6
Soft Externalities

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

7
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

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 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?

11
Origins of Clusters
12
Does proximity matter?
13
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

14
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

15
Identifying Clusters
16
Furniture in Alabama and Mississippi
17
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
Printing Publishing
JOB LOSS, LOW WAGES
JOB LOSS, HIGH WAGES
Apparel
JOB GROWTH, 1996-99
size of bubble indicates number of employees
18
Supply Chain Clusters
19
RHODE ISLANDS CLUSTERS

• JEWELRY
• BOAT BUILDING
• ELECTRONICS INSTRUMENTS
• SOFTWARE
• TOURISM
• PRECISION METAL WORKING
• AQUACULTURE
• FINANCIAL SERVICES
• BIOMEDICAL

20
ARIZONAS CLUSTERSNOW AND THEN

• 2001
• BIOINDUSTRY
• ENVIRONMENTAL TECH.
• FOOD FIBER NATURAL PRODUCTS
• HIGH TECHNOLOGY
• MINING MATERIALS
• OPTICS
• PLASTICS COMPOSITES
• SENIOR INDUSTRIES
• SOFTWARE INFORMATION
• TOURISM

• 1993
• AEROSPACE
• AGRICULTURE, FORESTRY, FOOD
• BUSINESS SEVICES
• HEALTH/BIOMEDICINE
• INFORMATION
• MINING MATERIALS
• OPTICS
• TOURISM
• TRANSPORTATION DISTRIBUTION

21
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

22
Cluster Benchmarks

• RD 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

23
Actions for engagement

• Inventory social capital
• Establish, recognize cluster organizations
• Formalize communications channels
• Facilitate networks

24
Measures of Social Capital

• of business, trade, professional associations
• Sector advisory board membership
• Membership, meetings, attendance
• Networks formed
• Civic leadership by businesses

25
Putnams 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

26
Forming Networks

• Publicize concepts
• Train brokers
• Identify multipliers
• Provide startup incentives
• Assessment

27
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

28
(No Transcript)
29
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!

30
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.

31
Outcomes

• Networked expertise to solve manufacturing
  problems, share costs
• Increased opportunities to bid on projects via
  joint bidding and procurement assistance
• Cultivation of local vendors/suppliers
• Advocacy voice for multiple companies, political
  leverage
• Expand skilled labor pool

32
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

33
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

34
META Logic Model
Problems Activity Outcome
Intermediate Final
Low unemployment (2.4- 7/00)
Model for Cluster Development

Training

Customized job training program designed to
build on the resources of industry partners
Retiring Workforce
Sustainability techniques
Create business alliances
Competitive, Trained Work- force
Perception of the Manufacturing Industry
Centralized Facilities
Metrics for ROI
Continuous assessment
Resume Database
Value added organization
Lack of Educational Programs
Lean Manufacturing
Incorporate Lean
Database for tracking Outcome Measurements
Low-population Growth
35
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

36
Cluster Hubs

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

37
Actions for Allocating Resources, Making
Investments

• New business startups
• Set-asides or incentives for collective
  applications
• Invest in cluster RD needs
• Fund critical foundation factors
• Cluster technology and science parks

38
Examples of Technology Centers

• CITER (Carpi)
• NC Biotechnology Center (RTP)
• Ellison Miles Geotechnology Center (Dallas)
• TC2 (Raleigh)
• Ceramics Corridor Innovation Center (Alfred)

39
Actions for marketing clusters

• Focus inward investment
• Promote clusters
• Support regional branding
• Form export networks

40
A method of bringing the hosiery industry together
Legsource will provide the tools for you to do
business more efficiently.
41
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

42
Everyone is linked by

• Manufacturers database (information about mills
  they can update themselves via internet)
• Suppliers 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)

43
Example Report for a Vertical Mill Production
Planning Person

• Report For Sally _at_ Big Mill
• Top Gun Hosiery has 200 needle double cylinder
  production available, email bob_at_topgunhosiery.com
  for details
• ABC Hosiery has excess inventory of 1000 dozen
  108 needle womens ½ cushion cotton 9-11 crew
  socks, email jack_at_abchosiery.com for details

44
Response to Technical Knitting Question (From
Glenn _at_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 _at_ Big Mill
• Machine Supplier has a new 2 feed tail attachment
  that we have used to help with the problem.
  tim_at_bigmill.com
• Response from Eric _at_ 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 eric_at_machinesupplier.co
  m for more details

45
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

46
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

47
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

48
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

49
Intermediaries that raise incomes, build career
ladders

• Garment Industry Development Corp.
• Jane Addams Resource Center
• Wisconsin Regional Training Partnership
• ACENet