Roles of Clusters of Excellence in Fostering Economic Growth

1
Roles of Clusters of Excellence in Fostering
Economic Growth

• Can New Products and New International and
  Domestic Marketing Channels Increase Rural
  Incomes? Ideas, Models, and Evidence
• Sonoma Valley Inn
• Sonoma CA
• Michael Boland
• June 19, 2005
• Kansas State University

2
Motivation

• 2005 Galbraith Forum and Medal Recipient
• Professor Michael Porter (Harvard University)
• July 24 preconference at AAEA
• Describes Michael Porter and his contributions to
  competitiveness and economic clusters
• Four cases were commissioned for the
  preconference
• Linked to work on geographic indications and
  business development.
• ISU CARD program and tour

3
What is a cluster?

• Critical masses of unusual competitive success in
  a particular field
• Many examples in agriculture especially outside
  the US.
• Geographic concentrations of interconnected
  companies and institutions in a particular field
• Silicon Valley and Hollywood
• Linked industries and services
• Specialized inputs and outputs
• Include educational institutions that provide
  support for the cluster

4
Clusters are difficult to quantify.

• Standard ways of classifying industries obscure
  cluster identification.
• Promote cooperation and competition
• A cluster allows each member to benefit as if it
  had greater scale or as if it had joined with
  other members without giving up its uniqueness.
• Some aspects of a cluster are similar to clubs
• The literature uses club theory to help motivate
  why clusters exist

5
Clusters are vital to competition.

• Competition in 21st century depends upon
  productivity
• Access to inputs and scale are important but
  productivity is the crucial element
• Globalization is creating easier access to low
  cost sources of inputs
• How to use those inputs productively is the key
  for competitive advantage
• Clusters affect competition by
• Increasing productivity among businesses in the
  cluster
• Driving innovation
• Stimulating the growth of new businesses.
• Governments can help foster growth of clusters
  through policy.

6
Three Strands of Research on Clusters

• Spatial agglomeration of economic activity
• Krugman and Arthur
• Focus on mathematical models of IRTS
• Mobility of labor and land
• Porter
• Cases studies on clusters in various countries
• Long-run regional growth convergence
• Barro
• Focus on convergence of growth rates over regions
• Cultural aspects
• Detailed cases on clusters
• Antonelli and others on the third Italy and its
  industrial districts
• Focus on social, cultural, and institutional
  foundations for the cluster
• Amin and work on regulation political economy in
  France
• Includes governance, competition, and social
  regulation

7
Cultural aspects of clusters offer opportunities
for research.

• Many clusters are food related.
• Many applications to business development and
  policy.
• Linked to trade and marketing issues
• Geographic indications
• Agricultural economists are involved in clusters
  through education, training, and applied
  research.
• Dairy cluster in Wisconsin pork cluster in Iowa
  and Indiana wheat to a lesser extent in Kansas
  others likely exist.

8
Research

• Detailed cases of clusters
• Very few exist
• Many opportunities
• Needs field work which is extensive but necessary
  to understand the uniqueness of the cluster
• The Italian clusters would be of interest.
• Little economic research on identification of
  specific clusters using mathematical tools
• Some work done in UK (Quay)
• Opportunity for doctoral research

9
Policy Issues

• Clusters are a hot topic right now.
• Being used in USAID, World Bank, and other
  initiatives
• Can they work in developing economies?
• Need other things first
• Property rights, transaction costs, etc.
• Can they work in rural areas?
• Business development has not really addressed
  clusters in a coherent manner.
• Opportunities exist to do so.

10
Can clusters promote rural incomes?

• Need to understand the economics first
• Access to inexpensive inputs such as corn
  (industrial use) or labor (dairy) and which
  inputs are mobile
• Transportation, logistics, and access to demand
  points
• Need to create the mechanism for trust and
  cooperation
• Some planning is needed
• Need to get industry, trade associations, local
  policy makers, and research and training
  organizations on board.
• Concept of strategic intent
• Single-minded focus on an end result (e.g., 100
  life science companies in Iowa by 2010)
• Need to be focused (an ethanol industry may not
  be feasible in MT)
• Uniqueness needs to be understood
• Do the social aspects of clusters appeal to
  businesses?
• Organic, natural foods, etc.
• Governance issues and cultural exist and may be
  different
• Trade vs. domestic markets
• How should a cluster be developed?
• Need to get ideas like this in front of policy
  makers