The National Governors Association Center for Best Practices (NGA Center) selected seven states—Georgia, Illinois, Iowa, Kentucky, Maryland, Oregon and West Virginia—to participate in a new policy academy entitled State Strategies for Promoting Innovative Clusters and Regional Economies. State leaders will work with nationally recognized experts and peers from others states to apply contemporary cluster analysis and innovation-based economic development strategies in their states. Working with NGA Center staff and other experts, state teams will plan strategies to orient state investments, workforce development, and education initiatives around potential clusters. LINK: NGA Center's report Cluster-Based Strategies for Growing State Economies or visit www.nga.org/center/sewp.
"In the face of intensifying international competition, governors recognize innovation-based economic development is critical to states’ participation in the global marketplace," said Arizona Gov. Janet Napolitano, who heads NGA's Innovation America initiative. The study aims to:
· Provide states a deeper understanding of their competitive clusters and fast-growing business sectors through a unique empirical analysis;
· Conduct a scan of the major policy challenges and opportunities in the regions;
· Develop a plan for strengthening major industry clusters and improving the general environment for innovation; and
· Align state research and development investments, workforce development and education systems with the current and future needs of the state’s most promising clusters.
The State Science & Technology Institute SSTI (www.ssti.org ) asks what are the main factors that influence the growth of successful clusters within regions? Andreas Eisingerlich and Leslie Boehm peer into this question in a recent article in Business Insight, a series produced this year by the Wall Street Journal in cooperation with M.I.T. Sloan Management Review. After looking at different clusters on three continents, the authors identified four key factors determining the growth potential and competitiveness of a cluster. They found the most successful clusters:
1) Are anchored by an academic entity or research institution and supported by private or government-sponsored agencies;
2) Contain research centers and companies that value innovation and venture into new markets;
3) Have a network of service providers that perform non-core activities, which allows firms to concentrate on more essential tasks; and,
4) Encourage collaboration and competition, at both global and local levels.
Practitioners who want to establish clusters in their states and regions may need to have a much deeper understanding of the varied dynamics of cluster development as they attempt to create technology-based clusters. The continually changing aspect of clusters is the subject of some recent research by Anne L. J. ter Wal and Ron Boschman. In their paper, Co-Evolution of Firms, Industries, and Networks in Space, the authors contend existing cluster literature suffers from a handful of shortcomings. Their first assertion is that most cluster studies do not incorporate the large diversity of firms’ actions, capabilities and strategies within a cluster. Each firm is different and performs differently in the economy. Treating all firms similarly within a cluster located in a certain region ignores the specific features of individual firms that may account for their performance.
They identify a second shortcoming in that most studies overestimate the importance of geographical proximity and underestimate the importance of networks. The performance of firms may be strongly related to the networks to which they belong, and these networks may not have a spatial component. Finally, they feel the active development of clusters does not receive much attention in the literature. The authors claim the origins and evolution of cluster development deserves more attention.
With these shortcomings in mind, the authors combine existing cluster research with other concepts from the fields of network dynamics and evolutionary economics. Their analysis connects the evolution of clusters with the evolution of individual firms, their industry, and their networks of interaction. For example, as new technologies are introduced, there are a low number of firms in an industry based on this technology, and there are a large variety of firms. At this introductory stage, the network is unstable and clustering does not really exist. As the technology progresses, the number of firms and the diversity of firms increase and clusters begin to form. By time the technology reaches maturity, the clusters are firmly established and the variety of firms decreases. With maturation, a number of firms begin to compete on terms of price and cost reduction, instead of product innovation.
What can this research tell us? That without continuing innovation and new technologies, even clustered industries will begin to decline. Clusters have life cycles, as do technologies and industries. Besides attempting to co-locate similar firms to a state or region by growth or attraction, practitioners might attempt to ensure that individual firms within a cluster are flourishing if they want to have a vibrant local cluster that drives innovation.
Co-Evolution of Firms, Industries, and Networks in Space by Anne L. J. ter Wal and Ron Boschman can be downloaded at http://ideas.repec.org/p/egu/wpaper/0707.html
Eisingerlich and Boehm’s article in Business Insight can be accessed here: http://online.wsj.com/public/article/SB118841858437012520.html
