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Rural Knowledge Clusters: The Challenge of Rural Economic Prosperity

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Title: Rural Knowledge Clusters: The Challenge of Rural Economic Prosperity


1
Rural Knowledge ClustersThe Challenge of Rural
Economic Prosperity
  • Lee W. Munnich, Jr.
  • Senior Fellow and Director,
  • State and Local Policy Program
  • Humphrey Institute of Public Affairs
  • University of Minnesota

2
Overview
  • The Challenge of Rural Economic Prosperity
  • Rural Knowledge Clusters as a Model of Rural
    Innovation
  • Case Studies Evidence of Rural Knowledge
    Clusters
  • Key Findings and Implications for Economic
    Development

3
1. The Challenge of Rural Economic Prosperity
  • Double-edged sword Access to global markets but
    exposure to global competition
  • Rural areas produce goods vulnerable to changing
    export conditions
  • Rural disadvantages affect performance
  • geographic (inability to achieve equivalent
    economies of scale and specialized division of
    labor)
  • structural (migration from rural communities)
    help to explain the underperformance of rural
    economies relative to urban ones.
  • Rural areas have lower levels of educational
    attainment, patenting and venture capital
    investment than metropolitan areas

4
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

5
2. Rural Knowledge Clusters as a Model of Rural
Innovation
  • Rural knowledge clusters A definition
  • Innovative, interrelated groups of firms
  • Located outside metropolitan areas
  • Deriving competitive advantages through
    accumulated, embedded, and imported knowledge
    among local actors and institutions.

6
Models Become Important for Economic Development
Practice
  • Deindustrialization in 1970s and early 1980s led
    to renewed focus on industrial location and
    regional competitiveness
  • Growing interest in models of innovative and and
    competitive economies
  • Silicon Valley emerging center of global
    high-tech development free-wheeling
    entrepreneurship synergistic relationships
    between higher education and industry (Saxenian
    1994)
  • Third Italy flexible specialized networks of
    small producers in relatively low-tech sectors
    like shoe production (Piore and Sabel 1984)

7
Industry Clusters as an Economic Development
Strategy
  • Michael Porter, The Competitive Advantage of
    Nations (1990), drew together reemergent theories
    of regional development with elements of business
    strategy to explain internal dynamics of
    successful economies in terms of key industry
    clusters
  • Countless states, regions and localities
    throughout the world have adopted
    cluster-basedeconomic development strategies
    (Wait 2000).

8
Michael PortersDiamond of Advantage
Chance

Government

9
SLPP Industry Cluster Studies in Minnesota
  • 1995 Twin Cities
  • 1996 Southeast Minnesota
  • 1998 Southwest Minnesota
  • 1998 Northwest Minnesota
  • 2001 Northeast Minnesota

10
Rural Knowledge Cluster Studies
  • University of Minnesota Extension concept
    development
  • Minnesota State Colleges and Universities case
    studies
  • Economic Development Administration review of
    literature and practice
  • USDA Fund for Rural America research,
    application, education

11
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

12
3. Case Study Evidence of Rural Knowledge
Clusters in Minnesota
  • Wireless and radio frequency technologies
    (Mankato)
  • Automation and motion control technologies
    (Alexandria)
  • Recreational transportation equipment (Northwest
    Minnesota)
  • Advanced composite materials (Winona)
  • Precision Agricultural Machinery (Southwest
    Minnesota)

13
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14
Case Study Questions
  • What is the history of the cluster? What
    individuals have been most important to its
    development?
  • What is the knowledge base embodied in this
    cluster? What indicators of knowledge can be
    identified?
  • What companies and industries comprise this
    knowledge cluster? What institutions relate to
    them and what role have they played?

15
Mankato Key Facts
  • Population (2000) 105,238
  • Major Cities
  • Mankato 32,427
  • North Mankato 11,798
  • Waseca 8,493
  • Population Density (pop/sq mi) 65
  • (Twin Cities 601 MN state 62)
  • Population Growth (1990-2000) 5
  • (MN non-metro 4 US non-metro 9)
  • Job Growth (1990-2000) 26
  • (MN non-metro 25 US non-metro18)
  • Blue Earth, Nicollet and Waseca Counties
  • Source Census Bureau Bureau of Economic
    Analysis

16
Mankato Wireless and Radio Frequency Technologies
  • Key Industries
  • Telecommunications Services(NAICS 5133/SIC
    4812) 
  • 2000 Employment 500, 2 more concentrated than
    U.S. overall
  • Semiconductor other electronic component
    manufacturing (NAICS 3344/SIC 3679)
  • 2000 Employment 1,043, 333 more concentrated
    than U.S. overall
  • Communications equipment mfg (NAICS 3342/SIC
    3661)
  • 2000 Employment 384, 255 more concentrated than
    U.S. overall
  • Source County Business Patterns

17
Mankato Wireless and Radio Frequency Technologies
  • Key Employers
  • EI Microcircuits (Mankato) 162 employees
  • EF Johnson Co. (Waseca) 243 employees
  • HickoryTech (Mankato) 525 employees
  • Johnson Components (Waseca) 210 employees
  • Midwest Wireless (Mankato) 356 employees
  • PrePaid Systems (Mankato) 5 employees
  • Thin Film Technology (North Mankato) 130
    employees
  • Winland Electronics (Mankato) 107 employees
  •  
  • Source MN Dept of Trade and Econ Development

 
18
  • Mankato Rural Knowledge Cluster Profile
  • Competitive Advantages
  • Skilled, specialized labor force
  • Diverse market opportunities
  • Cooperative interfirm relations
  • Firms and Industries
  • Wireless service providers
  • Electronic components for wireless applications
  • Training in wireless technology
  • History
  • EF Johnson radio manufacturer, incubator of
    local talent
  • Informal networking through ham radio club
  • Wireless and radio frequency technologies

19
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

20
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

21
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

22
  • 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

23
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

24
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

25
Northwest Minnesota Recreational 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

26
  • 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

27
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

28
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

29
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

30
  • 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
  • Spinoff/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

31
Southwestern MinnesotaPrecision Agricultural
Equipment
  • Agricultural sprayer technology
  • Potential pitfall of having a cluster of
    companies doing essentially the same thing,
    rather than diverse activities around the same
    technology
  • Vulnerability that comes from non-local ownership

32
4. Key Findings
  • History and context are important in the
    development of rural knowledge clusters.
  • A core knowledge base can be instrumental in
    driving multiple industries and applications.
  • Developing comparable quantitative indicators of
    knowledge is extremely difficult.
  • The acquisition of local firms by non-local firms
    can either bolster or threaten the vitality of
    rural knowledge clusters, depending on the
    circumstances.
  • Two different strategic approaches can boost the
    vitality of rural knowledge clusters an
    institutional strategy and an entrepreneurial
    strategy.

33
Implications for Economic Development
  • Understand your local knowledge base.
  • Foster linkages between firms and local
    institutions that support them
  • Develop strategies for promoting innovation
    around rural knowledge clusters
  • Dont try to go it alone promote a regional
    vision to guide local strategies

34
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.hhh.umn.edu/centers/slp/
  • (612) 625-7357
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