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The Power of Industry Clusters

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to engage industry leaders in a regional strategy and to foster ... industry clusters; ... for action based on the industry cluster analysis. ... – PowerPoint PPT presentation

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Title: The Power of Industry Clusters


1
The Power of Industry Clusters
  • Minnesota Hydrogen Initiative Forum
  • March 7, 2002
  • Lee W. Munnich, Jr.
  • Senior Fellow and Director
  • State and Local Policy Program
  • Humphrey Institute of Public Affairs
  • University of Minnesota

2
The Theory of Industry Clusters
  • Alfred Marshall
  • Industries tend to cluster in distinct geographic
    districts, with individual cities specializinng
    in production of narrowly related set of goods
  • Joseph Schumpeter
  • Entrepreneur plays a disruptive role in creating
    products. Creative destruction, the successive
    replacement of one technology by newer
    technologies is the key to continuing economic
    development

3
The Theory of Industry Clusters
  • Paul Romer
  • Increasing returns associated with knowledge, not
    the accumulation of capital and labor, are the
    key forces driving growth
  • Michael Porter
  • Clusters, or critical masses of unusual
    competitive success in particular business areas,
    are a striking feature of virtually every
    national, regional, state, and even metropolitan
    economy, especially in more advanced nations.

4
What are Industry Clusters? (Porter)
  • Geographic concentrations of competing,
    complementary, or interdependent firms
  • Common needs for talent, technology, and
    infrastructure
  • Dynamic, changing as the industries themselves or
    external conditions change
  • Centered on firms that sell outside the local,
    state, national market
  • Driving forces in a national, regional, state or
    metropolitan economy

5
Michael PortersDiamond of Advantage
Chance


Government
6
Michael PortersDiamond of Advantage
  • Factor conditions
  • specialized labor pool, specialized
    infrastructure, selected disadvantages that drive
    innovation
  • Home demand
  • local customers push companies to innovate,
    especially if their tastes anticipate global
    demand
  • Related and supporting industries
  • internationally competitive supplier industries,
    creating a high quality, supportive business
    infrastructure, and spurring innovation and
    spin-off industries

7
Michael PortersDiamond of Advantage
  • Firm, strategy, structure and rivalry
  • intense local rivalry among local industries that
    is more motivating than foreign competition
  • a local culture which influences individual
    industries attitudes toward innovation and
    competition
  • Chance
  • Government

8
Successful Cluster Initiatives (Porter)
  • Shared understanding of competitiveness and role
    of clusters in competitive advantage
  • Focus on removing obstacles and easing
    constraints to cluster upgrading
  • Structure embraces all clusters in a nation or
    state
  • Appropriate cluster boundaries
  • Wide participation of cluster participants and
    associated institutions
  • Private sector leadership
  • Close attention to personal relationships
  • Bias toward action
  • Institutionalization

9
Arizonas Model of Cluster-based Economic
Development
  • Analytical tool
  • to better understand the economy and deploy
    resources strategically
  • Organizational tool
  • to engage industry leaders in a regional strategy
    and to foster communication, networking and
    improvement among the companies within clusters
    and across clusters
  • Service delivery tool
  • to organize the states workforce development
    efforts
  • to better provide international trade development
    services

10
SLPP Industry Cluster Studies
  • Purpose Strengthen economic competitiveness and
    increase economic opportunities
  • Identify successful industry clusters
  • Examine the competitive advantage of these
    industries using Michael Porters framework
  • Bring communities, businesses and economic
    development professionals together to discuss
    these clusters and the regional economy
  • Develop recommendations for action based on the
    industry cluster analysis.

11
SLPP Industry Cluster StudiesAnalysis and
Selection
  • Analysis
  • Location Quotients
  • Shift-Share
  • Selection Criteria
  • Is the industry competitive?
  • Is there evidence of clustering?
  • Are the jobs good jobs (wages, etc)?
  • Is the industry sustainable in long-term?
  • If an emerging cluster, are there growth
    prospects?

12
SLPP Industry Cluster Studies in Minnesota
  • 1995 Twin Cities
  • 1996 Southeast Minnesota
  • 1998 Southwest Minnesota
  • 1998 Northwest Minnesota
  • 2001 Northeast Minnesota

13
Twin Cities Industry Clusters
  • Medical Devices
  • Printing and Publishing
  • Information Technology
  • Metals and Metalworking
  • Financial Services
  • Professional Services
  • Arts/Leisure
  • Source Metro Council/Humphrey Institute, Twin
    Cities Industry Cluster Study (1995)

14
Twin Cities Competitive Advantages
  • Major corporations 3M, Medtronic, General
    Mills/Pillsbury, Target, Best Buy, Northwest
    Airlines, West Publishing, Wells Fargo, etc.
  • Balanced mix of competitive industry clusters
  • Competitive network of suppliers driven by
    demanding corporate customers
  • University of Minnesota
  • Entrepreneurial environment
  • High skilled workforce
  • Attractive quality of life

15
Why are clusters important?
  • Common understanding of the dynamic competitive
    forces affecting your local economy
  • Organizational tool for economic development,
    education, workforce development and community
    development strategies in a knowledge economy
  • Continuous improvement of programs and services
    based on an industry cluster approach
  • Effective linkages among private, public and
    non-profit stakeholders for long-term sustainable
    development

16
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17
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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