Innovation Clusters as governance systems: Local Proximity Global Reach

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Innovation Clusters as governance systems Local
Proximity Global Reach
Cami Ryan January 23, 2003
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Outline

• Evolution of clusters.
• Marshall to Porter
• Innovation Clusters
• Critical Elements of Clusters
• Knowledge Innovation
• Forces Affecting Geographical Concentration
• Exploring Ag Biotech Innovation Clusters A
  Comparison of Innovation Structures of NA, the
  EU, and Australia

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Evolution of clusters.

• Post-war regional growth poles designed to
  attract firms to areas
• Coincide with an emphasis on agglomeration
  economies
• Linkages through formal and informal networks
• MANY, MANY definitions of clusters

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mysteries... in the air...

• Marshall, A. (1907) Agglomeration Economies
• firms locate together to reduce transaction
  costs, to increase flexibility and to facilitate
  communication flows.
• industrial clusters arise because of
• 1)the backward and forward linkages associated
  with large local markets
• 2) the advantages of thick markets for
  specialized skills
• 3) knowledge spillovers.

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Innovation Clusters

• Michael Porter (1990) defines clusters as
• "geographic concentrations of interconnected
  companies, specialized suppliers, service
  providers, firms in related industries, and
  associated institutions (for example,
  universities, standards agencies, and trade
  associations) in particular fields that compete
  but also cooperate.

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Sources of Locational Competitive Advantage
(Porter 1990)
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Critical Elements of Clusters

• Factor conditions
• Infrastructure, social learning, social capital,
  resources, framework policies, mobility of skills
• Research, Research institutes, Universities,
  incubators

Source Review of Knowledge Intensive Industrial
Clusters in Canada Scoping Study (2001)
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Critical Elements of Clusters

• Firm strategy, rivalry collaboration
• Champions, larger firms MNEs, SMEs
• Related and supporting industries.
• Local markets, external markets, cross border
  trade
• Demand conditions

Source Review of Knowledge Intensive Industrial
Clusters in Canada Scoping Study (2001)
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Why this new emphasis on clusters?

• International adoption of new types of innovation
  
• Shifts in trade policies
• Availability and mobility of knowledge workers
• Global expansion of communications technologies

Source Review of Knowledge Intensive Industrial
Clusters in Canada Scoping Study (2001)
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Local global tension of clusters.

• Global reach of networks increases market access
  and influences cluster activity and success

• Local aspects of clusters yield trust,
  reciprocity, and cooperation

amidst an environment of competition,
collective vision and an atmosphere of openness
to new arrivals
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Forces affecting geographic concentration.

• Centripetal Forces
• Market size effects
• Thick labour markets
• Pure external economies

• Centrifugal Forces
• Immobile factors
• Land rents
• Pure external diseconomies

FORCES THAT FACILITATE
FORCES THAT OPPOSE
Source Whats New about the New Economic
Geography? Oxford Review of Economic Policy
Vol.14, No. 2 Krugman, P. 1997
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What can we conclude from this?

• tension/circular dynamism involved in
  explaining economic concentration
• certain amount of unpredictability associated
  with the shaping of clusters
• externalities are a driving force of clusters in
  the knowledge based economy
• but what about the roles of knowledge and
  innovation in the innovation cluster?.

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The Role of Knowledge in clusters...

• New Growth Theory (NGT) identifies knowledge as a
  major driver of innovation and growth (OECD 1996)
• categories of knowledge (OECD 2000)
• Codified (know-what know-why)
• Tacit (know-who know-how)

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The Role of Innovation in clusters...

• Innovation is any change in inputs, methods, or
  outputs which improves the commercial position of
  a firm and that is new to the firms operating
  market (Padmore Gibson forthcoming)
• Innovation is actually a global activity that
  transcends any firm or region (Phillips 2002)

FIRM
GLOBAL
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Exploring Ag Biotech Innovation Clusters

• A Comparison of Innovation Structures
• Highlight the differences of regional economies
  in and between countries
• Assess a variety of life science clusters in
  Canada, the US, the EU and Australia
• Focus on the role of the agricultural
  biotechnology industry

Source Industrial innovation and regional
competitiveness in the agricultural
biotechnology sector A comparative analysis of
innovation structures in North America, Europe
and Australia (Ryan Phillips Forthcoming)
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Important influential factors

• Ability for actors to leverage embedded supply
  chains
• Definitive product / market focus definitive
  cluster identity
• Quality of networks access to new knowledge
• technology transfer offices, technopoles and
  research parks
• comprehensive government-based strategies in
  funding and promotion
• venture capital associated initiatives
• Geopolitical factors

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Results of study.

• Very few dedicated agricultural biotechnology
  innovation clusters in the world
• Ag biotech appears to operate on the periphery of
  more traditionally established pharma / bio
  clusters

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The test for cluster competency

• How do they define their market?
• A definitive product focus appears to offer
  insight into the comparative advantage of certain
  clusters
• Adelaide Innovation Region has no clear product
  focus
• May account for its inability to attract actors
  and its diminished strength relative to other
  clusters
• Innovation Place and the BioBelt in St. Louis
  have a more defined product / market focus

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Comparison of 4 specific clusters in 4 regions.

• Canada
• Innovation Place
• United States
• BioBelt St. Louis
• EU
• BioValley Germany, Switzerland France
• Australia
• Adelaide Innovation Region

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The US the EU

• BioBelt
• Largest private sector actors
• Clearly defined strategies, definitive market
  focus driven by the private sector

• BioValley
• Trend towards public sector presence
• Strongly defined strategies driven by public
  sector

Demand driven
Supply driven
Knowledge Networks
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Innovation Place, Saskatoon

• small in terms of geographic size and actor
  density
• one of the most clearly self-defined agricultural
  biotechnology innovation clusters in the world
• characteristics likened to that of the classical
  trade entrepot (Phillips 2002)

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Another test.

• World Firsts
• North American clusters
• GM canola and flax in Saskatoon
• Roundup Ready technologies and GM corn and
  soybeans in St. Louis
• EU and Australian clusters have only been able to
  adapt and adopt technologies developed elsewhere

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Geopolitical Structures

• United States
• federal system
• Canada
• joint federal and provincial system
• Australia
• federal system states dominate policy field
• EU
• distinguished by a variety of geopolitical systems