Cluster-Based Economic Development:
What Have We Learned
Christian H. M. Ketels, PhD
Institute for Strategy and Competitiveness
Harvard Business School
DTI
London, UK
17 March 2004
This presentation draws on ideas from Professor Porter’s articles and books, in particular, The Competitive Advantage of Nations (The Free
Press, 1990), “The Microeconomic Foundations of Economic Development,” in The Global Competitiveness Report 2003, (World Economic
Forum, 2003), “Clusters and the New Competitive Agenda for Companies and Governments” in On Competition (Harvard Business School Press,
1998), and the “Cluster Initiative Greenbook” by C Ketels, O Solvell, and G Lindqvist. No part of this publication may be reproduced, stored in a
retrieval system, or transmitted in any form or by any means - electronic, mechanical, photocopying, recording, or otherwise - without the
permission of the author.
Additional information may be found at the website of the Institute for Strategy and Competitiveness, www.isc.hbs.edu
Why the Interest in Clusters?
• Clusters are becoming increasingly popular as a policy tool to boost
economic development and competitiveness
• The interest in clusters is at least partly a response to the weaknesses
of economic strategies pursued in the past
– Strategies based on market opening and macroeconomic
stabilization alone have over time tended to exhibit falling returns
– Strategies based on market intervention and industrial policy have
fared even worse, undermining prosperity over time
• Clusters are seen as a market-based approach to economic policy
that develops new roles for government and companies, as well as for
universities, research institutions, trade associations, and others
Cluster-Based Development 03-10-04 CK
2
Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Cluster Policy in the UK
• UK competitiveness is entering a new phase
• The focus is shifting towards building stronger microeconomic
foundations to take better advantage of open markets and stable
macroeconomic conditions
• Competitiveness and clusters have become an established element
of DTI’s strategy to upgrade UK competitiveness
• New institutions, especially the Regional Development Agencies
(RDAs), have been created that push the agenda on the regional level
• Significant investments have been made in collecting performance
indicators, mapping clusters, and evaluating cluster policy
Cluster-Based Development 03-10-04 CK
3
Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Cluster Research Entering a New Phase
• Research on clusters has made significant progress, developing a
consistent conceptional framework over the last decade
• Economic development practitioners increasingly look at the cluster
concept as a promising new policy approach
• Clusters are moving from being an experimental, innovative idea to the
mainstream of research and policy
• The increased exposure puts new demands on the field
– Moving from case studies to large scale data bases and empirical
tests of theory-based hypotheses
– Moving theory development from the focus on clusters as an
empirical phenomenon to clusters as a policy approach
Cluster-Based Development 03-10-04 CK
4
Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Drivers of Sustainable Prosperity
Prosperity
Prosperity
Productivity
Productivity
Competitiveness
Innovative
Innovative Capacity
Capacity
Cluster-Based Development 03-10-04 CK
5
Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Determinants of Productivity and Productivity Growth
Macroeconomic,
Macroeconomic,Political,
Political,Legal,
Legal,and
andSocial
Social
Context
Contextfor
forDevelopment
Development
Microeconomic
MicroeconomicFoundations
Foundations of
of Development
Development
Sophistication
Sophistication
of
ofCompany
Company
Operations
Operationsand
and
Strategy
Strategy
Quality
Qualityof
ofthe
the
Microeconomic
Microeconomic
Business
Business
Environment
Environment
• A sound macroeconomic, political, legal, and social context creates the
potential for competitiveness, but is not sufficient
• Competitiveness ultimately depends on improving the microeconomic
capability of the economy and the sophistication of local companies and
local competition
Cluster-Based Development 03-10-04 CK
6
Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Business Competitiveness Index 2003
Relationship with GDP Per Capita
Norway
35,000
USA
y = 2002.2x2 + 8427.7x + 9514.9
30,000
R2 = 0.8266
Iceland
Denmark
Canada
Austria
Switzerland
Ireland
Germany
Finland
Italy
UK
Sweden
Taiwan
Singapore
2002 GDP per
Capita 25,000
(Purchasing
Power Adjusted)
Spain
20,000
New Zealand
Israel
Greece Portugal
Slovenia
Malta
15,000
S Korea
Czech Rep
Hungary
Argentina
10,000
Brazil
Thailand
Tunisia
China Jordan
Algeria
Paraguay
0
South Africa
Malaysia
Russia
Bulgaria
5,000
Estonia
Croatia
Vietnam
Kenya
Tanzania
India
Business Competitiveness Index
Source: Global Competitiveness Report 2003
Cluster-Based Development 03-10-04 CK
7
Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Productivity and the Business Environment
Context
Contextfor
for
Firm
Firm
Strategy
Strategy
and
andRivalry
Rivalry
z
Factor
Factor
(Input)
(Input)
Conditions
Conditions
z
Presence of high quality,
specialized inputs available
to firms
–Human resources
–Capital resources
–Physical infrastructure
–Administrative infrastructure
–Information infrastructure
–Scientific and technological
infrastructure
–Natural resources
z
z
z
z
A local context and rules that
encourage investment and
sustained upgrading
–e.g., Intellectual property
Demand
protection
Demand
Conditions
Meritocratic incentive systems
Conditions
across all major institutions
Open and vigorous competition
z Sophisticated and demanding local
among locally based rivals
customer(s)
z Local customer needs that anticipate
those elsewhere
Related
and
Related and
z Unusual local demand in specialized
Supporting
segments that can be served
Supporting
Industries
nationally and globally
Industries
Access to capable, locally based suppliers
and firms in related fields
Presence of clusters instead of isolated
industries
• Successful economic development is a process of successive economic upgrading, in which
the business environment in a nation evolves to support and encourage increasingly
sophisticated ways of competing
Cluster-Based Development 03-10-04 CK
8
Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
The Boston Life Sciences Cluster
Health
Healthand
and Beauty
Beauty
Products
Products
Cluster
Cluster Organizations
Organizations
MassMedic,
MassMedic, MassBio,
MassBio,others
others
Teaching
Teaching and
and Specialized
Specialized Hospitals
Hospitals
Surgical
Surgical Instruments
Instruments
and
Suppliers
and Suppliers
Specialized
Specialized Business
Business
Services
Services
Medical
Medical Equipment
Equipment
Dental
Dental Instruments
Instruments
and
and Suppliers
Suppliers
Biopharma
Biopharmaceutical
ceutical
Products
Products
Biological
Biological
Products
Products
Banking,
Banking, Accounting,
Accounting, Legal
Legal
Specialized
Specialized Risk
Risk Capital
Capital
Ophthalmic
Ophthalmic Goods
Goods
VC
VC Firms,
Firms, Angel
Angel Networks
Networks
Diagnostic
Diagnostic Substances
Substances
Specialized
Specialized Research
Research
Service
Service Providers
Providers
Containers
Containers
Analytical
Analytical Instruments
Instruments
Cluster-Based Development 03-10-04 CK
Research
Research Organizations
Organizations
Laboratory,
Laboratory, Clinical
Clinical Testing
Testing
Educational
Educational Institutions
Institutions
Harvard
Harvard University,
University, MIT,
MIT, Tufts
Tufts University,
University,
Boston
University,
UMass
Boston University, UMass
9
Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Levels of Clusters
• There is often an array of clusters at different locations in a given field, each
with different levels of specialization and sophistication
• Global innovation centers, such as Silicon Valley in semiconductors, are few
in number. If there are multiple innovation centers, they normally specialize in
different market segments
• Other clusters focus on manufacturing, outsourced service functions, or play
the role of regional assembly or service centers
• Firms based in the most advanced clusters often seed or enhance clusters in
other locations in order to reduce the risk of a single site, access lower cost
inputs, or better serve particular regional markets
• The challenge for an economy is to move from isolated firms to an array of
clusters, and then to upgrade the breadth and sophistication of clusters to
more advanced activities
Cluster-Based Development 03-10-04 CK
10
Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Influences on Competitiveness
Multiple Geographic Levels
World Economy
Broad Economic Areas
Groups of Neighboring
Nations
Nations
States, Provinces
Cities, Metropolitan
Areas
Cluster-Based Development 03-10-04 CK
11
Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Evolution of Regional Economies and Clusters
• Regional economies and their individual clusters develop slowly in an
evolutionary, path-dependent process
• Some of the factors that drive this process are inherited or externally given
(physical location, natural endowments, chance events)
• However, while these factors are important, they do not determine the
evolutionary path of a regional economy or cluster
• Choices, such as the investment in specific assets or the decision for a
particular regulation or policy, are important
– Institutions are an important factor enabling regions to make and execute choices
• So are entrepreneurial decisions
Cluster-Based Development 03-10-04 CK
12
Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Shifting Responsibilities for Economic Development
Old
Old Model
Model
New
New Model
Model
•• Government
Government drives
drives economic
economic
development
development through
through policy
policy
decisions
decisions and
and incentives
incentives
Cluster-Based Development 03-10-04 CK
•• Economic
Economic development
development is
is aa
collaborative
collaborative process
process involving
involving
government
government at
at multiple
multiple levels,
levels,
companies,
companies, teaching
teaching and
and
research
research institutions,
institutions, and
and
institutions
institutions for
for collaboration
collaboration
13
Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Institutions for Collaboration
Selected Massachusetts Organizations in Life Sciences
Life
Life Sciences
Sciences Industry
Industry Associations
Associations
University
University Initiatives
Initiatives
Harvard
Harvard Biomedical
Biomedical Community
Community
zz MIT
MIT Enterprise
Enterprise Forum
Forum
zz Biotech
Biotech Club
Club at
at Harvard
Harvard Medical
Medical School
School
zz Technology
Technology Transfer
Transfer offices
offices
Massachusetts
Massachusetts Biotechnology
Biotechnology Council
Council
zz Massachusetts
Massachusetts Medical
Medical Device
Device Industry
Industry
Council
Council
zz Massachusetts
Massachusetts Hospital
Hospital Association
Association
zz
zz
General
General Industry
Industry Associations
Associations
Informal
Informal networks
networks
Associated
Associated Industries
Industries of
of Massachusetts
Massachusetts
zz Greater
Greater Boston
Boston Chamber
Chamber of
of Commerce
Commerce
zz High
High Tech
Tech Council
Council of
of Massachusetts
Massachusetts
Company
Company alumni
alumni
zz VC
VC community
community
zz University
University alumni
alumni
zz
zz
Economic
Economic Development
Development Initiatives
Initiatives
Joint
Joint Research
Research Initiatives
Initiatives
Massachusetts
Massachusetts Technology
Technology Collaborative
Collaborative
zz Mass
Mass Biomedical
Biomedical Initiatives
Initiatives
zz Mass
Mass Development
Development
zz Massachusetts
Massachusetts Alliance
Alliance for
for Economic
Economic
Development
Development
New
New England
England Healthcare
Healthcare Institute
Institute
zz Whitehead
Whitehead Institute
Institute For
For Biomedical
Biomedical
Research
Research
zz Center
Center for
for Integration
Integration of
of Medicine
Medicine and
and
Innovative
Technology
(CIMIT)
Innovative Technology (CIMIT)
zz
Cluster-Based Development 03-10-04 CK
zz
14
Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Cluster-Based Economic Development
Key Hypotheses
• Extensive case evidence exists
• Economy-wide, systematic data in
Canada, the U.S., and Sweden
Clusters
Exist
• Case-based evidence on different
dimensions of benefits
• U.S. data provides evidence on
regional economic benefits
Clusters
Provide Economic Benefits
• Theory and case evidence suggest
impact of policy choices
Cluster Development
Can Be Influenced
• Theory and case evidence suggest
potential for net benefits
Cluster Development
Has Net Benefits
Cluster-Based Development 03-10-04 CK
15
Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Cluster Initiatives
• Conceptual Foundations
• Empirical Evidence on Clusters
• Empirical Evidence on Cluster Initiatives: The Greenbook
• Implications for Cluster-Based Economic Development
Cluster-Based Development 03-10-04 CK
16
Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Mapping Regional Clusters
Statistical Definition of Clusters
• Many previous studies have used ad-hoc cluster definitions, in some
cases supported by input-output data
• The Cluster Mapping Project set out to delineate the boundaries of
clusters statistically
– Cluster boundaries are based on the actual patterns of co-location
of industry employment across U.S. states
• The process of identifying cluster involves two steps:
– Distinguishing local, traded, and natural-resource dependent
industries
– Grouping 590 traded industries into 41 traded clusters
• Findings and details of the methodology are available at the web site of
the Institute for Strategy and Competitiveness www.isc.hbs.edu and in
“Michael E. Porter, The Economic Performance of Regions”, Regional
Studies, Vol. 37, 2003”.
Cluster-Based Development 03-10-04 CK
17
Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Composition of Regional Economies
United States, 2001
Traded
Traded Clusters
Clusters
Local
Local Clusters
Clusters
Natural
Natural Resource
Resource-Driven
Driven Industries
Industries
31.6%
31.6%
1.7%
1.7%
67.6%
67.6%
2.8%
2.8%
0.8%
0.8%
--1.0%
1.0%
$44,956
$44,956
133.8
133.8
4.5%
4.5%
$28,288
$28,288
84.2
84.2
3.7%
3.7%
$33,245
$33,245
99.0
99.0
2.0%
2.0%
144.1
144.1
79.3
79.3
140.1
140.1
Patents per 10,000
Employees
21.7
21.7
1.3
1.3
7.2
7.2
Number of SIC Industries
590
590
241
241
48
48
Share of Employment
Employment Growth, 1990
to 2001
Average Wage
Relative Wage
Wage Growth
Relative Productivity
Note: 2001 data, except relative productivity which is 1997 data.
Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School
Broad Composition of Regional Economies
Local versus Traded Wages
Average Local Wage,
2001
$40,000
New York, NY
$35,000
Bay Area, CA
Boston, MA
Anchorage, AK
Seattle, WA
$30,000
Reno, NV
Las Vegas, NV
$25,000
y = 0.33x + 12069
R2 = 0.6869
P-value < .001
$20,000
Wheeling, WV-OH
$15,000
$15,000
$25,000
$35,000
$45,000
$55,000
$65,000
$75,000
Average Traded Wage, 2001
Source: County Business Patterns; Michael E. Porter, The Economic Performance of Regions”, Regional Studies, Vol. 37, 2003
Cluster-Based Development 03-10-04 CK
19
Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Cluster Overlap in the United States Economy
Common Industries Across Broad Traded Clusters
Textiles
Leather
and
Sporting
Goods
Sporting,
Recreation
and Children’s
Goods
Footwear
Chemical
Products
Financial
Services
Apparel
Forest
Products
Publishing
and Printing
Agricultural
Products
Processed
Food
Education
and
Knowledge
Creation
Transportation
and Logistics
Entertainment
Communications
Equipment
Aerospace
Vehicles &
Defense
Aerospace
Engines
Lightning &
Electrical
Equipment
Metal
Manufacturing
Power
Generation
Jewelry &
Precious
Metals
Note: Clusters with borders or identical colors/shading except gray
have at least 20% overlap of industries by number in both directions
Cluster-Based Development 03-10-04 CK
Prefabricated
Enclosures
Automotive
Hospitality
and Tourism
Tobacco
Heavy
Construction
Services
Medical
Devices
Analytical
Instruments
Furniture
Building
Fixtures,
Equipment
and
Services
Oil and
Gas
Pharmaceuticals
Information
Technology
Fishing &
Fishing
Products
Construction
Materials
Plastics
Production
Technology
Heavy
Machinery
Motor Driven
Products
Business
Services
20
Distribution
Services
Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Determinants of Regional Prosperity
Level versus Mix Effect, U.S. Regions
Cluster Wage Level Effect
as % of Wage Gap, 2001
100%
90%
80%
Median: 74.2%
70%
60%
50%
40%
30%
20%
10%
0%
U.S. Economic Areas
Source: County Business Patterns; Michael E. Porter, The Economic Performance of Regions”, Regional Studies, Vol. 37, 2003
Cluster-Based Development 03-10-04 CK
21
Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Traded Cluster Specialization and Relative Wage Levels
Ohio, 2001
Relative
Cluster Wage
4.29% of U.S. Employment
1.25
Production
Technology
Metal Manufacturing
Automotive
U.S. average
cluster wage
1.00
Business Services
0.75
Financial Services
y = 0.1902Ln(x) + 0.9874
R2 = 0.3403
0.50
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Relative Employment by Traded Cluster
Note: Uses narrow cluster definitions to avoid overlap; bubble size proportional to employment bracket
Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School
Cluster-Based Development 03-10-04 CK
22
Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Determinants of Regional Prosperity
Cluster Strength and Wage Levels, U.S. Regions
Average Regional
Wage, 2001
$55,000
Bay Area, CA
New York, NY
$45,000
Boston, MA
$35,000
$25,000
y = 96.736x + 16218
R2 = 0.377
$15,000
50
100
150
200
250
300
Share of Traded Employment in Strong Clusters (LQ > .8), Broad Cluster, 2001
Source: County Business Patterns; Michael E. Porter, The Economic Performance of Regions”, Regional Studies, Vol. 37, 2003
Cluster-Based Development 03-10-04 CK
23
Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Determinants of Regional Prosperity
Change in Cluster Specialization and Wage Growth, U.S. States
Annual Regional Wage
Growth Rate, 1990-2001
5.5%
MA
y = 8.7905x + 3.6107
R2 = 0.2626
P-value = .0001
5.0%
NY
DC
VA
WA
4.5%
CT
TX
NC
4.0%
RI
KS
WI
ND
3.5%
MN
CA
OR
GA
SC
AL
ID
PA
MO
IN
MT
NV
WY
KY
AR
DE
FL
IL
IA
CO
NJ
LA
3.0%
OK
AK
2.5%
Economy
becoming less
specialized
2.0%
-0.06
-0.04
WV
-0.02
Economy
becoming more
specialized
HI
0.00
0.02
0.04
0.06
0.08
0.10
Change of Cluster Employment GINI, 1990-2001
Source: County Business Patterns; Michael E. Porter, The Economic Performance of Regions”, Regional Studies, Vol. 37, 2003
Cluster-Based Development 03-10-04 CK
24
Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Explaining Average Regional Wages
Multiple Regression Model
Dependent variable: Regional Average Wage
Independent
Independent Variable
Variable
Effect
Effect
•• Total
Total regional
regional employment
employment
Positive,
Positive, significant
significant
•• Patents
Patents per
per capita
capita
Positive,
Positive, significant
significant
•• Patentor
Patentor concentration
concentration
Negative,
Negative, significant
significant
•• Share
Share of
of strong
strong clusters
clusters in
in
regional
regional employment
employment
Positive,
Positive, significant
significant
•• Cluster
Cluster breadth
breadth
Positive,
Positive, significant
significant
Explained Variation (adjusted R2): 72.8%
Note: Regression uses 2001 data for 172 U.S. economic areas
Source: Michael E. Porter, The Economic Performance of Regions”, Regional Studies, Vol. 37, 2003
Cluster-Based Development 03-10-04 CK
25
Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Cluster Initiatives
• Conceptual Foundations
• Empirical Evidence on Clusters
• Empirical Evidence on Cluster Initiatives: The Greenbook
• Implications for Cluster-Based Economic Development
Cluster-Based Development 03-10-04 CK
26
Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Cluster Initiatives
The Greenbook
• Cluster initiatives are coalitions of companies, government agencies, and other
institutions for joint action to upgrade a cluster’s competitiveness
– Relatively new policy approach
– Most current evidence is based on case studies
The Cluster Initiative Greenbook
• First ever quantitative look at a 250+ cluster
initiatives
– Sponsored by Vinnova (Swedish government
agency) for the 6th Annual Conference of the
The Competitiveness Institute
• Collects data on key characteristics of cluster
initiatives (CI) connected to performance
Free download at www.cluster-research.org
Cluster-Based Development 03-10-04 CK
– Objectives; what does the CI aim to do
– Process; how is the CI organized to achieve its
objectives
– Setting; what are the characteristics of the
cluster and its environment
27
Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Cluster Initiative Assessment
Context of the CI
Categories
• To describe the setting in which the cluster initiative
operates, we look at the overall business environment
and the characteristics of the cluster served
Objectives
Setting
Findings
• There is significant variance in the responses, but some
clear patterns emerge
– Most of the CI’s operate in a context of strong
regional governments focused on innovation
– Most of the clusters served have an important role
in their region or nation
– The level of heterogeneity among the context CI’s
face is highest in the level of trust towards
government, the level of competition within the
cluster, and the age of the cluster
Cluster-Based Development 03-10-04 CK
28
Performance
Process
Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Cluster Initiative Assessment
Objectives and Activity Areas of the CI
Common objectives
Foster networks among people
Establish networks among firms
Promote innovation, new technologies
Create brand for region
Provide business assistance
Analyze technical trends
Promote formation of spin-offs
Provide management training
Enhance production processes
Improve FDI incentives
Provide incubator services
Study and analyze the cluster
Conduct private infrastructure projects
Produce reports about the cluster
Promote expansion of existing firms
Facilitate higher innovativeness
Attract new firms to region
Promote exports from cluster
Assemble market intelligence
Improve firms’ cluster awareness
Provide technical training
Diffuse technology within the cluster
Lobby government for infrastructure
Improve regulatory policy
Lobby for subsidies
Co-ordinate purchasing
Establish technical standards
Reduce competition in the cluster
Objectives
Setting
Performance
Process
Rare objectives
•
•
On average, CI’s are pursuing 15 objectives/activity areas
Almost 50% of the CI’s pursue between 13 and 20 objectives
Cluster-Based Development 03-10-04 CK
29
Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Cluster Initiative Assessment
Roles
60%
Objectives
Initiative
Financing
50%
Setting
40%
30%
Performance
Process
20%
10%
0%
Companies
•
•
Government
Others
Jointly
Companies are the most influential participants in 70% of the CI’s
There is significant heterogeneity in the role of government
Cluster-Based Development 03-10-04 CK
30
Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Cluster Initiative Assessment
Financing by CI Starting Year
100%
12%
13%
23%
32%
17%
75%
Companies
Joint
Government
Objectives
25%
Setting
Performance
30%
32%
50%
Process
71%
62%
25%
47%
35%
0%
2002/2003
2000/2001
1997-1999
1996 and
earlier
CI Founding Year
•
While financing patterns change, the objectives tend to remain
stable
Cluster-Based Development 03-10-04 CK
31
Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Cluster Initiative Assessment
CI Facilitator and Office
Cluster Initiative Facilitator
• 90% of all CI’s responding have a CI facilitator playing a
central role in leading the effort
• More than 50% of the CI facilitators come from
companies, with the rest equally from government
and specialized consultancies
Objectives
Setting
Performance
Process
CI Infrastructure
• More than 75% of all CI’s have organized task-forces to
address specific issues
• About 70% of all CI’s have relationships to other cluster
initiatives in their region or economic field
• Less than 70% of the CI’s have an own office, and the
large majority have budget shortages
•
A significant minority of about 40% of CI’s report dependence on one key
individual and a lack of sustainability without continued outside support
Cluster-Based Development 03-10-04 CK
32
Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Drivers of Cluster Initiative Success
Setting
Setting
Objectives
Objectives
Process
Process
Cluster-Based Development 03-10-04 CK
•
•
•
•
Strong business environment
Trust in government
Strong regional government
Cluster strength
• Broad range of objectives
• Objectives selected based on cluster’s
specific needs
• No significant effect of special objectives
•
•
•
•
•
CI Facilitator with cluster insight
CI has office and significant budget
CI has clear strategy and measurable goals
No negative effect of government financing
Negative effect of limiting participation
33
Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Ongoing Empirical Research
Business Environment quality
• Continuous upgrading of data on national business environments
– Global Competitiveness Report, www.weforum.org
• Collection of data on regional business environments
– Studies in selected U.S. regions in the Clusters of Innovation-project
(www.compete.org)
Cluster
• Develop cluster data at the national level using trade patterns
– Launch of new data website at www.isc.hbs.edu
• Roll out of the methodology outside the United States
– Canada, 2001 (www.competeprosper.ca)
– Sweden, 2003 (www.cluster-research.org)
Cluster policy
• Collection of data on the impact of cluster policies on cluster-specific business
environments
– Cluster Competitiveness Report offered by the “Fundacio Clusters I Competitivitat”
(www.clustercompetitiveness.org)
Cluster-Based Development 03-10-04 CK
34
Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Cluster Initiatives
• Conceptual Foundations
• Empirical Evidence on Clusters
• Empirical Evidence on Cluster Initiatives: The Greenbook
• Implications for Cluster-Based Economic Development
Cluster-Based Development 03-10-04 CK
35
Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Emerging Implications
Implications for cluster initiatives
• Managing the Cluster Initiative Life Cycle
• Professionalizing Cluster Initiatives
Implications for economic development strategies
• Cluster initiatives organize policies; they are not a new policy
• Cluster creation versus cluster activation
• Clusters and regional economic strategy
Implications for UK cluster policy
Cluster-Based Development 03-10-04 CK
36
Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
The Life Cycle of a Cluster Initiative
Antecedence
Formation
CI
Cluster-based IFC
Time
Cluster-Based Development 03-10-04 CK
37
Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Professionalizing Cluster Initiatives
• The foundations of Cluster Initiatives’ strategies and structures need to
be improved as clusters enter the mainstream of economic policy in
many regions
• Activities need to be based on a consistent conceptual framework of
the drivers of the cluster’s performance, shared across the cluster
• A CI’s strategy needs to build on the unique circumstances of the
cluster, not copying of successful clusters elsewhere
• A CI needs a sound organizational structure with a sufficient
infrastructure and financing
• Data creation and analysis needs to be a central in supporting
decisions about CI activities and in measuring impact
Cluster-Based Development 03-10-04 CK
38
Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Cluster – A New Economic Policy Tool?
• In some cases, cluster initiatives are organized as an additional
policy area within the government’s economic development
organization
However
• Clusters are better understood as an effective process to identify,
prioritize, and act upon barriers to higher cluster performance
– Everything matters for microeconomic competitiveness
– It is not enough for policies too be generically “good”; they need to
be the most appropriate in the specific situation
Cluster-Based Development 03-10-04 CK
39
Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Different Approaches to Cluster Development
Cluster Creation
Cluster Activation
•• Targets
Targets areas
areas of
of perceived
perceived market
market
demand
demand
•• Leverages
Leverages existing
existing assets,
assets,
history,
history, and
and geographic
geographic location
location
•• Is
Is driven
driven by
by public
public sector
sector
intervention
intervention
•• Builds
Builds on
on coalition
coalition of
of private
private and
and
public
public sector
sector actors
actors
•• Requires
Requires sustained
sustained financial
financial
commitment
commitment by
by the
the public
public sector
sector
•• Requires
Requires sustained
sustained participation
participation
by
by all
all actors
actors
•• High
High failure
failure rate
rate
•• Level
Level of
of success
success is
is increasing
increasing over
over
time;
time; quick
quick returns
returns are
are possible
possible
• Deepens the dependence on
public sector intervention
Cluster-Based Development 03-10-04 CK
• Transforms the roles of private
and public sector
40
Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
The Role of Clusters in Economic Development
Overview
• Clusters are critical engines in the economic structure of national
and regional economies
• Clusters can identify fundamental challenges in the national or
regional business environment
• Clusters provide new roles for government, companies, and other
institutions in economic development
However
• Cluster initiatives alone are less effective, if they are not part of a
overarching approach to improve competitiveness on the
national and/or regional level
• An overall strategy to improve a country’s or region’s
competitiveness depends on progress in two dimensions
– Cross-cluster issues affecting the whole economy
– Clusters
Cluster-Based Development 03-10-04 CK
41
Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
Implications for UK Cluster Policy
Strategy
• Cluster initiatives need to be integrated into consistent regional economic
strategies
• Strategies need to reflect the unique circumstances in a cluster or region
Process
• Regional competitiveness efforts need to focus on winning leaders with
strong regional positions that can succeed in mobilizing the private sector
– RDAs are a relatively young institutions and are not led by elected officials;
they will need time to be perceived as ultimate decision makers
– Private sector leaders are, especially in the short run, critical to really drive
and direct the efforts
Data
• Cluster initiatives need effective data and expertise to be effective
– Past cluster mapping efforts in the UK seem to have been insufficient to
provide actionable data for cluster identification and evaluation
– There is lack of consistent data on regional business environments and
the impact of existing cluster efforts
Cluster-Based Development 03-10-04 CK
42
Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels
UK Competitiveness Entering A New Phase
The Role of Cluster-Based Policies
• The UK is moving from competing as an efficient location to do
business in Europe to become a base for competing on innovation
• Cluster-based strategies are an important tool to drive the transition of
policy and to establish a new public-private policy process
• The UK can and needs to set more ambitious goals for its clusterbased economic policies
– Use clusters to gain leverage for a broader competitiveness strategy
redefining what this country stands for in international competition
– Aim to become a leader in the practice of modern cluster-based policies
defining their shape and applying and developing new tools
Cluster-Based Development 03-10-04 CK
43
Copyright 2004 © Professor Michael E. Porter, Christian H. M. Ketels