Industry Cluster Approach
to Workforce and
Economic Development
RCCI Annual Conference
October 7, 2003
Lee W. Munnich, Jr.
State and Local Policy Program
With
Liz Templin
Extension Educ. - Community Economics
University of Minnesota
Why this presentation?
Link between workforce development and
economic development
A trained workforce is critical for success
Articulating the regions industry clusters
can focus community economic
development efforts
Objectives
Definition of industry clusters
Adaptation to rural communities
How industry clusters start (case studies)
Role of higher education
Michael Porter’s
“Diamond of Advantage”
Chance
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“The Knowledge Economy”
In today’s 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 challenge:
providing a fertile environment for innovation
Rural knowledge clusters defined
Innovative, interrelated groups of firms
Located outside metropolitan areas
Deriving competitive advantages through
accumulated, embedded, and imported knowledge
among local actors and institutions.
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
State and Local Policy Program
Industry Cluster Studies
Twin Cities
Southeast
Minnesota
Southwest
Minnesota
Northwest
Minnesota
Northeast
Minnesota
Printing and
Publishing
Composites
Computer and
Electrical
Components
Manufacturing
Recreation and
Transportation
Equipment
Manufacturing
Forest Products
Value-Added
Agricultural
Cooperatives
Value-Added
Agricultural
Processing
Health Services
Agricultural
Equipment
Manufacturing
Wood Products
Food Processing
Computers and
Software
Medical Devices
Machinery and
Metalworking
Financial Services
Printing,
Publishing, and
Software
Industrial
Machinery and
Computer
Manufacturing
Dairy Processing
Tourism
Information
Technology
Tourism
Industry Clusters Research Steps
1. Economic data on region’s industries
2. Local leaders determine industries to study
3. Focus groups of industry to identify:
A. Competitive advantage
B. History
C. Institutional support / needs
4. Policy recommendations
Identifying Clusters:
Location Quotient
Measures employment concentration in a particular
industry in a particular region
Measure of specialization
LQ is calculated as a ratio of the industry’s share of
employment in the region to the industry’s share of
employment in the nation
LQ > 1 means that concentration of employment in the
industry in the region is higher than concentration of
employment in same industry in the nation; i.e. the region
specializes in that industry
Case Study Evidence of Rural
Knowledge Clusters in Minnesota
Recreational transportation equipment
(Northwest Minnesota)
Automation and motion control
technologies (Alexandria)
Advanced composite materials (Winona)
Precision Agricultural Machinery
(Southwest Minnesota)
Case Example 1:
Competitive advantage
Factors that give local firms a market
advantage:
Supply or demand in the marketplace
Related industries
Local rivalry
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
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
Competitive Advantage:
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
Northland Community and Technical
College
Customized training for engineers
Certificate programs
Continuous quality improvement training
NW Minnesota: Rural Knowledge Cluster Profile
Competitive Advantages
Demanding local customers
Intense interfirm rivalry
Diffusion to new products and
industries
Firms and Industries
Recreational
transportation
equipment
Institutions
Northland Community &
Technical College
Minnesota Job Skills Partnership
 “Racing culture” – snowmobile
racing circuit
Snowmobile manufacturing
All-terrain vehicles
Equipment suppliers and
machine shops
Case Example Two:
History
An historical base of knowledge about an
industry or technology that is used to create
new products or services
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
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
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
Alexandria Technical College:
Fluid Power Technology major
Center for Automation and Motion Control
(CAMC)
Manufacturing Automation Research
Laboratory (MARL)
Customized training
Alexandria: Rural Knowledge Cluster Profile
Competitive Advantages
Industry collective action around
shared needs
Shortage of skilled labor in
related industries
Firms and Industries
Automation and
motion control
technologies
Institutions
Alexandria Technical College,
Ctr for Automation & Motion
Control
MN Mfg Automation Coalition
Tri-State Manufacturer’s Assoc.
Minnesota Technology Inc.
West Central Initiative
Industry packaging and
material handling machinery
Other light manufacturing
industries
Case Example Three:
Institutions
formal and informal; foster the creation,
diffusion, and renewal of the local
knowledge base
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
Winona
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
Winona
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
Winona
Higher Education:
Winona State University
The only composites engineering undergraduate
program in U.S.
Composite Materials Technology Center
(COMTEC)
Southeast Technical College
Customized training in process and quality
improvement
Winona: Rural Knowledge Cluster Profile
Competitive Advantages
Diverse local industry base
Skilled worker base around
composite engineering
Cooperative relationships
Firms and Industries
History
•Miller Brothers – formed
Fiberite after WWII
•Initial growth in aerospace,
military applications
•Spin-off/startup activity to
new firms
Advanced
composite
materials mfg
Institutions
•SAMPE – professional society
•Winona St – composite eng
•COMTEC – applied
R&D/testing
•Winona Composites
Consortium
•Technical college – custom
training, technical education
•Composite materials
producers
•Existing products improved
through use of composite
materials (i.e. canoes, heated
plastics, automotive products,
violin bows)
Case Study Four:
Industry Cluster at Risk
Southwestern Minnesota:
Precision Agricultural Equipment
Southwestern Minnesota:
Precision Agricultural Equipment
Agricultural sprayer technology
Pitfall -- companies doing the same thing,
rather than diverse activities around the
same technology
Vulnerability from non-local ownership
Needed: New products using existing
knowledge
RTS Snapshots of Rural Innovation:
Rural Cluster Vignettes
Auto Industry Supply Chain
Automotive
Carpet Manufacturing
Crafts
Furniture (Household)
Gaming
Hosiery
Hosiery
Houseboat Manufacturing
Oil and Gas
Pottery
Central Tennessee
Northwestern South Carolina
Dalton, Georgia
Western North Carolina
Northeastern, Mississippi
Tunica County, Mississippi
Catawba Valley, North Carolina
Fort Payne, Alabama
Somerset, Kentucky
Southern Louisiana
Seagrove, North Carolina
Source: Stu Rosenfeld, RTS http://www.rtsinc.org/rc/rc_home.html
Key Findings of Case Studies
History and context are important
Core knowledge base can drive multiple industries and
applications.
Difficulty developing comparable quantitative indicators
Non-local ownership risky if production-only
“Institutional” and “entrepreneurial” strategies boost rural
knowledge clusters
Implications for Economic
Development
1. Understand your local knowledge base.
A. Identify specialized knowledge (job
classifications)
B. Note firms in similar industry
C. Note underlying technology
D. Consider cluster industry study or Business
Retention and Expansion program
2. Foster linkages between firms and local
institutions
A. Map linkages and stakeholder relationships;
note gaps
B. Emerging workforce training: school-to-work,
apprenticeships
C. Incumbent workforce training: customized
job training, continuing education, training
partnerships
3. Develop strategies for promoting
innovation around rural knowledge
clusters
A. Research centers
B. Technical assistance to entrepreneurs
C. Risk capital
4. Don’t try to go it alone – promote a
regional vision to guide local strategies
A. Labor market is regional
For further information:
Go to
http://www.ruralvitality.org
http://www.hhh.umn.edu/centers/slp/
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@hhh.umn.edu
http://www.ruralvitality.org
http://www.hhh.umn.edu/centers/slp/
(612) 625-7357