Diane Primont, PhD
Bruce Domazlicky, PhD
Center for Economic & Business Research
cebr@semo.edu
http://www6.semo.edu/cebr
CLUSTER ANALYSIS IN MISSOURI’S
BOOTHEEL-A TOOL FOR ECONOMIC
DEVELOPMENT
The views expressed in this presentation are those of the authors and do
not necessarily reflect the views of Southeast Missouri State University
or the Economic Development Administration.
ECONOMIC DEVELOPMENT-THE DREAM
Major New Employer-200 Employees
 Typically Manufacturing: High-Paying Jobs
 Population Increases
 New Housing Construction
 Tax Base Increases
 Attracts Additional Firms and Population in a
Virtuous Circle of Economic Growth

ECONOMIC DEVELOPMENT-THE REALITY?
Industrial Park that Largely Sits Empty
 Growth is Slow and Uncoordinated
 Little Thought Given to the Interdependencies
between Firms
 Inadequate Recognition of the Region’s
Competitive Advantages
 Go-It-Alone Philosophy: Other regions are
Competitors

EXPORT-ORIENTATION
Region
R.O.W.
CLUSTER ANALYSIS
Global Economy
 Technological Change: Innovate or Perish
 Competitive Advantages are not Forever
 Develop Region Based on its Competitive
Strengths
 Multiregional Approach May Often Be
Necessary

MULTIREGIONAL APPROACH
Political Boundaries Are Unimportant to Most
Firms
 Political Boundaries Not Very Important to
People, Either
 Access to Labor, Raw Materials, Inputs,
Transportation, Markets Are the Keys
 Counties Need to Cooperate, Not Compete
with each Other

WHAT IS AN INDUSTRY CLUSTER?
Geographic concentration of interconnected
companies and institutions in a particular
field
 A cluster includes

 the
core or driver industries
 upstream industries (suppliers)
 downstream industries (customers)
 other institutions (such as, agricultural extension,
research labs, trade associations, and so on)
INDUSTRY CLUSTER DEFINITIONS

Definitions are adopted from Indiana
Business Research Center, work done with
 Center
for Regional Development at Purdue
University and Strategic Development Group
 under grant from EDA
Industry Clusters Definitions
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
Advanced Materials
Agribusiness, Food Processing & Technology
Apparel & Textiles
Arts, Entertainment, Recreation & Visitor Industries
Biomedical/Biotechnical (Life Sciences)
Business & Financial Services
Chemicals & Chemical Based Products
Defense & Security
Education & Knowledge Creation
Energy (Fossil & Renewable)
Forest & Wood Products
Glass & Ceramics
Information Technology & Telecommunications
Transportation & Logistics
Primary Metal Mfg
Fabricated Metal Product Mfg
Machinery Mfg
Computer & Electronic Product Mfg
Electrical Equipment, Appliance & Component Mfg
Transportation Equipment Mfg
Mining
Printing & Publishing
EXAMPLE: BIOMEDICAL/BIOTECHNICAL
Support Industries:
Scientific R&D
Suppliers:
Laboratory
apparatus
and
furniture
Mfg
Driver Industries:
Pharmaceuticals and Medicines Mfg
Medical Instruments/
Equipment/Supplies Mfg
Infrastructure:
Waste
management
and remediation
Customers:
Health and
personal
care stores;
Doctors’
offices;
Hospitals
WHY ARE INDUSTRY CLUSTERS
IMPORTANT?
Industry clusters create a competitive
advantage for the region.
 The competitive advantage derives from four
factors:

 Factor
conditions
 Demand conditions
 Related and supporting industries
 Firm strategy, structure, and rivalry
LOCATION QUOTIENTS
Used to measure the extent of a region’s
specialization or concentration in an industry
cluster
 The location quotient (LQ) is:

LQ =

Fraction of region’s employment in industry cluster
Fraction of nation’s employment in industry cluster
Employment data for 2001 and 2007 from
Minnesota IMPLAN Group
EXAMPLE: LOCATION QUOTIENTS
If the region employs 15% of its workforce in
the industry cluster, while the nation employs
10% then
 LQ = 0.15 / 0.10 =
1.5
 Since LQ exceeds one

 the
fraction of the workforce employed in the
region’s cluster exceeds the fraction employed in
the cluster at the national level
 the region specializes in the cluster
INDUSTRY CLUSTER BUBBLE CHART
 Bubble
chart is a three dimensional
display
 LQ
in 2007 (vertical axis)
 % Change in LQ 2001-2007 (horizontal
axis)
 Employment in 2007 (size of bubble)
INDUSTRY CLUSTER BUBBLE CHART
Hypothetical Data
LQ in 2007
Mature
5
Star
1
-10
Transforming
10
0
% chg in LQ 2001-2007
Emerging
INDUSTRY CLUSTER BUBBLE CHART
Hypothetical Data
LQ in 2007
Mature
5
Star
1
-10
Transforming
10
0
% chg in LQ 2001-2007
Emerging
INDUSTRY CLUSTER BUBBLE CHART
Hypothetical Data
LQ in 2007
Mature
5
Star
1
-10
Transforming
10
0
% chg in LQ 2001-2007
Emerging
INDUSTRY CLUSTER BUBBLE CHART
 Four
Quadrants
 Northwest:
Mature clusters
 Specialization
 Northeast:
Star clusters
 Specialization
 Southeast:
 Not
and fast growth
Emerging clusters
specialized, but fast growth
 Southwest:
 Not
and slow or declining growth
Transforming clusters
specialized and slow or declining
growth
THE BOOTHEEL MISSOURI REGION
Source: www.oseda.missouri.edu/modot/rpc/
Bootheel Regional Planning
Commission: Industry Clusters
10.0
Mature
Star
Agribusiness
Prim. Metal Mfg.
8.0
Forest & Wood
LQ in 2007
6.0
Transportation4.0
& Logistics
Transportation Equip. Mfg.
2.0
-100
-50
Transforming
Business & Financial
0
50
100
150
Defense & Security
0.0
Biomedical
-2.0
% chg in LQ 2001-2007
Emerging
200
INDUSTRY CLUSTERS IN THE BOOTHEEL
MISSOURI REGION
LQ Analysis Summary

Mature Clusters


Star Clusters


Electrical Equipment Manufacturing; Glass & Ceramics
Primary Metal Manufacturing; Agribusiness; Forest &
Wood Products; Transportation Equipment
Manufacturing; Transportation and Logistics
Emerging Clusters

Advanced Materials; Biomedical/Biotechnical; Fabricated
Metal Product Manufacturing; Defense & Security
Uses of LQ Analysis
Picture of regional economy
 Choosing clusters to target

 LQ
and its change
 Employment size
 Ability to create jobs
 Ability to generate tax revenues
 Availability of federal and state funding/grants
 Ability to sustain economic stability of region
CLUSTERS AND ECONOMIC
DEVELOPMENT
“Clusters arise because they increase the productivity with which
companies can compete. The development and upgrading of
clusters is an important agenda for governments, companies and
other institutions.”
Institute for Strategy and Competitiveness, Harvard Business School
“…economic development leaders are urged to think of their future
target industry as a portfolio containing a mix of industries that help
grow and diversify the region’s economy over time.”
Don Iannone & Associates
EXAMPLES OF CLUSTERS
North Carolina’s research Triangle
 Austin’s Information Technology Cluster
 Connecticut’s Insurance & Finance Markets
 Hollywood’s Film Industry
 Silicon Valley in California
 Carpets in Northern Georgia

WHAT MAKES CLUSTERS INITIATIVES
SUCCESSFUL?
Build on the unique strengths of their regions
 Go beyond analysis and engage in dialogue
with cluster members
 Develop different strategies for different
clusters
 Foster an environment that helps new clusters
to emerge and existing ones to grow rather
than creating a cluster from scratch

BUILDING A CLUSTER TEAM
Business leaders
 University representatives
 Economic developers
 Chambers of commerce
 Support groups: law, marketing, etc.

ACTIVITIES OF A CLUSTER GROUP
Catalog the cluster: identify firms and
interrelationships
 Craft a vision of what the cluster can become in
the next 10 years
 Identify opportunities for growing the cluster
 Identify opportunities for more synergy within
the cluster
 Identify needs: labor force, resources, etc.

CLUSTER PROJECTS
Co-Inform to identify cluster members
 Co-Learn: training programs
 Co-Market: promote the cluster’s products
 Co-Purchase: strengthen buyer-supplier
linkages
 Co-Produce: produce a product together or
conduct R & D crucial to the cluster
 Co-Build economic foundations

Thanks for your attention
ANY QUESTIONS?