New Industries and the Process of Regional Diversification – The Role of Clusters Prof. Christian KetelsHarvard Business School, Stockholm School of Economics, and EBS
A New Era for Cluster PolicyOld Industrial Policy Current Cluster Policy The Challenge Ahead• Creating winners? • Enabling new • Backing winners!• Backing losers! winners to emerge FAILURE PARTIAL SUCCESS European Commission Enterprise and Industry 26.04.2012 2
Sources of Cluster Emergence POLICY Location Existing Clusters Business Environment Natural Resources Entrepreneurs Context for competition across regions European Commission Enterprise and Industry
Clusters and Entrepreneurship The stronger the cluster , the higher CLUSTER the survial rate of Survial Rates new businesses of New Businesses (+) The stronger the cluster, the more New Industries (+) New Business Formation (+) dynamic is the process of new business formation The stronger the cluster, the more likely new industries within the cluster are to emerge The stronger the cluster, the Job Growth higher the job In New Businesses (+) growth in new businesses European Commission Enterprise and IndustrySource: Porter, The Economic Performance of Regions, Regional Studies, 2003; Delgado/Porter/Stern, Clusters and Entrepreneurship, Journal of Economic Geography, 2010;Delgado/Porter/Stern, Clusters, Convergence, and Economic Performance, mimeo., 2010.
Transformation of Clusters: Gothenburg Automotive Cluster Textiles 1907 Roller bearings 1924 Vehicles 1956 Vehicle safety Telematics 2001 European Commission Enterprise and IndustrySource: Sölvell, 2009Source: Sölvell, Lindqvist,,2011
Related Clusters and Regional Diversification Textiles Sporting, Footwear Construction Recreation Plastics Leather Materials and Children’s Furniture and Goods Building Sporting Oil and Fixtures, Goods Chemical Gas Equipmen Products Financial t and Apparel Services Services Pharma- Heavy ceuticals Construction Forest Products Education Services Publishing Prefabricated and Printing and Medical Knowledge Devices Enclosures Agricultural Creation Products Aerospace Analytical Information Instruments Vehicles & Aerospace Fishing & Technology Defense Engines Fishing Automotive Processed Products Food Lightning & Transportation Communi- Electrical Metal and Logistics cations Equipment Manufacturing Equipment Production Hospitality Power Technology Heavy and Tourism Generation Machinery Jewelry & Entertainment Motor Driven Tobacco Precious Products Metals Business Distribution Services Services European Commission Enterprise and Industry Note: Clusters with borders or identical colors/shading except graySource: Porter, The Economic have at least 20% overlap of industries by number in both directions and Entrepreneurship, Journal of Economic Geography, 2010; Performance of Regions, Regional Studies, 2003; Delgado/Porter/Stern, ClustersDelgado/Porter/Stern, Clusters, Convergence, and Economic Performance, mimeo., 2010.
Transformation of Regional Economies:San Diego, California The San Diego Economy• Existing cluster Hospitality and Tourism portfolios have a Sporting and Climate and significant impact on the Leather Goods Geography Transportation evolutionary path of and Logistics regional economies Power Generation (Neffke et al, 2009; Aerospace Vehicles Communications Boschma et al. 2011) and Defense Equipment U.S. Military Information Technology• Clusters provide a Analytical Instruments powerful analytical tool Education and to understand Knowledge Creation Medical Devices diversification and the emergence of new Bioscience Biotech / Pharmaceuticals economic activities Research Centers 1910 1930 1950 1970 1990 Source: Porter, Monitor Company, Council on Competitiveness (2003) European Commission Enterprise and Industry
Specialization Patterns and EconomicPolicy: Two Views “What you do” “How you do it” Structural Transformation (Lin) Clusters Economic Complexity (Hausmann et al.) • To get rich, do what • To get rich, do what European Commission rich locations do you do best Enterprise and Industry
Specialization Patterns and Economic Policy: Smart Specialization in the EU The Challenge: How to support structural change towards higher value-added activities?The Old Answer: The New (Smart Specialization) Answer:• Identify growing markets and try to enter • Identify your assets, including your existing them (bio, nano, eco, …) cluster base • Actively pursue opportunities in areas adjacent to current strengths and leading towards higher value added• Failure to succeed in intensely • Longer-term development of sustainable competitive markets without unique competitive advantages European Commission assets Enterprise and Industry
Enabling Emergence: How Cluster Mapping Data can help …the EU and national governments …regional governments In which regions is a What new clusters new cluster category are likely to emerge likely to emerge? in our region?• Identify regions with growing industries or • Identify opportunities within existing firms in the emerging clusters regional clusters• Identify regions with existing strong • Identify clusters adjacent to existing clusters in related cluster categories regional clusters• Identify regions with relevant business • Identify growing industries and firms environment strengths outside of existing regional clusters • Identify regional business environment strengths not leveraged by current clusters European Commission Enterprise and Industry 26.04.2012 10
A New Type of Cluster Program Backing Winners Enabling EmergenceCluster effort success factors• Strong cluster √ x• Strong cluster organization √ ~• Clear strategy √ ~ • Require funding for • Require seed funding for large scale investments exploration • Moderate risk; • Require technical support evaluation to keep for collaboration implementation process • High risk; evaluation to on plan weed out nonperforming efforts European Commission Enterprise and Industry 26.04.2012 11
Emerging Industries and Clusters• This is hard• Clusters are a powerful diagnostic and policy tool• Effective policy needs to integrate three Linkages dimensions: Cluster Mobilization Supply Demand Knowledge Market Creation Creation European Commission Enterprise and Industry 26.04.2012 12