TCIOceania14 Economic & social impacts of clusters
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  • 1. Economic & social impacts of clusters Richard Walker 30 May 2014
  • 2. Economic & social impacts of clusters Richard Walker The TCI Network
  • 3. Definition: • A business cluster is a system of inter-related companies, institutions and networks with common understandings, a desire for continual growth and a level of trust which enhances the flow of knowledge. [After AEEMA] • A business cluster is geographic concentration of interconnected businesses, suppliers, and associated institutions in a particular field. Clusters are considered to increase the productivity with which companies can compete, nationally and globally. In urban studies, the term agglomeration is used. [After Porter]
  • 4. Typical benefits of joining a Cluster 14% higher value added growth, 7% higher profitability growth and 2% higher wages per employee (a proxy for productivity) to the advantage of firms in clusters vs. those not in clusters” SeeTable 2, Page 30 in Sölvell, Ö & Williams, M
  • 5. Further benefits • Muro [2013] in a study of 10 pilot cluster programs undertaken by the SBA (USA), 50% of cluster participants reported that cluster participation increased their integration into their industry supply chain. • Ketels [July 2013] found that average wages are positively and statistically significantly affected by the presence of Clusters.
  • 6. Innovation performance in Clusters • Madeline Smith UK The following figure provides a snapshot of innovation performance in clusters. It measures the performance of innovative businesses involved in clusters against a range of innovation indicators and draws comparisons with innovative businesses that are not involved in clusters. • The evidence suggests that there is a direct link between innovation and working together through clusters/networks, as those that are involved in cluster activity are generating higher levels of successful innovation than those that don’t across a whole range of indicators. Following graph: European Commission (2006d) Innobarometer on cluster’s role in facilitating innovation in Europe
  • 7. Innovation Performance in Clusters 78 63 53 44 41 29 29 74 56 33 53 20 14 12 0 10 20 30 40 50 60 70 80 90 Introduce new or signifiacntly improved products or services Introduce new or signifiacntly improved production technology Conduct market research for introducing new prodcuts or services Carry out research in your own laboratories Contract out research to other firms, universities or research instiututes Register one or more internatioanl trademarks Apply for one or more patents %ofTotal Involvedinacluster Not involvedinacluster
  • 8. Job creation • Muro & Fiktri [2011] found that some 95 percent of all job gains in a year in an average state come from the expansion of existing businesses or the birth of new establishments • Properly designed, cluster strategies are a low-cost way to stimulate innovation, new-firm start-ups, and job creation by helping to link and align the many factors that influence firm and regional growth. • Additionally, thinking in terms of clusters gives States a way to articulate a positive vision of economic prosperity, engage broad groups of stakeholders in driving recovery, boost the export intensity of the economy, and bring focus and discipline to myriad state investments and policies.
  • 9. Manufacturing cluster helps members boost capability • Gustafson, MD Australis Engineering “by joining with other local manufacturers in the cluster increased his firm’s capability to bid for larger projects” Southern Strength Cluster Sydney Increases opportunities as suppliers Boost their business education Assists members to share their experiences
  • 10. Cluster driven regional growth • Delgardo, Porter & Stern March 2011 found that Industries participating in a strong cluster register higher employment growth as well as higher growth of wages, number of establishments, and patenting. Industry and cluster level growth also increases with the strength of related clusters in the region and with the strength of similar clusters in adjacent regions. Importantly, they found evidence that new regional industries emerge where there is a strong cluster environment. • Their analysis also suggests that the presence of strong clusters in a region enhances growth opportunities in other industries and clusters.
  • 11. Innovate & Collaborate in R&D • The Danish Agency for Science & Innovation in a 7 year longitudinal study [2002-2008] of 1225 companies Clusters increase the companies’ probability to innovate by more than 4.5 times, Participation increases the probability of R&D Collaboration by 4 times • Both effects showing from the first year of participation in the cluster
  • 12. References • Solvell, Orjan & Williams, M Building the Cluster Commons - An Evaluation of 12 Cluster Organizations in Sweden 2005 – 2012 Ivory Tower Apr 2013 • Muro, Mark Economic Cluster Policy Begins to Work Brookings Institute Jul 9 2013 http://www.brookings.edu/blogs/the- avenue/posts/2013/07/09-economic-cluster-policy-muro • Muro, Mark and Kenan Fikri Job Creation on a budget: How Regional Industry Clusters Can Add Jobs, Bolster Entrepreneurship, and Spark Innovation http://www.brookings.edu/research/papers/2011/01/19- clusters-muro
  • 13. References 2 • Delgado, Mercedes Michael E. Porter, Scott Stern Clusters, Convergence, and Economic Performance Mar 2011 http://www.nber.org/papers/w18250 • Danish Agency for Science The impacts of cluster policy in Denmark - An impact study on behaviour and economical effects of Innovation Network Denmark 2011 http://fivu.dk/en/publications/2011/the-impact-of-cluster-policy-in- denmark • Smith, Madeline Head Strategy Instit of Design, Innovation Glasgow Personal Communication • EU Commission 2006 Innobarometer – on clusters role in innovation in Europe
  • 14. References 3 • Delgardo, Porter & Stern Clusters, Convergence and Economic Performance 2011 HBS • Balinski, Brent From strength to strength: manufacturing cluster helps members boost capacity Manufacturers’ Monthly Feb 2014