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Cluster basics: Setting the Stage - Competitiveness, Innovation and Clusters

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By Christian Ketels at the 11th TCI Global Conference, Cape Town 2008

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Cluster basics: Setting the Stage - Competitiveness, Innovation and Clusters

  1. 1. Setting the Stage:Competitiveness, Innovation, and Clusters1 Copyright 2008 © Christian KetelsChristian H. M. Ketels, PhDInstitute for Strategy and CompetitivenessHarvard Business SchoolTCI Conference Cape TownOctober 2008This 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,” (with C Ketels, M Delgado) in The Global Competitiveness Report 2007, (World EconomicForum, 2007), “Clusters and the New Competitive Agenda for Companies and Governments” in On Competition (Harvard Business School Press, 1998),and the Cluster Initiative Greenbook (Ivory Tower, 2004) by C Ketels, O Sölvell, and G Lindqvist. No part of this publication may be reproduced, stored in aretrieval system, or transmitted in any form or by any means - electronic, mechanical, photocopying, recording, or otherwise - without the permission of theauthor.Additional information may be found at the website of the Institute for Strategy and Competitiveness, www.isc.hbs.edu
  2. 2. Cluster Development: New Approach to Economic PoliciesInterventionCluster-2 Copyright 2008 © Christian KetelsInterventionLaissez FaireCluster-policy
  3. 3. What Creates Sustainable Prosperity?Productivity CompetitivenessProsperity3 Copyright 2008 © Christian KetelsProductivityInnovative CapacityCompetitiveness
  4. 4. Business Environment Quality: The DiamondContext forFirmStrategyand RivalryFactor(Input)ConditionsDemandConditionsLocal rules and incentivesthat encourage investmentand productivity– e.g. salaries, incentives forcapital investments,intellectual property protectionVigorous local competition4 Copyright 2008 © Christian KetelsAccess to high qualitybusiness inputs– Natural endowments– Human resources– Capital availability– Physical infrastructure– Administrative infrastructure(e.g. registration, permitting)– Information infrastructure(e.g., transparency)– Scientific and technologicalinfrastructureRelated andSupportingIndustriesAvailability of suppliers andsupporting industriesPresence of clusters instead ofisolated firmsSophistication of localcustomers and needs–Strict quality, safety, andenvironmental standardsVigorous local competition– Openness to foreign and localcompetitionSource: Michael Porter (1990)
  5. 5. Key Dimensions of ClustersGeographyPROXIMITY5 Copyright 2008 © Christian KetelsIndustriesActorsLINKAGESINTERACTION
  6. 6. Cluster Strength and Regional ProsperityEU-15 Countries40,000 €50,000 €60,000 €70,000 €GDP per Capita (PPP adjusted), 20046 Copyright 2008 © Christian Ketelsy = 83342x2- 16467x + 22886R2= 0.394110,000 €20,000 €30,000 €40,000 €0% 10% 20% 30% 40% 50% 60% 70% 80%Share of Employees in Strong Clusters*, 2005Note: Strong clusters defined by LQ>2; NUTS Regions excluding Portugal and Greece.Source: European Cluster Observatory. ISC/CSC cluster codes 1.0, dataset 20070510
  7. 7. Cluster Initiatives• Upgrading ofcompany operationsand strategies• Upgrading of cluster-specific businessenvironmentCluster initiatives are collaborative activities by a group of companies, public sectorentities, and other related institutions with the objective to improve the competitiveness of agroup of interlinked economic activities in a specific geographic region7 Copyright 2008 © Christian Ketelsand strategiesacross a group ofcompanies• Strengthening ofnetworks to enhancespill-overs and othereconomic benefits ofclustersenvironmentconditions
  8. 8. The Process of Economic DevelopmentShifting Roles and ResponsibilitiesOld Model• Government drives economicdevelopment through policydecisions and incentivesNew Model• Economic development is acollaborative process involvinggovernment at multiple levels,8 Copyright 2008 © Christian Ketelsdecisions and incentives government at multiple levels,companies, teaching andresearch institutions, andinstitutions for collaboration• Competitiveness must become a bottom-up process in which many individuals,companies, and institutions take responsibility• Every community and cluster can take steps to enhance competitiveness
  9. 9. What is New about the Cluster Approach?Own Strength9 Copyright 2008 © Christian KetelsRegionBottom-UpCo-operation

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