The document discusses clusters and economic development. Some key points: 1) Clusters are economic ecosystems defined by systemic relationships that provide competitive advantages, not membership organizations. 2) A minimum critical mass of firms is necessary to produce external economies that benefit all firms, such as specialized suppliers and labor pools. 3) Cluster boundaries are self-selecting and set by distances people are willing to travel for work and networking. 4) Clusters have life cycles from embryonic to growth to mature to decaying stages with different needs at each phase.

1. National Governors Association Clusters and Economic Development April 4-5, 2002 Stuart Rosenfeld Regional Technology Strategies

2. Clusters are economic ecosystems, not membership organizations Rule of Thumb 1 : Select clusters based on systemic relationships that provide market advantage

3. Wood Products Mini-Cluster

4. Critical mass attracts externalities, cooperation creates externalities Rule of Thumb 2 : The minimum firm density necessary is what will produce external economies

5. Hard externalities Externality > Benefit Supply chains > efficiency Specialized labor > productivity Specialized services > access More choice > costs, quality Range of firms > joint ventures

6. Soft Externalities Externality > Benefit Association > Vision, planning, influence Trust > Networking Learning (1) > Tech transfer, innovation Learning (2) > Know how Informal Labor Markets > Career ladders

7. Boundaries of clusters are self-selecting--and are not constraining Rule of Thumb 3 : Boundaries are set by distances people will travel to work, associate, and network

8. Clusters have life cycles Rule of Thumb 4 : Stages of Development of a cluster shape its needs and interests - Embryonic - Growth - Mature - Decaying

9. Success Factors Concepts - Innovation - Imitation and competition - Entrepreneurship Connections - Networks and networking - Connections and Intermediaries Competencies - Specialized labor force - Industry leaders - Talent - Knowledge

10. Common Concerns Can states create clusters? Is there a risk of being too specialized? Do clusters constitute favoritism? Are firms too competitive to compete? Is a rural cluster an oxymoron? Will Internet negate proximity advantage? Do clusters serve low income people/places? Do decaying clusters have an afterlife?

11. Origins of Clusters Chance Plastics-combs 1760 NC Mass. Labor,wood Furn.-Futorian 1948 Tupelo, MS University Biotech-Research 1950 San Diego Costs, distr. Toys-Immigrants 1968 Los Angeles Local clay Tiles-Rubbiani 1600 Sausoulo, IT Chance Carpet-craft tufters 1918 Dalton, GA Marine ind. Telecom-SP Radio 1948 Aalborg, DK Reason Cluster/Origin Year Cluster

12. Does proximity matter?

13. Actions for states For understanding economies For engaging industry For organizing and delivering services For investing and allocating resources For marketing the region an state For preparing the work force For achieving social goals

14. Actions for understanding economies Identify clusters - measures of scale & concentration - local views and intelligence Map systemic relationships - competitiveness factors - supply chains - knowledge chains Benchmark against competitors

15. Identifying Clusters # of patents $ in equipment $ in R&D # know. workers # scientists, eng, technicians # employees # firms Growth employ. Growth firms. Loc. quotients Average wages Products Processes Value chains Technologies Skills Resources Measures of innovation Measures of scale Aggregating criteria

16. Furniture in Alabama and Mississippi

17. MAJOR 2-DIGIT MANUFACTURING SECTORS, 1996-1999 Fabricated Metals Electronic & Other Electric Equipment Industrial Machinery Lumber & Wood Products Furniture & Fixtures Printing & Publishing Food Products Paper Apparel Chemicals Rubber & Plastics Products Textiles Stone, Clay & Glass Products Primary Metal Industries JOB GROWTH, LOW WAGES JOB GROWTH, HIGH WAGES JOB LOSS, LOW WAGES JOB LOSS, HIGH WAGES WAGES, AS % OF NONRETAIL AVG. JOB GROWTH, 1996-99 size of bubble indicates number of employees

18. Supply Chain Clusters

19. RHODE ISLAND’S CLUSTERS JEWELRY BOAT BUILDING ELECTRONICS & INSTRUMENTS SOFTWARE TOURISM PRECISION METAL WORKING AQUACULTURE FINANCIAL SERVICES BIOMEDICAL

20. ARIZONA’S CLUSTERS NOW AND THEN 1993 AEROSPACE AGRICULTURE, FORESTRY, FOOD BUSINESS SEVICES HEALTH/BIOMEDICINE INFORMATION MINING & MATERIALS OPTICS TOURISM TRANSPORTATION & DISTRIBUTION 2001 BIOINDUSTRY ENVIRONMENTAL TECH. FOOD FIBER & NATURAL PRODUCTS HIGH TECHNOLOGY MINING & MATERIALS OPTICS PLASTICS & COMPOSITES SENIOR INDUSTRIES SOFTWARE & INFORMATION TOURISM

21. ILLINOIS’ CLUSTERS AGRICULTURE & FOOD PROCESSING COAL MINING TRANSPORTATION & DISTRIBUTION EXPORT SERVICES HEALTH & BIOMEDICAL BUSINESS AND PERSONAL TRAVEL MANUFACTURED INPUTS INDUSTRIAL MACHINERY TRANSPORTATION EQUIPMENT TELECOMMUNICATIONS EQUIPMENT CONSUMER PPLIANCES AND ELECTRONICS ELECTRICAL EQUIPMENT

22. Cluster Benchmarks R&D capacity • Work force & skills Education & training • Proximity to suppliers Capital availability • Specialized services Tool builders/software • Social capital Entrepreneurship • Innovation/imitation Market leaders • Specialized services External connections • Vision and leadership

23. Actions for engagement Inventory social capital Establish, recognize cluster organizations Formalize communications channels Facilitate networks

24. Measures of Social Capital # of business, trade, professional associations Sector advisory board membership Membership, meetings, attendance Networks formed Civic leadership by businesses

25. Putnam’s Regional Survey Factors Social trust • Informal socializing Interracial trust • Diversity of friends Convent. Politics • Giving, volunteering Protest politics • Faith based engage. Civic leadership • Social cap equality Associational involvement

26. Forming Networks Publicize concepts Train brokers Identify multipliers Provide startup incentives Assessment

27. USNet State Programs: Examples Delaware DE Manufacturing Alliance Florida Enterprise Florida Illinois Dept of Com/Comm Affairs Louisiana Depart of Economic Dev. Massachusetts Bay State Skills Minnesota Minnesota Technology New York Empire State Development Oklahoma Alliance for Mfg Excellence Washington Dept of Comm. Development

29. The Northeast Oklahoma Manufacturers’ Council, Inc. Formed in 1993 as a 501-C3. Began with a few core members locally Grew to around 40 members and held steadily for several years With growth in new economy has grown to over 80+ active members today The NEOMC, Inc. was the first organized collaborative in Oklahoma, now there are over 25!

30. MISSION Statement The Northeast Oklahoma Manufacturers’ Council, Inc will provide leadership to form partnerships to continuously improve manufacturing operations, address manufacturing issues and concerns, foster employee development, modernize technology, support industrial education, and promote corporate citizenship.

31. Outcomes Networked expertise to solve manufacturing problems, share costs Increased opportunities to bid on projects via joint bidding and procurement assistance Cultivation of local vendors/suppliers Advocacy voice for multiple companies, political leverage Expand skilled labor pool

32. Metal Workers Mfg & Training Alliance (META) 12 Companies 1,700 Employees Over $235 million in annual sales 821,800 square feet of manufacturing space Core competencies include: Engineering Design (CAD & CAM) CNC & Lathe Turning Grinding, Milling,Welding, Machining Process Development Assembly

33. Genesis of the META “Cluster” BERC / Housatonic Community College Employer Surveys Manufacturing Committee Initiative for a Competitive Inner City (ICIC) Cluster Research- Michael Porter CT Economic Resource Center/Connecticut Business and Industry Association Business Workforce development $10,000 grant State of CT Cluster Funding $125,000 DOL Grant $1.7 million

34. META Logic Model Problems Activity Outcome Intermediate Final Centralized Facilities Continuous assessment Low unemployment (2.4%- 7/00) Perception of the Manufacturing Industry Sustainability techniques Metrics for ROI Create business alliances Training Lack of Educational Programs Customized job training program designed to build on the resources of industry partners Resume Database Lean Manufacturing Database for tracking Outcome Measurements Competitive, Trained Work- force Value added organization Model for Cluster Development Retiring Workforce Low-population Growth Incorporate Lean

35. Actions for organizing and delivering services Collect and disseminate by cluster Establish one-stop cluster shops Form cross agency cluster teams Employ cluster expertise Facilitate external connections Work with intermediaries

36. Cluster Hubs PT-CAM (Greensboro) CITER (Carpi) TC 2 (Raleigh) Advanced Mfg Tech Center (Lynchburg) Candy Institute (Chicago) WIRENet (Cleveland)

37. Actions for Allocating Resources, Making Investments New business startups Set-asides or incentives for collective applications Invest in cluster R&D needs Fund critical foundation factors Cluster technology and science parks

38. Examples of Technology Centers CITER (Carpi) NC Biotechnology Center (RTP) Ellison Miles Geotechnology Center (Dallas) TC2 (Raleigh) Ceramics Corridor Innovation Center (Alfred)

39. Actions for marketing clusters Focus inward investment Promote clusters Support regional branding Form export networks

40. A method of bringing the hosiery industry together Legsource will provide the tools for you to do business more efficiently.

41. Legsource Services Industry Communication Infrastructure Maintain Mill Database Assist Mills in Website Development Search for New Ind. Business Opportunities Government Procurement Assistance Video Conferencing Technology E-Commerce Assistance to Suppliers

42. Everyone is linked by: Manufacturer’s database ( information about mills they can update themselves via internet) Supplier’s database (information about suppliers they can update themselves via internet) Retail/consumer “hosiery terms” search engine ( “keyword” search capabilities to match mills with retail or consumer searches)

43. Example Report for a Vertical Mill Production Planning Person Report For Sally @ Big Mill Top Gun Hosiery has 200 needle double cylinder production available, email bob@ topgunhosiery .com for details ABC Hosiery has excess inventory of 1000 dozen 108 needle women’s ½ cushion cotton 9-11 crew socks, email jack@ abchosiery .com for details

44. Response to Technical Knitting Question (From Glenn @Top Gun Hosiery) Question: We are having yarn tails protruding from the sock where the yarn feeder changes take place our KnitBetter knitting machines. Does anyone have a solution for this problem? Response from Tim @ Big Mill: Machine Supplier has a new 2 feed tail attachment that we have used to help with the problem. [email_address] Response from Eric @ Machine Supplier: We offer a 2 feed tail attachment that can be added to the 2 nd feed to address the yarn tail ends. Please contact me at eric @ machinesupplier .com for more details

45. Actions for building a work force Develop specialized labor force Contextualize curricula Form industry cluster skills hubs Build partnerships between education & clusters Create work force information portals Form regional skills alliances Work with non-profits

46. Characteristics of Community College Cluster Hubs Staff experienced in cluster Develops & updates curricula, case studies Engages and works with cluster leaders Technology and market scanning Maintains contacts with other regions Brokers specialized services Conducts needs assessments, research Organizes forums, workshops, study tours

47. Examples of College Hubs Itawamba Community College, MS - Upholstered Furniture Technology Center Catawba Valley Community College, NC - Hosiery Technology Center Northampton Community College , PA- Electrotechnology Applications Center Alabama Southern Community College - Chemical Processing Technology Center

48. Actions for achieving equity Qualify people for employment Include community based intermediaries in clusters Provide incentives and subsidies Support industry networks in distressed areas Encourage social responsibility

49. Intermediaries that raise incomes, build career ladders Garment Industry Development Corp. Jane Addams Resource Center Wisconsin Regional Training Partnership ACENet