The document discusses cluster-led economic development strategies in the United States, with a focus on new federal policies and regional approaches. It provides details on the National Network for Manufacturing Innovation (NNMI) initiative that has established seven manufacturing innovation institutes since 2012 to accelerate technology commercialization. The document also examines opportunities to develop a sensor technology cluster in metro Phoenix, Arizona by leveraging the region's strengths in semiconductors, electronics, defense, and research capabilities. Key challenges include limited local resources compared to other global locations of firms and the need for industry champions.

1. New Approaches to Cluster-Led Economic
Development:
A Comparative Analysis of Federal Policies and
Metro Level Strategies in the USA
Kathleen Lee
Senior Vice President, Strategy
Greater Phoenix Economic Council
USA
Parallel Session 1.4: New Direction in Cluster Policy for Sustainable and Inclusive Competitiveness

2. Manufacturing is still vital
to US economy
New manufacturing is driven by
process and product innovation
Cluster policies can accelerate
manufacturing innovation
Cluster development must be
inclusive and advance the idea of
“shared prosperity”
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MAIN ARGUMENT
Cluster Development is Critical to U.S. Manufacturing Revival

3. CLUSTER DEVELOPMENT
Theories
Co-location of interrelated industries
Benefit from agglomeration of workforce,
infrastructure, creativity, innovation
Externalities
Vertically disintegrated industrial
Structure leading to agglomeration eco
nomies; emphasis on lean production
Network and Lean Production
International spatial division of labor
reinforces north-south divide even
while technologies support leap frogging
Globalization
Historical determinism limits replication
and challenges intentional planning
Path Dependency
CLUSTER DEVELOPMENT
Practices
Infrastructure investment (transportation, IT,
energy), workforce development, university
R&D
Investment in “industrial commons”
Strategies focus on attracting and retaining
corporate investment through targeted financ
ial incentives
Business Attraction and Retention
Reinvestment in the urban core in older
Industrial regions and emergence of multi-nodal
development patterns in new regions
Place-Based Economic Development
Laissez-faire approach to organizing economic
activities across space
Primacy of Free Market Policies

4. CLUSTER DEVELOPMENT
New Federal Program to Spur Manufacturing Innovation
“Through long-term partnerships, the [National Network of Manufacturing
Innovation] institutes will be able to maintain a sustained focus on
manufacturing technology innovation, workforce development, the transfer o
f promising new processes and technologies to the manufacturing sector,
and the support of small- and medium-sized enterprises and aspiring start-ups
for developing advanced manufacturing know-how and capabilities.”
Executive Office of the President National Science and Technology Council,
Advanced Manufacturing National Program Office, January 2013

5. NATIONAL NETWORK OF MANUFACTURING INNOVATION
NNMI Cluster Approach: Leveraging Cluster Attributes
Cluster Attributes NNMII Goals
Co-location of interrelated economic
activities
Leverage local strengths / clusters to support
development of key innovation technologies
Knowledge spillover
Address the gap in the continuum of research
discoveries to development and
scale-up manufacturing
Shared resources: “industrial commons”
R&D, engineering, manufacturing
capabilities / shared-use facilities
Networked institutions
Government, industry, and academia
partnerships / broad stakeholder base
Virtuous cycle of growth Strengthen innovation ecosystem

6. 7
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5
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No Agency Technology Location Mfg LQ Fed $ Match $ Est.
1 DoD 3D/Additive Youngstown, OH 1.61 $30M $30M Aug-12
2 DOE Wide Bandgap (WBG) Semiconductors Raleigh, NC 0.66 $70M $70M Jan-14
3 DoD Digital Manufacturing and Design Chicago, IL 1.08 $70M $248M Feb-14
4 DoD Lightweight Metals Detroit, MI 1.56 $70M $70M Feb-14
5 DOE Advanced Composites Knoxville, TN 1.12 $70M $180M Jan-15
6 DoD Integrated Photonics Rochester, NY 0.68 $110M $500M Jul-15
7 DoD Flexible Hybrid Electronics San Jose, CA 1.82 $75M $90M Aug-15
Since 2012, the US federal government h
as invested 7 manufacturing innovation
institutes in order to facilitate rapid
commercialization of technologies,
increase productivity, and ensure U.S.
competitiveness.
NATIONAL NETWORK OF MANUFACTURING INNOVATION
Current Status

7. NATIONAL NETWORK OF MANUFACTURING INNOVATION
Opportunities and Challenges Ahead
Opportunities Challenges
Learning from industry consortium
models (e.g., SEMATECH), NNMII
relies on industry investment, expertise,
R&D and commercialization
Pre-competitive collaboration is
difficult to sustain beyond
federal funding stage
Development and deployment of cross-industry
technologies; emphasis on applied research
(R5 and above) in order to accelerate
commercialization and market development
Short-term industry outlook;
Intellectual property regimes
Leverage existing clusters that have
ready workforce and industrial capacity
Investment concentrating in
old industrial belt; national scope
while the firms are global
The National Network for Manufacturing Innovation Institute is a new breed
of applied research centers designed to “enable U.S. industry and academia t
o solve the scale-up challenges that are relevant to industry.”

8. 3,207establishments
3.4% of total establishments
-4.7% 5-year decline
Trending with US
116,741 jobs
6.6% of total jobs
2.7% 5-year growth
Better than US
$69,463 average wage
45% more than all industries
12.6% 5-year growth
Trailing US
$18.3B output
8.5% of total output
14.7% 5-year growth
Better than US
GREATER PHOENIX MANUFACTURING
By the Numbers

9. GREATER PHOENIX MANUFACTURING
Key Trends
Steady growth in the number of jobs and output combined with the long-term decline in the number of
establishments indicate an ongoing trend of consolidation amongst manufacturing firms.
Consolidation
Arizona manufacturing exports are growing faster than total output. Demand for Arizona products overseas is
driving the overall growth in manufacturing in the state.
Overseas demand drives manufacturing growth
Around 37% of manufacturing jobs in the region require more than a high school diploma.
Increasing average wages in manufacturing along with higher than national productivity growth indicate a
shift to high-tech production requiring higher-skilled and more educated workers.
Transition to a higher-skilled workforce
Many local manufacturers face difficulty finding skilled technical workers (according to recent interviews with
more than 35 electronics firms). Unemployment among production workers in the greater Phoenix region is
lower than the nation.
Skilled technical workers needed
Innovation and integration of technologies will drive new growth in these sectors, while competition for new
investment will continue to intensify.
Aerospace and electronics are main anchors

10. Critical mass of firms and
industries, entrepreneurs, and
institutions
Existing specializations in
semiconductors and electronics
Research capabilities at local
universities and industry
Strong interests among firms and
ecosystem players to collaborate
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METRO PHOENIX SENSOR TECHNOLOGY CLUSTER INITIATIVE
Business Case

11. Aerospace & Defense
General Dynamics C4 Systems
L3 Communications
Honeywell
Orbital Sciences Corp.
The Boeing Company
Lockheed Martin
Northrop Grumman
Raytheon
United Technologies – Goodrich and Hamilton Sun
dstrand
Bombardier
Nammo Talley
Sensor Developers
Burge Environmental
TF Sensors, LLC
Flow Technology
Interface
Validity Sensors
Freescale
Microchip Technology
PCB Piezotronics
Colnatec
Kutta Technologies
Medtronic
Benchmark Electronics
Simulation, Test Bed & Research Centers
Banner Simulation Systems
MIHS Simulation Center
Arizona Simulation Technology & Education Center
Arizona Center for Simulation & Innovation
Arizona State University
University of Arizona
ASU’s Biodesign Institute
ASU’s Center for Innovations in Medicine
Project Honeybee
A.T. Still School of Osteopathic Medicine
PIMA Medical Institute
Healthcare
Banner Health
Mayo Clinic
Cancer Treatment Centers of America
Dignity Health
Veteran’s Administration Healthcare System
Arizona State Hospital
University of Arizona Medical Center
St. Joseph’s Hospital and Medical Center
Ulthera, Inc
Systems Integrators
Parallel Design (GE Healthcare)
Medtronic
General Dynamics
Honeywell
St. Jude Medical, Inc.
Funding/Start-up Resources
The Arizona Innovation Accelerator Fund
Angel Investment Tax Credit Program
Research and Development Refundable Tax Credit
Arizona Innovation Challenge
Arizona Furnace Technology Transfer Accelerator
Arizona Fast Grant
Venture Ready
EO Accelerator
Launchpoint, Technology Accelerator
ASU Startup Accelerator
Small Business Capital Investment Tax Credit Program
Environmental Sensing
Arizona Dept. of Environmental Quality
Central Arizona Project
County of Maricopa Env Svcair Quality
State of AZ Department of Water Resources
Arizona National Parks Service
Environmental Protection Agency
Arizona Department of Agriculture
Arizona Department of Health Services
Arizona Game and Fish Department
Arizona Department of Mines and Mineral Resources
State Land Department
Inputsand
Partners
TechnologyDevelopers
andIntegrators
EndUser
Markets
METRO PHOENIX SENSOR TECHNOLOGY CLUSTER INITIATIVE
Sensor Assets in Arizona
Sensor
Consortium

12. Sensor
Technology
Companies
End Users
Universities
Government
& Civic
Organizations
New technology,
existing technology
in alternative
application
Commercialization
Products in the
Marketplace
ICCAM
System
Integrators
Equipment
Makers
METRO PHOENIX SENSOR TECHNOLOGY CLUSTER INITIATIVE
Consortium Model

13. Market
Development
Business Services
Commercializ
ation
Asset Inventory
Market Insights
Innovation Forum
Online Forum
Member Matching
Standards Clearinghouse
Regulatory Assistance
Manufacturing Assistance
International Market Expansion
Advanced Development Lab
Design & Integration Lab
Test & Evaluation Center
METRO PHOENIX SENSOR TECHNOLOGY CLUSTER INITIATIVE
Sensor Assets in Arizona

14. METRO PHOENIX SENSOR TECHNOLOGY CLUSTER INITIATIVE
Opportunities and Challenges Ahead
Opportunities Challenges
Existing concentration of semiconductor,
electronics, and defense firms
Established regional know-how in sensors
A supplier base in microelectronics manufacturing
Research capabilities at the universities and
industry
Local firms are global and already have
established R&D centers elsewhere;
Need for industry champions;
Limited local resources and development tools
Large and growing market (healthcare,
infrastructure, environmental)
Institutional mechanisms for collaboration and
coordination not developed
Large engineering and technical workforce;
entrepreneurial ecosystem
Human capital locked in existing industries;
re-skilling required
Form a financially independent and sustainable industry consortium to
promote research, development and commercialization of sensor technologies.

15. CONCLUSION
New Cluster Development Model
Intentionality
Renewed focus on intentional planning in
cluster development. NNMII combines old and
new approaches; harnesses market strategies; and b
ecoming model for regional/local efforts
New/Old Geographies
NNMII investment pattern (and to some extent
state-led initiatives) suggests potential revival of
old industrial belt states, re-emphasizing
north-south divide within the U.S.
Sustainability
Strong commercialization and market development i
s required to sustain centers beyond initial
investment
Integrated Strategy
Builds on localized clusters at national level;
provides role for institutions (e.g., universities and
colleges, industry associations, economic
development organizations) to expand and
deepen the ecosystem
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Politics Still Matter
Politics play an important role in investment flows
at national and local levels
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