clusters and cluster initiatives: recent learnings, current challenges

Clusters and Cluster Initiatives:Recent Learnings, Current Challenges

Prof. Christian H. M. KetelsInstitute for Strategy and Competitiveness

Harvard Business School

VINNOVA Brown Bag SeminarStockholm

21 November 2011

2 Copyright 2011 © Christian Ketels

The Changing Face of Cluster Policy

Early 1990s: Pioneer countries and regions

Mid-1990s to mid 2000s: Cluster policy entrepreneurs

Mid 2000s onwards: Cluster policy moving into the mainstream

Concerns about distortions

Concerns about impact


Cluster Research: Current Status

• Traded versus local industries– Different market dynamics– Different roles in regional prosperity

• Cluster specialization and economic performance– Prosperity– Productivity and job creation– Entrepreneurship

• Cluster initiatives and economic performance

• The relationship between clusters, cluster initiatives, and regional business environments

4 Copyright 2011 © Christian KetelsSource: European Cluster Observatory (2009)

Forest Products

Furniture

Fishing

Aerospace

Oil & Gas

Telecom

Furniture

Apparel

Forest Products

Automotive

Textiles

Fishing

Fishing

Fishing

Oil & Gas

Oil & Gas

Furniture

Aerospace

Medial Devices

Transportation

Transportation

Biopharma

Transportation

Fishing

Biopharma

PowerTransportation

Telecom

Fishing

Statistical Clusters Across the Baltic Sea Region

IT

IT

Food

State of the Region-Report 2009

Note: Fully colored boxes indicate clusters strong in size and specialization; other boxes are clusters strong in only one of these dimensions. No comparable Russian data was available.

IT

http://z.about.com/d/geography/1/0/1/L/europe.jpg


Clusters, Urbanization, and Regional Economic Performance

Swedish Regional Clusters, 2006

Highlights Stockholm

Source: Ketels (2009)


FurnitureBuilding Fixtures,

Equipment & Services

Fishing & Fishing Products Hospitality

& TourismAgricultural

Products Transportation

& Logistics

Cluster Overlap Matrix: Stockholm

Plastics

Oil & Gas

Chemical Products

Biopharma-ceuticals

Power Generation

Aerospace Vehicles & Defense

Lightning & Electrical

Equipment

Financial Services Publishing

& Printing

Entertain-ment

Information Tech.

Communi-cations

Equipment

Business Services

DistributionServices

Forest Products

Heavy Construction

Services

Con-struction Materials

Pre-fabricated Enclosures

Apparel

Leather & Related Products

Jewelry & Precious Metals

Textiles

Footwear

Processed Food

Tobacco

Medical Devices

Analytical InstrumentsEducation &

Knowledge Creation

Marine Equipment

Aerospace Engines

Heavy Machinery

Sporting & Recreation

Goods

Automotive

Production Technology

Motor Driven

Products

Metal Manufacturing

Source: Ketels (2009). Cluster Overlap Matrix developed by Michael Porter, Mercedes DelgadoNote: Clusters with overlapping borders have at least 20% overlap (by number of industries) in both directions.

Red shading indicates clusters with LQ > 1, dark red with LQ > 2


Drivers of ProsperityRevisiting the Role of Location

Business EnvironmentQuality

Urbanization(Density)

Clusters(Specialization, Mix,

Collaboration)

Prosperity


The Case for Cluster Policy

Path dependency

Information asymmetries

Coordination failures

Local Externalities


Two Opposing Approaches to Cluster Policy

MORE (Agglomeration)

BETTER (Competitiveness)

FINISH


The Case for Cluster PolicyLevers

Path dependency

Information asymmetries

Coordination failures

Local Externalities

Target Public Policy at Clusters

Create Platforms for Joint Action


Target Public Policy at Clusters

ClustersClusters

Specialized Physical Infrastructure

Natural Resource Protection

Environmental Stewardship

Science and TechnologyInfrastructure (e.g., centers, university departments, technology transfer)

Education and Workforce TrainingBusiness Attraction

Export Promotion

• Clusters provide a framework for organizing the implementation of public policy and public investments towards economic development

Setting standardsMarket Information and Disclosure


Paper Province, Wärmland RegionImpact of Cluster Efforts

INVESTMENT RETURN

Spending over 10 years

Local government: € 1.3mEU funds € 1.4mCompany funds € 1.3m

TOTAL € 4.0m

€ 270,000 public money per year

Impact according to survey of cluster participants

• 81% report new products/services due to the project activities

• 42 innovation projects (Framtidsfabrkien)

• 40% have increased sales

• 60% report better access to human resources

• Much more networking


What are Cluster Initiatives?

• Upgrading of company operations and strategies across a group of companies

• Strengthening of networks to enhance spill-overs and other economic benefits of clusters

• Upgrading of cluster-specific business environment conditions

Cluster initiatives are collaborative activities by a group of companies, public sector entities, and other related institutions with the objective to improve the competitiveness of a

group of interlinked economic activities in a specific geographic region


The Role of Government in Cluster Initiatives

• Initiate/ Convene

• Co-Finance

• Support all existing and emerging clusters

• Participate• Enable data

collection and dissemination at the cluster level

• Be ready to implement recommendations

• Pick favored clusters

• Pick favored companies

• Subsidize or distort competition

• Define cluster actionpriorities

Governmentshould

Governmentmay

Government should not


The Emergence of Cluster Policy in EuropeTimeline

Initial EU Efforts2000 - 2006

2002:SME Observatory

Report on Clusters

2000Latvian IT Cluster (SHARE program)

2006“EU-10

Cluster Mapping”

• Reaction to experience at the level of member countries and regions

• Seen within the context of SME policy

• Narrow experimentation

Basque Country

Catalonia

Scotland

…


The Evolution of Cluster-Driven Economic PolicyBasque Country, Spain

Institutions(1980s)

Efficiency(1990s)

Innovation(2000s-)

Machine ToolsAFM, 1992

AppliancesACEDE, 1992

AutomotiveACICAE, 1993

Port LogisticsUNIPORT

BILBAO, 1994

Environmental Services

ACLIMA, 1995

Electronics, Computing and

TelecomGAIA, 1996

Energy CLUSTER

ENERGIA, 1996

Aeronautics HEGAN, 1997

Maritime Industry ORO

MARÍTIMO VASCO, 1997

Paper CLUSTER PAPEL1998

Audiovisual EIKEN, 2004

Transport and Logistics

CLUSTERTIL, 2005

BioBasque, 2002


The Evolution of National Cluster PoliciesGermany

Source: VDI (2010)

• Reorganization of innovation and SME policies

• Reorganization of the role of regional government

• Wide use of competitions


The Evolution of National Cluster

ProgramsFrance

• Launched in 2004

• 67 cluster efforts, including 17 globally competitive, identified in 2005

• 1.6bn Euro public co-funding over the first three years (90% for R&D)

• Major review in 2008; 13 efforts put on notice for funding to be terminated


Cluster Policy in Europe: EU ActivitiesTimeline

Initial EU Efforts2000 - 2006


Report on Clusters


2006“EU-10

Cluster Mapping”

1. Phase2007 - 2009

2008“European Cluster

Memorandum”

High Level Advisory Group

on Clusters

2008“Commission

Communication on Clusters ”

European Cluster Observatory

Inno-Nets

Inno-Actions

• Introduce a consistent idea of cluster efforts

• Provide data on the presence and role of clusters

• Create support for use of cluster efforts

• Broad experimentation with support for many networks

http://www.youtube.com/watch?v=TdjUf_VQBWQ



Cluster Policy in Europe: EU ActivitiesTimeline

Precedents2000 - 2006


Report on Clusters


2006“EU-10

Cluster Mapping”

Innovation Union

Industrial Policy for the Globalization Era

2. Phase2010 -

2010“ECPG

Recommendations”

1. Phase2007 - 2009

2008“European Cluster

Memorandum”

High Level Advisory Group

on Clusters

2008“Commission

Communication on Clusters ”

European Cluster Observatory

Inno-Nets

Inno-Actions

• Focus on increasing the effectiveness of cluster programs and efforts

• Consolidate EU efforts around smaller number of efforts

• Introduce clusters into broader EU policies



http://www.proinno-europe.eu/node/25334

http://www.proinno-europe.eu/clusterconference2010/content/conference-proceedings








Cluster Programs Among Sweden’s Neighbors

Danish Competence

and Innovation Networks

FinnishSHOKs

BSR Stars

Lithuanian Valley’s

Estonian cluster

program

Norwegian Centres of Excellence

(NCEs)

ARENA

Polish cluster program

http://z.about.com/d/geography/1/0/1/L/europe.jpg


Key Issues for Cluster Mobilization

Strategy Practice

• Scaling the impact of cluster efforts to the regional level

• From harnessing to developing regional strengths: Smart specialization

• Internationalization through clusters

• Management of clusters


Cluster Policy: Breaking the Glass Ceiling

From a few successful cluster islands…

…to a more competitive economy

• Systematic use of clusters as a delivery channel for microeconomic policies

• Active management of regional cluster portfolios that engage many clusters and harness cross-cluster linkages

• Design of feed-back mechanisms from cluster efforts to general business environment upgrading

Locations will only be able to harness the full potential of cluster efforts, if they match a bottom-up operational approach with a clear top-down concept for the integration of

cluster efforts in a broader competitiveness strateg


Clusters and Regional Policy: Smart Specialization

The Challenge:• How to support structural change towards higher

value-added activities?

The New (Smart Specialization) Answer:• Identify your assets, including your

existing cluster base• Actively pursue opportunities in areas

adjacent to current strengths and leading towards higher value added

• Longer-term development of sustainable competitive advantages

The Old Answer:• Identify growing markets and try to

enter them (bio, nano, eco, …)

• Failure to succeed in intensely competitive markets without unique assets


Clusters and Internationalization

“local buzz and global pipelines”

• Cluster organizations can build bridges to foreign markets that are especially for SMEs to costly and risky to build on their own

• Crucial for the success of a cluster-driven internationalization strategy is a clear strategy– What are we looking for in our foreign partners (access to markets, access

to technologies, etc.)?– What are the unique competitive advantages we can offer our foreign

partners?

• Internationalization activities can be one of the key initial motivators for companies to join cluster efforts

• Public support for internationalization can be channeled through cluster organizations


Issues in Cluster Management

• Leadership

• Network management

• Controlling, Impact assessment

• IP management

• Branding

• Financing

• Governance


The Swedish Policy MixWhat Role for Clusters?

Sustain solid fiscal and

monetary policies

Increaselabor market

participation and flexibility

Upgrade microeconomic competitiveness

Clusters should be an important element of an overall Swedish competitiveness strategy

- Focus on specific fields- Use as delivery mechanism- Integrate programs across policy areas


What is Different about Cluster-Based Policy?

Cluster vs.Narrow Industries

RegionalPerspective

Build on Regional Strengths

Demand-driven

Policy Priorities

Public-PrivateCollaboration

ProductivityFocus

clusters and cluster initiatives: recent learnings, current challenges

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