Scott Stern: Innovation in Clusters
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1 Innovation in Clusters Professor Scott Stern MIT Sloan School and NBER Microeconomics of Competitiveness Faculty Workshop Harvard Institute for
description
Transcript of Scott Stern: Innovation in Clusters
Innovation in Clusters
Professor Scott SternMIT Sloan School and
NBER
Microeconomics of Competitiveness
Faculty WorkshopHarvard Institute for
Strategy and Competitiveness
December 2010
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Innovation and Economic Performance
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210
182 177
135124 119
111
82 7870 64 62
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Global Innovation is Concentrated in a Small Number of Nations Around the World
CanadaU.S
.
Israel
Denmark
Germany
Taiw
an
Australia
Sweden
Japan
Finland
Netherla
nds
Korea
France
U.K.
Singapore
Spain
Portugal
Data are Patents Per Million Population, 2002. Source: United States PTO
Switzerla
nd
4
0
50
100
150
200
250
300
-10% -5% 0% 5% 10% 15% 20% 25% 30%
– Source: USPTO (2008), EIU (2008)
Average U.S. patents per 1 million population, 2006-2008
CAGR of US-registered patents, 1998 to 2008
Innovative OutputSelected Countries, 1998 to 2008
– Hong Kong
– Germany
– Canada
– Norway
– Belgium
– Netherlands
– Taiwan
– India
– France
– Israel
– Spain
– Sweden
– Finland
– China
– United States
– Singapore– Denmark
– Italy
– Australia
– Switzerland
– UK
– South Korea
– 10,000 patents =
– Austria
– South Africa
– Japan
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Even with similar initial innovation rates, regions can diverge dramatically in producing world-class technology…
Country United States Granted Patents
1976-1980 1995-1999 Growth Rate
Emerging Latin American Economies
Argentina 115 228 0.98
Brazil 136 492 2.62
Chile 12 60 4.00
Costa Rica 22 48 1.18
Mexico 124 431 2.48
Emerging Asian Economies
China 3 577 191.33
Hong Kong 176 1,694 8.63
Singapore 17 725 41.65
South Korea 23 12,062 523.43
Taiwan 135 15,871 116.56
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Within the US, states differ by a factor of 4-5 in terms of patents per capita…
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With even more striking variation at the regional level…
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US Issued Patents by Sri Lanka Inventors
– Sri Lankan Population = 20 million people
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– 7/17/2008
143
150160
134
152
159
133
121
149
122
0
20
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Issu
ed U
.S. P
aten
ts
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Fiscal Year
M.I.T. Issued U.S. Patents by Fiscal Year, 1999-2008
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Bob Langer has published more than 1100 articles and been granted more than 760
patents…
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Why is innovation so closely related to
globally competitive clusters?
Why does location matter for innovation?
What is the role for policy and
management?
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Outline
• Innovation: Location Matters
• The Drivers of Innovative Capacity (Australia Case Study)– Benchmarking Innovative Capacity– Innovative Capacity as a Diagnostic Tool
• The Drivers of Regional Innovation-Based Entrepreneurship
• Clusters and Economic Performance
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Innovation & Prosperity in a Global Economy
• Prosperity depends on a region’s productivity in leveraging its human and physical capital resources
• In advanced regions, productivity depends less on cost than on whether and how a region’s companies compete on the basis of innovation• Creating high value products and services• Developing unique products, features, and processes• Staying ahead of technology diffusion, through cumulative innovation
• Rather than focusing on small differences in factor costs or taxes, regional development policy must increasingly emphasize the environment for technology development, entrepreneurship and innovation
• Innovation-oriented competition is less a game of winners and losers but a mechanism to improve the standard of living for all citizens
• Innovation is more than just science & technology• No “low-tech” industries, just firms not taking advantage of innovative opportunities• Service sector innovation is becoming increasingly important
Innovation is perhaps the most important long-term strategy for addressing pressing social challenges
• Prosperity depends on a region’s productivity in leveraging its human and physical capital resources
• In advanced regions, productivity depends less on cost than on whether and how a region’s companies compete on the basis of innovation• Creating high value products and services• Developing unique products, features, and processes• Staying ahead of technology diffusion, through cumulative innovation
• Rather than focusing on small differences in factor costs or taxes, regional development policy must increasingly emphasize the environment for technology development, entrepreneurship and innovation
• Innovation-oriented competition is less a game of winners and losers but a mechanism to improve the standard of living for all citizens
• Innovation is more than just science & technology• No “low-tech” industries, just firms not taking advantage of innovative opportunities• Service sector innovation is becoming increasingly important
Innovation is perhaps the most important long-term strategy for addressing pressing social challenges
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What is Innovative Capacity?The potential for a region – as both a political and economic entity – to produce and commercialization a stream of innovation with potential global impact.
Not simply the realized level of innovation, but the fundamental conditions, investments and policy choices that create the region’s environment for innovation
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Common InnovationInfrastructure
Common InnovationInfrastructure
Cluster-SpecificConditions
Cluster-Specific Environmentfor Innovation
Quality of LinkagesQuality of Linkages
Innovation Policy
Factor (Input)Conditions Demand Conditions
Related & SupportingIndustries
Context for FirmStrategy and Rivalry
National “Knowledge”
Stock
InnovationResources
The Drivers of Innovative Capacity
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The Innovation Infrastructure
• Science & Engineering Workforce
• Access to Higher and Postgraduate Education
• Availability of Risk Capital• High Quality of Information
Infrastructure
• “Basic” Research Investments• Cumulative Innovation Record• Overall Technological Sophistication
• Subsidy and Grant Programs • R&D Tax Policy• Education Policy & Funding• Intellectual Property Protection
Policy• Openness to International Trade
and Investment
InnovationResources
InnovationResources Innovation PolicyInnovation Policy
National “Knowledge” Stock
National “Knowledge” Stock
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Climate for Innovation- Based Local
Rivalry
Climate for Innovation- Based Local
Rivalry
Clusters of Related and Supporting Industries
Clusters of Related and Supporting Industries
Factor (Input)
Conditions
Factor (Input)
Conditions
Innovation-Oriented Industrial Clusters
Sophisticated and demanding local customers
Customer needs that anticipate those elsewhere
A critical mass of capable local suppliers Presence of Clusters instead of industries
A local context that encourages investment in innovation-related activity
Open and vigorous local competition Demand
ConditionsDemand
Conditions
High quality human resources, especially scientific, technical, and managerial personnel
Strong basic research infrastructure
An ample supply of risk capital
High quality information infrastructure
A critical mass of capable local suppliers Clusters of related and supporting industries
and institutions to harness linkages
• Economic development is a process of successive upgrading, in which the business environment evolves to support and encourage increasingly sophisticated and productive ways of competing
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Common InnovationInfrastructure
Common InnovationInfrastructure
Cluster-SpecificConditions
Cluster-Specific Environmentfor Innovation
Quality of LinkagesQuality of Linkages
- Universities- Venture Capital
Innovation Policy
Factor (Input)Conditions Demand Conditions
Related & SupportingIndustries
Context for FirmStrategy and Rivalry
National “Knowledge”
Stock
InnovationResources
Innovative Capacity Depends on Strong Linkages Between Solid Infrastructure & Dynamic Clusters
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Finally, global innovation leadership results from leveraging local innovative capacity though effective
and sophisticated firm operations and strategy
Company Operations and
Strategy
Company Operations and
Strategy
Innovative Capacity
Innovative Capacity
• Regional innovative capacity may be squandered through ineffective innovation management
• Innovation leadership within a region results from integrating external resources with internal capabilities
• R&D productivity depends on the locations at which a company’s business units are based
• Cluster participation is an important contributor to innovative success
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The Emergence of the Australian Wine Industry is Rooted in the Evolution of Australian Competitive Advantage
Abundant Productive
Land
WineProduce
Logistics / Trade
Information Technology
1980 1990 2002 +
Bioscience Research Centers
Mining and Natural
Resources
Gold
Medical Devices
Biotech / Pharmaceuticals
Education andKnowledge Creation
Travel and TourismIron / Aluminum Bauxite
Beef
Grains
Ag Research Centers
Wool
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Over the 1990s, growth in Australian exports was driven by improvement in Australia’s wine cluster
0%
5%
10%
15%
20%
25%
30%
35%
-8% -6% -4% -2% 0% 2% 4%
Materials/Metals
Food/Beverages*
Textiles/Apparel
Note: Wine export growth accounts for >45% of the increase in the export share of food/beveragesSource: UN Trade Statistics
Transportation Equipment
Health Care
Oil/Chemicals
Multiple Business
Share of Australian Exports, 2000
Change in Share of Australian Exports, 1995-2000
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$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
1995 1996 1997 1998 1999 2000
0%
1%
2%
3%
4%
5%
6%
7%
8%
Value
Market Share
The Australian Wine ClusterTrade Performance
Source: UN Trade Statistics
Australian Wine Exports in million US Dollars
Australian Wine World Export Market Share
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The Australian Wine ClusterLocations
Western Australia
South Australia
New South Wales
Victoria
Queensland
Northern Territory
TasmaniaNote: Colored areas indicate wine growing regionsSource: Australian Wine & Brandy Corporation
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The Australian Wine ClusterHistory
1955
Australian Wine Research Institute founded
1970
Winemaking school at Charles Sturt University founded
1980
Australian Wine and Brandy Corporation established
1965
Australian Wine Bureau established
1930
First oenology course at Roseworthy Agricultural College
1950s
Import of European winery technology
1960s
Recruiting of experienced foreign investors, e.g. Wolf Bass
1990s
Surge in exports and international acquisitions
1980s
Creation of large number of new wineries
1970s
Continued inflow of foreign capital and management
1990
Winemaker’s Federation of Australia established
1991 to 1998
New organizations created for education, research, market information, and export promotion
Source: Michael E. Porter and Örjan Sölvell, The Australian Wine Cluster – Supplement, Harvard Business School Case Study, 2002
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The Australian Wine ClusterRecently founded Institutions for Collaboration
Wine Industry National Education and Training Council
Wine Industry National Education and Training Council
Established in 1995
Focus: Coordination, integration, and standard maintenance for vocational training and education
Funding: Government; other cluster organizations
Established in 1995
Focus: Coordination, integration, and standard maintenance for vocational training and education
Funding: Government; other cluster organizations
Cooperative Centre for ViticultureCooperative Centre for Viticulture
Established in 1991
Focus: Coordination of research and education policy in viticulture
Funding: other cluster organizations
Established in 1991
Focus: Coordination of research and education policy in viticulture
Funding: other cluster organizations
Australian Wine Export CouncilAustralian Wine Export Council
Established in 1992
Focus: Wine export promotion through international offices in London and San Francisco
Funding: Government; cluster organizations
Established in 1992
Focus: Wine export promotion through international offices in London and San Francisco
Funding: Government; cluster organizations
Winemakers’ Federation of AustraliaWinemakers’ Federation of Australia
Established in 1990
Focus: Public policy representation of companies in the wine cluster
Funding: Member companies
Established in 1990
Focus: Public policy representation of companies in the wine cluster
Funding: Member companies
Grape and Wine R&D CorporationGrape and Wine R&D Corporation
Established in 1991 as statutory body
Focus: Funding of research and development activities
Funding: Government; statutory levy
Established in 1991 as statutory body
Focus: Funding of research and development activities
Funding: Government; statutory levy
Wine Industry Information ServiceWine Industry Information Service
Established in 1998
Focus: Information collection, organization, and dissemination
Funding: Cluster organizations
Established in 1998
Focus: Information collection, organization, and dissemination
Funding: Cluster organizations
Source: Michael E. Porter and Örjan Sölvell, The Australian Wine Cluster – Supplement, Harvard Business School Case Study, 2002
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Healty Rivalry
Based on Quality and Execution
Healty Rivalry
Based on Quality and Execution
Growing (but not
intl. Leader)
Growing (but not
intl. Leader)
Natural Resources &
Deployment of Best Global Technology
Natural Resources &
Deployment of Best Global Technology
Wine Industry
Increasingly Sophist.
Local Market
Increasingly Sophist.
Local Market
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An objective, quantitative international benchmark of the national capacity for innovation
Assessing National Innovative Capacity
Measures of NationalInnovative CapacityMeasures of NationalInnovative Capacity
Methodology
InnovationOutput
InnovationOutput
National Innovative Capacity Rankings and Sub-Rankings
National Innovative Capacity Rankings and Sub-Rankings
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The National Innovative Capacity Framework facilitates assessment of global innovation drivers
across countries and over time
• The Evolution of Innovation Capacity Over Time– The historical basis of innovation leadership and changes
over time in national positioning– Key Reports
• Porter and Stern, Council on Competitiveness, 1999• Furman, Porter and Stern, Research Policy, 2002• Gans and Stern, 2002; Gans, et al, 2005 onwards
• The World Economic Forum Global Competitiveness Report– “Snapshots” of relative innovative capacity at a Point in Time– Detailed and nuanced measures available for recent years– Comprehensive national coverage, including over 70 countries– Findings in the annual Global Competitiveness Report (“GCR”)
• Global Competitiveness Report (“GCR”), 2001, 2002, 2004
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The Evolution of Innovation Capacity Over Time
• Looking across the OECD for nearly 30 years, key Innovative Capacity measures are highly significant in explaining international patenting output
• Infrastructure Investments and Policies have a significant influence– R&D spending & Employment– Intellectual Property and Openness to Intl. Trade– Higher Education & Overall Technological Sophistication
• R&D composition has an additional impact– R&D spending by business more productive than Govt. R&D– Innovation productivity is higher for countries specialized in (broad)
technology areas– Universities play a key role in translating funding into innovation
performance
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Historical Innovation Index (“Gans and Stern”)Selected Countries, 1975-2000
* From 1973 to 1989, the Index is based on data for West Germany only.
0.00
50.00
100.00
150.00
200.00
250.00
300.00
1975 1980 1985 1990 1995 2000
Australia
France
Germany
J apan
New Zealand
Sweden
Switzerland
UK
USA
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“Historical” Innovation Index Findings
• Over time, convergence has occurred.
• Prior to mid-1980s, the U.S. and Switzerland stood apart.
• Japan’s dramatic improvement in international patenting is well explained by national innovative capacity measures.
• After rising through the 1980s, Germany has struggled to maintain its innovative capacity after reunification
• Denmark and Finland have made major gains in innovative capacity, especially since the mid-1980s, while France and Italy have treaded water
• Between 1973 and the late 1990s, Australia transformed itself from a “classical” imitator economy countries to a low “second-tier innovator” economy
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The World Economic Forum Global Competitiveness Report:Innovative Capacity Report, 2002
• Attractiveness of National Environment for Retaining S&E
• Intellectual Propriety Protection• Government R&D Tax Credits• Government Subsidies for R&D• Company Spending on R&D• Environmental Regulation• Regulatory Standards• Effectiveness of Antitrust Policy• Procurement of Advanced
Technology Products
• Absorption of New Technology• University/Industry Collaboration• Venture Capital Availability
• State of Cluster Development• Production Process Sophistication• Extent of Product and Process
Collaboration• Local Supplier Quality
Common Innovation Infrastructure
Common Innovation Infrastructure
Cluster-Specific Conditions
Cluster-Specific Conditions
Quality of LinkagesQuality of Linkages
Company Ops and Strategy
Company Ops and Strategy
• Nature of Competitive Advantage • Firm’s Capacity for Innovation• Company R&D Spending Priority• International market orientation• Pay Linked to Productivity
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Benchmarking Australia…
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2002 GCR Innovative Capacity Rankings
S&E Rank
Inn. Policy
Cluster Innovation Linkages
Ops & Strat
Country Rank IndexUnited States 1 31.0 4 7 1 1 1
United Kingdom 2 29.7 15 10 2 2 2Finland 3 29.1 8 4 5 3 9
Germany 4 28.5 10 6 7 7 4Japan 5 28.3 2 13 6 17 7Taiwan 8 27.8 16 5 4 15 14
Singapore 10 27.6 17 1 12 22 10Netherlands 11 27.3 18 12 9 9 17
France 13 27.1 14 15 18 10 11Israel 15 26.8 29 2 31 4 12
Australia 17 26.6 9 9 15 18 22Italy 21 26.0 37 38 3 20 16
Korea 22 25.9 23 20 10 25 21New Zealand 24 24.3 20 47 29 21 27
Innovative Capacity
– Over the past several years, Australia has registered a second-tier innovation ranking, ranging between 7th and 17th.
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Over the past thirty years, Australia has evolved from a classic “imitator” to a second-tier “innovator” nation
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10
20
30
40
50
60
1975 1980 1985 1990 1995 2000Year
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Australian Innovative Capacity is just behind its position in terms of GDP per capita
New Zealand
Korea
Australia
Slovenia
Czech Rep.Hungary
Brazil
IsraelSpain
Italy
Ireland
U.S.
Finland
6
11
16
21
26
31
18 20 22 24 26 28 30 32
NIC Index
GD
P p
er C
apit
a
Adj. R 2̂ = 0.8289
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The innovative capacity of Austrlalia has been driven by improvements in innovation policy and resources,
and through the recent emergence of key clusters
Openness
4.00
5.00
6.00
7.00
8.00
9.00
10.00
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0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
0% 5% 10% 15% 20% 25%
The R&D spending boom of the late 1990s outpaced international competitors
Source: OECD Science, Technology and Industry Scoreboard 2001.
USA
Germany
UK
Sweden
Canada
Singapore
Japan
Ireland
Italy New Zealand
South Korea
France Israel
R&D Spending as Share of GDP, 1998
R&D Expenditures, CAGR, 1985 - 1998
Netherlands
Belgium
Denmark
Finland
Spain
AUSTRALIA
Portugal
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Note: Finnish Growth Rate for 1991-98Source: OECD, 2001
Growth Rate of Researchers, CAGR 1991 - 1999
Researchers per 10’000 Employed, 1998
However, after strong growth in the 1980s, Australia science and engineering laborforce intensity has slowed relative to
similar countries
0
20
40
60
80
100
120
-5% 0% 5% 10%
Italy
Finland
Sweden
UK
Canada
US
France
Spain
AUSTRALIA
Japan
Germany
NetherlandsNew Zealand
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Australia’s position among “second-tier” innovator nations is limited by ineffective company operations & strategy …
Nigeria
Jamaica
Jordan
Bostw ana
Morocco
Haiti
BoliviaBangladesh
Paraguay
Zimbabw e
Ecuador
Guatemala
Nicaragua
El Salvador
Venezuela
UruguayPeruColombia
Philippines
Indonesia
Trinidad and Tobago
Panama
Sri LankaMauritiusTurkey Vietnam
Argentina Mexico
Bulgaria
Dominican Republic
RomaniaUkraine
Thailand
TunisiaLatvia
India
Croatia
Chile
Slovak Republic
Malaysia
Costa Rica
GreeceChina
Poland
Russia
Brazil
Czech RepublicLithuania
South Africa
Estonia
Hungary
Portugal
Hong Kong SAR
SloveniaNew Zealand
SpainKorea
Italy
Ireland
Norw ay
Iceland
Australia
Belgium
IsraelAustria
France
Denmark
Netherlands
Singapore
CanadaTaiw an
Sw eden
Sw itzerland
Japan GermanyFinland
United Kingdom
United States
Honduras
Namibia
Adj. R2 = 0.6819
2
3
4
5
6
7
1.8 2.3 2.8 3.3 3.8 4.3
Innovation Policy Index
Op
era
tio
ns
an
d S
tra
teg
y In
de
x
– Australia ranks only 22nd in Company Operations and Strategy.
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And stagnation in the development of effective institutions linking the innovation infrastructure to
local cluster requirements
R&D performed by universities (%)
20.00
22.00
24.00
26.00
28.00
30.00
32.00
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Dynamic Australian clusters have begun to evolve building upon historical strengths…
Abundant Productive
Land
Wine
Produce
Logistics / Trade
Information Technology
1980 1990 2002 +
Bioscience Research Centers
Mining and Natural
Resources
Gold
Medical Devices
Biotech / Pharmaceuticals
Education andKnowledge Creation
Travel and TourismIron / Aluminum Bauxite
Beef
Grains
Ag Research Centers
Wool
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…and an internationally competitive scientific personnel base in life and agricultural sciences…
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However, to date, leading clusters are driven by public rather than private research expenditures…
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Nurturing Australian Innovative Capacity:An Innovation Policy Agenda
Current Assessment
– Macroeconomic Stability
– Improved Cost / Quality Competitiveness
– Diversifying away from traditional industrial sectors
– Some Examples of Globally Relevant Cluster Development (e.g. Wine and Biotechnology)
Current Assessment
– Macroeconomic Stability
– Improved Cost / Quality Competitiveness
– Diversifying away from traditional industrial sectors
– Some Examples of Globally Relevant Cluster Development (e.g. Wine and Biotechnology)
How to Build Capacity for World-
Class Innovation?
How to Build Capacity for World-
Class Innovation?
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The Australian Innovation Policy Agenda
1990s 2000+ ??
Science & Engineering Workforce
Educational Investments
Nurture Clusters Leveraging Traditional Strength
Target local knowledge accumulation
Innovation Policy: IP Protection and Openness
Foster Science & Industry Linkages
Upgrading effectiveness of company innovation management
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Outline
• Innovation: Location Matters
• The Drivers of Innovative Capacity (Australia Case Study)– Benchmarking Innovative Capacity– Innovative Capacity as a Diagnostic Tool
• The Drivers of Innovation-Based Entrepreneurship
• Clusters and Economic Performance
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Regional Cluster Strength
Regional Entrepreneurship
Capacity
Regional Innovation Capacity
• These three elements combined are the foundations for regional innovation-based entrepreneurship.
• They are enhanced by the strength and number of connections among them.
Clusters are particularly powerful drivers of economic performance when they leverage regional innovative and entrepreneurial capacity
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Regional Innovation Capacity
• The capacity of a region to generate “new to the world” ideas, products and services supported by:.
– Regional Innovation Capacity
PEOPLE -Pool of innovators-Education in tech commercialization-Networks
FUNDING -Funding for research-Government programs-Corporate R&D spending
INFRASTRUCTURE -Physical infrastructure-Example: hi speed internet
POLICY -Clear rules around patents-Clear support for STEM education
REWARDS & NORMS -Experimentation culture-Celebration of invention and innovation- Rewards to innovation – tenure process
DEMAND -Nature of companies in region (relates directly to cluster analysis)
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Regional Entrepreneurship Capacity
• The capacity of a region to generate new start-up companies supported by: – Regional
Entrepreneurship Capacity PEOPLE -
ENTREPRENEURS-Entrepreneurship Education & Training-Mentorship programs-Groups to share info
FUNDING -Government early stage funding-Angel funding-Private & public risk capital
INFRASTRUCTURE -Real estate-Voice & Data Communications-Services for start ups (legal, acctng, HR)
POLICY -Bankruptcy laws-Ease of incorporation- Ease of doing business
CULTURE REWARDS & NORMS
-Recognition in press for success-Rewarded for trying-Societal stigma or halo
DEMAND -Procurement policies of government-Procurement policies of companies-Transportation infrastructure
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Innovative Capacity and Entrepreneurial Capacity Are Different and Have Distinct Drivers
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Potential for benchmarking entrepreneurial capacity …
EconomyEase of Doing Business Rank
Starting a Business
Employing Workers
Registering Property
Getting CreditProtecting Investors
Paying Taxes
Singapore 1 4 1 16 4 2 5Hong Kong, China 3 18 6 75 4 3 3United States 4 8 1 12 4 5 61United Kingdom 5 16 35 23 2 10 16Denmark 6 28 9 47 15 27 13Thailand 12 55 52 6 71 12 88Saudi Arabia 13 13 73 1 61 16 7Japan 15 91 40 54 15 16 123Germany 25 84 158 57 15 93 71Lithuania 26 99 119 4 43 93 51Israel 29 34 90 147 4 5 83Netherlands 30 70 123 29 43 109 33France 31 22 155 159 43 73 59Russian Federation 120 106 109 45 87 93 103Indonesia 122 161 149 95 113 41 127
– World Bank, Doing Business Project 2010
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Effective coupling of innovative and entrepreneurial capacity is realized through a strong cluster environment
In what clusters does the region have a clear comparative advantage?
• How are these potential clusters related to each other?
• Addressing these questions provides a useful lens for focusing actions and making choices about how to deploy scarce resources
– Regional Cluster Strength
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Innovation Capacity & Entrepreneurial Capacity building can be focused on the needs of the most competitive clusters
– Regional Entrepreneurshi
p Capacity
– Regional Innovation Capacity
Cluster-needs based for focused technical training
PEOPLE Training of entrepreneurs with cluster-specific expertise
Cluster-based initiatives to build up research expertise & depth
FUNDING Focused risk capital for specific clusters
Cluster-oriented research infrastructure & facilities
INFRASTRUCTURE Cluster-focused incubators
Research funding focus guided toward key supporting research areas
POLICY Cluster-specific tax policies and targeted program funding
Celebrating research across disciplines in key cluster-specific activities
CULTURE Rewarding and celebrating cluster-oriented business activities & connections
Ensuring strong demand for ideas from cluster firms
DEMAND Ensuring links with sophisticated cluster internal & external customers
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– Cluster-focused
– Coupling
Cluster-specific coupling mechanisms can enhance innovation-based entrepreneurship
CLUSTER-SPECIFIC COUPLING MECHANISMSPEOPLE: Cluster-based entrepreneurial education bridging universities, start-up companies and large cluster “anchor” firmsLeadership council for the cluster to promote integration, common goals,
networking etc.FUNDING & INFRASTRUCTURE Cluster-focused investment strategieCluster-focused infrastructure for demonstration projects & proof of conceptREWARDS: Cluster-oriented celebrations of innovators and entrepreneurs e.g. MIT Clean Energy Prize
– Regional Entrepreneurshi
p Capacity
– Regional Innovation Capacity
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Bayh-Dole Act:Arguably the single most important single shift in the
environment for regional innovation-driven entrepreneurship
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Significant increase in patent filings
– About 10,000 patents granted per year to US universities on about US$30billion per year research funding ~ $3M/patent!
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Executed through the establishment of technology transfer offices
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– Hausman, 2010
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The Challenge of Regional Strategy
• Regional economies and their individual clusters develop slowly in an evolutionary, path-dependent process
• Some of the factors that drive this process are inherited or externally given (physical location, natural endowments, chance events)
• However, while these factors are important, they do not determine the evolutionary path of a regional economy or cluster
• Choices, such as the investment in specific assets or the decision for a particular regulation or policy, are important– Institutions for collaboration are an important factor enabling
regions to make and execute choices– So are entrepreneurial decisions
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Climate for Innovation- Based Local
Rivalry
Climate for Innovation- Based Local
Rivalry
Clusters of Related and Supporting Industries
Clusters of Related and Supporting Industries
Factor (Input)
Conditions
Factor (Input)
Conditions
Nurturing Entrepreneurship as Part of Cluster Development
Sophisticated and demanding local customers
Customer needs that anticipate those elsewhere
A critical mass of capable local suppliers Presence of Clusters instead of industries
A local context that encourages investment in innovation-related activity
Open and vigorous local competition Demand
ConditionsDemand
Conditions
High quality human resources, especially scientific, technical, and managerial personnel
Strong basic research infrastructure
An ample supply of risk capital
High quality information infrastructure
A critical mass of capable local suppliers Clusters of related and supporting industries
and institutions to harness linkages
• Economic development is a process of successive upgrading, in which the business environment evolves to support and encourage increasingly sophisticated and productive ways of competing
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The Role of Cluster Analysis and Cluster Developmentin Regional Strategy
• Clusters are a forum to identify fundamental challenges in the national or regional business environment
• Clusters provide new roles for government, companies, and other institutions in economic development
• Clusters are critical engines in the economic structure of national and regional economies– Clusters need to be a core element of any competitiveness effort
but they should not stand alone
• Clusters go hand in hand with innovative and entrepreneurial capacity as a driver of long-term economic performance
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Key Lessons
• In a global economy, innovation-based competitiveness provides a more stable foundation for productivity growth than low-cost production
• Current economic and security challenges have placed pressure on regional strategies from the “boom years.” Rather than a “extra” during good times, coherent regional strategy is critical for overcoming current challenges to our fiscal health, economic growth, and national security.
• Effective regional policy must be grounded on a clear understanding of the drivers of regional innovative and entrepreneurial capacity and the central role of clusters– Regions must leverage and expand the scope of the innovation
system that supports regional competitiveness in advanced economies.
– The strategy for long-term growth relies less on bidding wars and high-profile investments than on creating conditions for firm development and cluster formation.
• Beyond simple analysis, though, regional strategy only matters in the presence of an effective implementation plan
