Introduction to Industry Clusters · name@illinois.edu Value chain analysis for regional economic...

name@illinois.edu

BEYOND CLUSTERS

ANALYZING YOUR VALUE CHAINS

2015 Council for Community and Economic Research Annual Conference

Value Chain Analysis with Dr. Ed Feser

Oklahoma Example with Jon Chiappe

Open Discussion

name@illinois.edu

BEYOND CLUSTERS

ANALYZING YOUR VALUE CHAINS

2015 Council for Community and Economic Research Annual Conference

Resources

U.S. Cluster Mapping: http://clustermapping.us/cluster

Industry Trends and by Firm Age/Size: http://qwiexplorer.ces.census.gov/

BLS Location Quotient Calculator: http://data.bls.gov/location_quotient/ControllerServlet

County Business Patterns: http://www.census.gov/econ/cbp/

Stats America: http://statsamerica.org/

Industry Staffing Patterns: http://www.bls.gov/oes/current/oessrci.htm

Education Assets with IES College Navigator: http://nces.ed.gov/collegenavigator/

name@illinois.edu

Value chain analysis for regional

economic developmentAn brief introduction

Edward FeserUniversity of Illinois at Urbana-Champaign

Center for Regional Economic Competitiveness

C2ER Annual Conference & LMI Institute Forum

10 June 2015, Portland, OR

Outline

Value chain analysis (VCA): What is it?

VCA: Why do it?

Relation of VCA to cluster analysis

Undertaking VCA: Three tips

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What is value chain analysis?

A type of analysis that seeks to…

1. Uncover the linkages among businesses and

industries via which tangible value is created in the

design, production, marketing, sale and

distribution of a product or service

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Source: Center on Globalization,

Governance & Competitiveness, Duke

University.

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What is value chain analysis?

A type of analysis that seeks to…

1. Uncover the linkages among businesses and

industries via which tangible value is created in the

design, production, marketing, sale and

distribution of a product or service

2. Understand the existing and prospective sources of

that value and their relationship to location

3. Inform ongoing development strategizing in a

given locality, region, state or province

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Source: OECD/Ferrero

A global picture of Nutella VC

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Why do VCA?

To detect opportunities

To steward regional economy

To anticipate change (forecast)

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And what of clusters?

Interdependence: Each member firm’s competitive

position depends on one, some, or all other members of

the group. Business is the core.

Intermediate suppliers

Capital good suppliers

Producer services

Consultants

Contract R&D

Similar technologies

Share pool of labor

Similar strategies

Innovation flows

Education (univ, colleges)

Training (cc’s)

R&D (univ, fed labs)

Development agencies

Regulatory agencies

Trading

sectors

Related

sectors

Supporting

institutions

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The three dimensions of clusters

Linkage

Time Location

Emerging

Potential

Existing

Nationwide

Regional

Trade

Labor

Innovation

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778 6-digit NAICS 51 traded U.S. clusters

310 6-digit NAICS 16 local U.S. clusters

Clusters and cluster analysis

Motivated by broad

observation of a “spiky”

world

Linkage often under- or

over-specified

The linkage threshold

problem

The critical mass problem

Often needlessly

comprehensive

Now a well-known concept

Offers alternative lens for detecting regional specializations

A means of motivating useful cross-industry economic development actions

Seeks to capture effects of broad externalities

PitfallsStrengths

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The three

dimensions:

A VC view

Linkage

Time Location

EXISTING

TRADE

Labor

Innovation

Emerging

Potential

National

Regional

Technology

Other factor costs

Externalities

GLOBAL

Supra-regional

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Non-upholstered

wood furniture

Wholesaling

Marketing

Retail Trade

Truck Transport

Computer Manf

Organic Chemicals

Inorganic Chemicals

Carbon Black

Poultry

Sawmills and

planing mills

Metal furniture

Tires

Legal Services

Eating & DrinkingMetal stampings,

n.e.c.

Logging

Petroleum refining

Veneer and

plywood

Aircraft ManfNon-upholstered

wood furniture

Wholesaling

Marketing

Retail Trade

Truck Transport

Computer Manf

Organic Chemicals

Inorganic Chemicals

Carbon Black

Poultry

Sawmills and

planing mills

Metal furniture

Tires

Legal Services

Eating & DrinkingMetal stampings,

n.e.c.

Logging

Petroleum refining

Veneer and

plywood

Aircraft ManfNon-upholstered

wood furniture

Wholesaling

Marketing

Retail Trade

Truck Transport

Computer Manf

Organic Chemicals

Inorganic Chemicals

Carbon Black

Poultry

Sawmills and

planing mills

Metal furniture

Tires

Legal Services

Eating & DrinkingMetal stampings,

n.e.c.

Logging

Petroleum refining

Veneer and

plywood

Aircraft Manf

Illustrative chain for a hypothetical industry of interest

A typical approach to VCAIndustry view (can also start with enterprises)

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Non-upholstered

wood furniture

Wholesaling

Marketing

Retail Trade

Sawmills and

planing mills

Metal stampings,

n.e.c.

Logging

Petroleum refining

Veneer and

plywood

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Linkages: Some characteristics

Are of different kinds

Direction: Forward, backward

Proximity: In stage of production

Size: Significance of exchange (sales volume, critical

nature of good or service)

Connection to economic impact is direct

“Rounds of spending” in multiplier context refer to

workings of value/supply chain

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Automotive

assembly

Wheels

Tires

Rubber

molding

Engines

Vehicle rental

services

Legal services

Advertising

Rubber

Steel

Consumers

Governments

Exports

Exports and purchases by

consumers and governments

are sources of final demand

Engine and rubber molding

manufacturing occupy a

similar position in the

automotive assembly value

chain but the magnitude of

sales of engine manufacturing

to automotive assembly is

much higher

Automotive assembly’s backward linkages

Automotive assembly’s

forward linkages

Purchases by

vehicle rental

services are a

source of

intermediate

demand

Wheel manufacturing is a direct

supplier to automotive assembly and

steel is an indirect supplier (through

wheel manufacturing). Wheel

manufacturing is closer in proximity

to automotive assembly in the

automotive assembly value chain.

The direction of

automotive assembly’s

linkage to rubber

molding is backward.

The direction of its

linkage to vehicle

rental services is

forward. The direction

of vehicle rental

services linkage to

automotive assembly is

backward.

Direction of sales

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Exploratory

analysis phase

RELATED INDUSTRIES

INDUSTRY OF INTEREST (known regional strength?)

Non-upholstered

wood furniture

Wholesaling

Marketing

Retail Trade

Sawmills and

planing mills

Metal stampings,

n.e.c.

Logging

Petroleum refining

Veneer and

plywood

Historic Growth Forecast GrowthAbsolute Size Specialization

Historic Growth Forecast GrowthAbsolute Size Specialization

OPPORTUNITIES

& GAPS ANALYSIS

Employment Location Quotient Region Region

Output State/Province State/Province

Nation Nation

N America/Int’lN America/Int’l

Employment Location Quotient Region Region

Output State/Province State/Province

Nation Nation

N America/Int’lN America/Int’l

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Non-upholstered

wood furniture

Wholesaling

Marketing

Retail Trade

Sawmills and

planing mills

Metal stampings,

n.e.c.

Logging

Petroleum refining

Veneer and

plywood

The locational clustering of chain components

Urban

advanced

services?

Urban

industrial?

Coastal

regions? Rural

places?

Ubiquitous?

In this context, what does “regional cluster” mean?

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Link to occupational

analysis

A

B

C

D

E

F

G

H

I

JK

K

KL

Occupation

Occupation

Occupation

Occupation

Occupation

Stage

Stage

PRODUCT

or

SERVICE

TASK OCCUPATION PRODUCTSTAGE

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Undertaking VCA: Three tips

1. Begin with

ready-made

tools and data,

but move beyond

2. Get micro early!

3. Approach with

clear strategy

and policy use in

mind

Perceived need or

opportunity

Verification

“Infrastructure” for

capturing opportunities,

solving problems

VCA

Requires ongoing

engagement with

business, partnerships

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Typical strategy/policy actions

Customized process improvement & technical training

Energy efficiency/utility improvements

Waste reduction assistance

Membership directories/supply chain

connections/networking

Incubation

Manufacturing parks

Career portals/virtual job boards

Career pathway identification

Tech/community college collaboration

Online and on-site training

Scholarship programs

Marketing

Recruitment

Business,

technical

assistance

Creation

Workforce

development

Attraction

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Thank you!

Edward Feser

Professor & Dean, College of Fine & Applied Arts, University of Illinois at Urbana-Champaign

Senior Research Fellow, Center for Regional Economic Competitiveness, Arlington, Virginia

Questions or suggestions?

Please write me at feser@Illinois.edu

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