Clusters and their Future Role - clusterexcellencedenmark.dk · Clusters and their Future Role Dr. Christian H. M. Ketels Institute for Strategy and Competitiveness, Harvard Business

Clusters and their Future Role

Dr. Christian H. M. Ketels Institute for Strategy and Competitiveness, Harvard Business School

President, The TCI Network

Innovation Camp 2016, Cluster Excellence Denmark

Aalborg, Denmark

25. August 2016

[email protected]

2 Copyright 2013 © Christian Ketels

• How will clusters change?

• How will cluster-based based economic

development change?

• How will the demands on cluster initiatives

change?


Clusters: An Old Concept….


…with a Stable Set of Core Building Blocks …

Collaboration

& Rivalry

Related Variety

Critical

Mass

Proximity


… in a Changing Economic Environment

Rising

Knowledge-Intensity

Globalization of Production Sites

Falling Transportation/

Communication Costs

Accelerated

Technological Change

Agglomeration Dispersion

Globalization of Markets

New

Business

Models

Restructuring of

Industries

Lower Trade Barriers

Convergence of

Technologies

Clusters are a stable

feature of economies

Clusters are

constantly changing

Growing Firm

Heterogeneity

Alignment of Business

Environments


Strong global pipelines

through research networks,

global value chains, and

companies present in multiple

locations

Strong local buzz through

breadth of activities, quality of

firms, research institutions, and

business environment

conditions, and rich local

linkages

Successful Clusters: Positioning in Global Markets


The Role of Clusters in the Economy

EMPLOYMENT

INCOME

PATENTS

36% 64%

51% 49%

91% 9%

Local Industries

• Present everywhere at

similar levels

• Serve exclusively the local

market

• Little exposure to cross-

regional competition

• Important for jobs, but

lower wages; growth

potential limited by size of

the local market

Traded Industries

• ‘Spiky’ across space; 2/3s of all

traded industry employment is in

strong clusters

• Serve national and global markets

• Exposed to competition from other

regions and nations

• Critical for prosperity through

higher wages, productivity, and

innovation; growth potential set by

the global market

Traded vs. Local Share of the U.S. Economy

Clusters’ role over time

• Falling share of overall employment

• Growing productivity advantage vs rest of the

economy

• Growing dominance of limited number of

service-oriented cluster categories in total

cluster employment

• No signs that the dominance of strong clusters

in clusters’ geographic footprint is falling


The Impact of Clusters on Firms and Regions

Strategies Performance Structural Change

• Opportunities and

pressure to develop

unique value

propositions

• Nature of

competitive

advantages

• Wages

• Productivity

• Job growth

• Resilience

• Patenting

• Entrepreneurship

• Path of structural

change (emergence

of new clusters)

Presence of Strong Clusters

9

The Evolution of Clusters

Factors that trigger

cluster emergence:

• Natural resources,

location

• Unique (combination of)


conditions

• Anchor firms

• Existing (related)

clusters

Critical Mass-effects:

Long periods before

dynamics set in…

Evolutionary Forces:

Growth/Investments by Firms

Local Rivalry, Spill-Overs

Market Dynamics

Technological Trends

Constructive Forces:

Joint actions to improve the


Government policies to

strengthen the cluster

Decline vs. Re-birth

Challenges of Lock-In and

Congestion, Opportunities of

Capabilities and Social Capital

Time

Cluster

Strength

Stagnation and Demise:

Failure to Generate

Sustainable Competitive

Advantages

10

Metal-

working

BCR ≥ 95th pctile

& RI ≥ 20%

BCR 90th-94th

pctile & RI ≥ 20%

Next closest

clusters

Food

Processing

Lighting

Medical

Devices

IT &

Analytical

Instruments

Comm-

unications

Equip. &

Services

Down-

stream

Chemicals Biopharma

Leather

Apparel

Printing

Services

Financial

Services

Insurance

Environ-

mental

Services

Business

Services

Education &

Knowledge

Creation

Marketing

Services

Music &

Sound

Recording

Performing

Arts

Video

Production

Hospitality

& Tourism

Metal

Mining

Coal

Mining

Upstream

Metals

Wood

Products

Furniture

Tobacco

Aerospace

Upstream

Chemicals

Trailers &

Appliances

Textiles

Footwear

Forestry

Agriculture

Plastics Plastics

Distribution

& eComm.

Livestock

Processing

Fishing &

Fishing

Products

Water

Transport

Transport

&Logistics

Vulcanized

Materials

Construction

Nonmetal

Mining

Oil & Gas

Electricity

Down-

stream

Metals

Production

Metal-

working Automotive

Paper &

Packaging

Recreation

& Electric

Goods

Jewelry &

Precious

Metals

Clusters New to a Region


Clusters New to the World

New technologies, new business models

• What industries will exit in the future?

• Which industries will be related through strong linkages in the future?

• Which linkages will benefit materially from geographic proximity?


Clusters New to the World: A ‘Weak Linkages’-Approach

Digital Industries

Computer consultancy activities

Computer programming activities

Other

information

technology and

computer ser vice

activities

Manufacture of

communication

equipment

Other telecommunications activities

Satellite telecomm unications activities

Wireless

telecommunications

activities

Wholesale of computers,

computer peripheral

equipment and softwar e

Wholesale of electrical

household appliances

Wholesale of

electronic and

telecommunications

equipment and

partsWholesale of other

machinery and equipment

Wholesale of

other office

machinery and

equipment

Manufacture of

computers and

peripheral

equipmentManufacture

of consumer

electronics

Manufacture of

electronic

components

Manufacture of

instruments and

appliances for

measuring, testing

and navigation

Manufacture of

loaded electronic

boards

Manufacture of

optical instruments

and photographic

equipment

Other software

publishing

Publishing of

computer games

Manufacture of

electricity

distribution and

control apparatus

Manufacture of

other electrical

equipment

Book publishing

Market research

and public

opinion polling

Public

relations and

communication

activities

Manufacture of medical

and dental instruments

and supplies

Manufacture of tools

Treatment and

coating of metals

Manufacture of other

plastic products


general−purpose

machinery n.e .c.


special−purpose

machinery n.e .c.

Business Services

Com m unications

Equipm ent and Services

Distribution and Electronic Commerce

Inform ation Technology and

Analytical Instrum ents

Lighting and Electrical Equipm ent

Marketing, Design,

and PublishingMedical Devices

Metalworking TechnologyPlasticsProduction Technology

and Heavy Machinery

Digital Industries

Source: European Cluster Panorama, 2014


Economic Geography and New Clusters

Number of

locations

Heterogeneity

of locations

1

New ideas come from many

places; ‘nursery’ cities

best to translate them into

successful companies;

competition of approaches

2

Agglomeration forces

(path dependency +

locational advantages) lead

to emergence of strong,

dominant clusters

3

Maturation allows de-bundeling

of activities; churn among

clusters as new value chains of

connected & specialized

clusters emerge to reduce costs


An Example: The Internet of Things – a new Cluster?

Limited uniqueness in

skills required

Low level of local

externalities

High level of industry-

specificity in use

High uniqueness in

skills required

High level of local

externalities

Low level of industry-

specificity in use

Concentrated

Dispersed

IoT as a

technology

IoT as

an industry


Where Will the Clusters of the Future Be?

• Strong legacy effects

• Business environment qualities relevant in the future

• Openness, rivalry, collaboration, and flexibility


Europe’s Hotspots of

Emerging Clusters


Cluster-Based Economic Development

• The current situation

• Addressing existing weaknesses

• Moving towards new tasks and ambitions


Economic Development: Prevailing Approaches

Entrepr.

Eco-

systems

Clusters

Mixed

Economic

Gardening

Big Game

Hunting

The Next Big

Thing

Picking

Winners

Firm/Sector

Focused

New

Existing

Framework

Conditions

Build it and

They Will

Come

Place

Making

Open for

Business

Business Environment

Focused

Narrow

Broad


Economic Development: Prevailing Approaches

Framework

Conditions

Economic

Gardening

Big Game

Hunting

Build it and

They Will

Come

The Next Big

Thing

Picking

Winners

Place

Making

Open for

Business

Firm/Sector

Focused

Business Environment

Focused

Entrepr.

Eco-

systems

Clusters

Mixed

New

Existing

Narrow

Broad

High Risk

Lack of

competitive advantages

Interest group capture

Limited potential

Limited potential

Often not creating specific

competitive advantages

High Risk

How to

get it right?

Copyright 2015 © Christian Ketels 20

Types of Government Interventions in Clusters

• Direct intervention at the

firm level

– Attraction of firms

– Subsidies, directed credit

High short-term impact/High distortion/low productivity impact Long-term impact/Low distortion/high productivity impact

• Intervention into the

market

– Provision of monopoly

rights; Entry/trade barriers

– Demand subsidies

• Investments in the cluster-

specific business environment

– Specific to the cluster

– Benefiting the cluster but part of a

general upgrading strategy

• Enable collaboration with

and within the cluster

– Support for cluster initiatives

– Active engagement with the

cluster in setting and

implementing policies


Organize Public Policy around Clusters

Clusters

Specialized Physical

Infrastructure

Environmental Stewardship

Setting standards

Science and Technology

Infrastructure

(e.g., centers, university

departments, technology

transfer)

Education and Workforce Training Business Attraction

Export Promotion

• Clusters provide a framework for organizing the implementation of public

policy and public investments towards economic development

Entrepreneurship Market Information

and Disclosure


Resources &

Capabilities

• Quality of staff

• Budget and tools

• Governance

Narrow model

• Focus on networking

• Limited resources

• Limited impact

Systemic model

• Cluster initiatives as

key channel for

delivering policy action

• Moderate operational

resources, strong

influence on other

investment streams

• High impact possible

What Drives the Success of Cluster Initiatives?

Context

Activities

• Cluster strength

• Business

environment

conditions

• Firm sophistication

• Collaboration

culture, trust

IMPACT

• Activities aligned with the needs of firms

• Activities aligned with actions of partners

• Effectiveness of implementation


Current Status of Cluster Policies and Programs

• Many countries and regions, especially within the OECD, have cluster-related

policy programs

• Spending on cluster-related programs is meaningful, but only a modest

percentage of total spending per policy area

• Funding is tilted towards existing strengths, but many efforts exist without

established critical mass

• Cluster programs are often run by a range of ministries or agencies; there is

limited coordination between programs

• Funding for strengthening collaboration is always a part; other elements

differ significantly

• Design principles differ widely across many dimensions

Copyright 2015 © Christian Ketels 24

Modes of Cluster Policy

Fund operation of

cluster initiatives/

sectoral plans

Create/task backbone

organizations to

mobilize clusters

Deploy policy funds

through cluster

initiatives/networks

Use cluster

initiatives/networks as

organizational infrastructure

for policy action

Policy for Clusters Cluster-based Policy

• Impact • Mission • Selection • Dialogue

Basque

Germany

France

Sweden

US

Catalonia

Korea

Austria

Mexico

Colombia

Sporadic:

Create

stronger linkages

Tactical:

Deliver programs

more effectively

Strategic:

Choose & design

better policies

Denmark

25

What will (should) Cluster-Based Economic Policy

Look Like in the Future?

CURRENT CHALLENGES A NEW APPROACH

Active management of a portfolio

of existing & emerging clusters

Target regional

impact Balance servicing &

challenging firms

Support

competitiveness Local buzz &

global pipeline

Strategy-driven selection

& integration of activities

Support

collaboration

Inward focus of

activities Policy-driven

activity selection

Isolated support for

individual clusters

Focus on ‘Wishful

Thinking’-Clusters

Focus on ‘Usual

Suspect’-Clusters

Support of existing firms,

competitive approaches

Target individual

firms’ performance

Cluster programs a

new policy silo

Fund &

control Clusters as an overarching

policy approach, integrating

many tools

Public-private dialogue

and collaboration

WHO

WHAT

HOW


New Roles for Cluster Organizations:

Addressing Societal Challenges

• Yes, because many of the necessary changes require

‘systemic’ responses beyond a single new technology,

product, or service

Does it make

sense?

What is needed to

make it a success?

• Achieving more requires doing more

– Additional resources and new capabilities for cluster

initiatives charged with playing a more pro-active role in

addressing societal challenges

• Be careful about the potential impact on the relationship to firms

– Integration into a multi-pronged strategy needed; cluster

initiatives can not do this alone

Is it new?

• Many cluster initiatives do this already to some degree –

usually because societal challenges have translated into

market opportunities


Clusterinitiatives with Social/Environmental Missions


Market-Based Mechanisms to Address Societal Challenges

Firms:

Shared Value

Approaches

Clusters:

Organizing

Systemic Changes

Governments:

Markets and

Public Goods


(Some) Implications for Cluster Organizations

• Change detector, enabler, and driver

• More than a bridge builder: Listen to and challenge firms, government

• Cluster initiatives have a stake in good cluster policy

• The need for a political antenna

Changing Clusters Changing Policies


Knowledge Sharing Session


• How will clusters change?

• How will cluster-based based economic

development change?

• How will the demands on cluster initiatives

change?

32

Working in Cluster Initiatives

• What core demands do you

experience today; from firms, from

funders, from others

• What is changing?

• What is needed for you to be able

to meet the (current) changing

demands?

Working with Cluster Initiatives

• What are your core demands

towards cluster initiatives today

• What will become more important;

what less?

• In what respects are cluster

initiatives meeting you demands, in

what respects do they not?

Documents

Clusters and their Future Role - clusterexcellencedenmark.dk · Clusters and their Future Role Dr. Christian H. M. Ketels Institute for Strategy and Competitiveness, Harvard Business