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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
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/
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
4
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
5
6
Source: Center on Globalization,
Governance & Competitiveness, Duke
University.
7
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
8
Source: OECD/Ferrero
A global picture of Nutella VC
9
Why do VCA?
To detect opportunities
To steward regional economy
To anticipate change (forecast)
10
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
11
The three dimensions of clusters
Linkage
Time Location
Emerging
Potential
Existing
Nationwide
Regional
Trade
Labor
Innovation
12
13
14
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
15
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)
17
Non-upholstered
wood furniture
Wholesaling
Marketing
Retail Trade
Sawmills and
planing mills
Metal stampings,
n.e.c.
Logging
Petroleum refining
Veneer and
plywood
18
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
20
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
21
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?
22
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
23
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
24
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
25
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 [email protected]
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