Rural Knowledge Clusters:Innovation and Rural Community Vitality

Overview

Globalization and Knowledge Clusters for Rural America

Rural Knowledge ClustersMinnesota Case StudiesRural Knowledge Cluster Strategies

Globalization and Knowledge Clusters for Rural America

1. Research examining the consequences of globalization for local government and local development policy and activities

2. Research examining the phenomenon of “rural knowledge clusters” through a series of case studies and related empirical research

3. National conferences • Rural Community Vitality in a Global Economy (2002)• Knowledge Clusters and Entrepreneurship as Keys to Regional

Economic Developmnt (2004)4. Outreach effort to translate research findings into

strategies for communities of rural Minnesota  

Goals of the Project• An enhanced understanding among rural,

economic, and community development practitioners about the dynamics of globalization for rural economies;

• Contribution toward a model of rural innovation that emphasizes the role of community institutions as catalysts of knowledge creation; and

• Effective outreach to rural communities, consistent with the University’s land grant mission.

Challenge of Rural Economic Prosperity

Double-edged sword – Access to global markets but exposure to global competition

Traditional staples – agriculture, natural resource-based industries (forestry, mining) vulnerable to changing export conditions

Rural competitive advantages for manufacturing – low costs, access to markets – diminished with globalization

Human capital shifts in knowledge-based economy

Successful Rural Development Themes

• Adaptability, not conformity• Emphasis on education, entrepreneurship,

ownership in human community, tools of the age

• Interdisciplinary thinking, combining economics, sociology, demography, geography, political science, and more

• Sustained efforts, journey not a destination

“The Knowledge Economy”In today’s economy, innovation is survival, no

matter what your product or service line is.Any innovation requires knowledge about the

technologies, processes, markets, etc., that make it work.

The economic development challenge:providing a fertile environment for innovation.

“Rural Knowledge Clusters”Specialized networks of innovative,

interrelated firms

Centered outside major metropolitan areas

Deriving competitive advantages primarily through accumulated, embedded, and imported knowledge among local actors

What Matters for“Rural Knowledge Clusters”?

• Competitive advantage: current factors related to supply or demand conditions, related industries, or local rivalry that give local firms a market advantage.

• History: an historical base of knowledge about an industry or technology that has given rise to current sources of competitive advantage.

• Institutions: formal and informal institutions that develop around clusters to support the creation, diffusion, and import of knowledge.

Competitive AdvantageMichael Porter, Competitive Advantage of

Nations (1990)“Diamond of advantage” drives innovation:

Factor conditionsDemand conditionsRelated and supporting industriesFirm strategy, structure, and rivalry

History• Knowledge is path dependent –

the new knowledge you create is directly related to the knowledge you already possess

• Specialization is prevalent and self-reinforcing in high-tech economies (Cortright)

• Patent activity as example

Institutions Local institutions as catalysts of knowledge

creation and diffusion Formal

Educational – universities, tech colleges Government – cities, counties Civic – trade associations, non-profits Regional partnerships

Informal Social capital Entrepreneurship

Rural Knowledge Clusters Indicators

Economic Indicators - location quotients; self-employment concentrations; wage levels; new business formation

Demographic Indicators - educational attainment; in-migration

Knowledge Creation Indicators - patent data; R&D expenditures

Industry Specific Indicators - industry associations; trade directories

Minnesota Case Studies

• Mankato area: wireless technologies and radio frequency technologies

• Alexandria area: automation and motion control technologies

• Northwest Minnesota: recreational transportation equipment

• Winona area: advanced composite materials • Southwest Minnesota: precision agricultural

equipment

Alexandria

Northwest Minnesota

Mankato

Rural Knowledge ClusterCase Studies

Winona

Institutions

• MSU Mankato

• South Central Technical College

• Wireless & Comm. Tech Alliance

• Global Wireless Ed Consortium

• MN High Tech Association

Competitive Advantages

•Skilled, specialized labor force•Diverse market opportunities•Cooperative interfirm relations

Firms and Industries•Wireless service providers

•Electronic components for wireless applications

•Training in wireless technology

History•EF Johnson: radio manufacturer, incubator of local talent

•Informal networking through ham radio club

Wireless and radio frequency

technologies

Mankato: Rural Knowledge Cluster Profile

History•Ag region, craft-like machine shops and equipment mfg

•Proximity to markets for packaging equipment

Automation and motion control technologies

Alexandria: Rural Knowledge Cluster Profile

Competitive Advantages

•Industry collective action around shared needs•Shortage of skilled labor in related industries

Firms and Industries•Industry packaging and material handling machinery

•Other light manufacturing industries

Institutions

•Alexandria Technical College, Ctr for Automation & Motion Control•MN Mfg Automation Coalition•Tri-State Manufacturer’s Assoc.•Minnesota Technology Inc.•West Central Initiative

History•Farm equipment mfg base

•Need for transportation in snow

•Heteen et al develop first modern snowmobile, start Polaris

•Spins off, starts Arctic Cat

Recreational transportation

equipment

NW Minnesota: Rural Knowledge Cluster

Competitive Advantages

•Demanding local customers•Intense interfirm rivalry•Diffusion to new products and industries

Firms and Industries•Snowmobile manufacturing

•All-terrain vehicles

•Equipment suppliers and machine shops

Institutions•Northland Community & Technical College•Minnesota Job Skills Partnership• “Racing culture” – snowmobile racing circuit

Advanced composite

materials mfg

Winona: Rural Knowledge Cluster Profile

Competitive Advantages•Diverse local industry base•Skilled worker base around composite engineering•Cooperative relationships

Firms and Industries•Composite materials producers•Existing products improved through use of composite materials (i.e. canoes, heated plastics, automotive products, violin bows)

Institutions•SAMPE – professional society•Winona St – composite eng•COMTEC – applied R&D/testing•Winona Composites Consortium•Technical college – custom training, technical education

History•Miller Brothers – formed Fiberite after WWII•Initial growth in aerospace, military applications•Spinoff/startup activity to new firms

Southwestern Minnesota:Precision Agricultural Equipment

• Agricultural sprayer technology• Potential pitfall of having a cluster of

companies doing essentially the same thing, rather than diverse activities around the same technology

• Vulnerability that comes from non-local ownership

What did we find out about rural knowledge clusters?

Innovation doesn’t take place in a vacuum – history and context matter.

Educational institutions are important feedback mechanisms that foster knowledge development.

A core base of knowledge can be a driver of innovation and success for a diverse set of industries.

Knowledge is heterogeneous, and comparable indicators are extremely hard to find.

An institutional or entrepreneurial strategy can boost the vitality of rural knowledge clusters.

Rural Knowledge Cluster StrategiesInstitutional Strategies • Develop consensus around the need for new or enhanced

local institutions to address key competitiveness issues facing the cluster. Such institutions--when developed effectively--may represent a key competitive advantage, or alternatively, provide the kind of support necessary to overcome disadvantages.

Entrepreneurial Strategies • Focus on creating an environment that is supportive for start-

up and spin-off firms, as new ventures often extend the region's knowledge base into technologies and product markets. Further, they mitigate the risk of overspecialization and reduce the cluster's reliance on the success of a small number of larger firms.

Northwest Minnesota Knowledge Cluster Development Project

Project Partners• Northwest Minnesota Foundation• Northwest Technical College• Headwaters Regional Development

Commission• University of Minnesota’s Humphrey Institute

of Public Affairs• Minnesota Department of Employment and

Economic Development

Northwest Minnesota Knowledge Cluster Development Project

Key Clusters• Wood products• Value-added agriculture• Recreational vehicles

Northwest Minnesota Knowledge Cluster Development Project

Ingenuity Frontier Strategies• Center for Applied Engineering and Manufacturing• Applied engineering degree/graduate program • Career ladders for skill development and training within

clusters• Apprenticeship, internship and scholarship programs• Seed/venture-capital fund to encourage entrepreneurship

and business development within clusters• Targeted marketing campaign to attract and retain high-

skill workers and businesses within cluster areas

Implications for Rural Development

Understand your local knowledge base.Foster linkages between firms and the local

institutions that support them.Develop strategies for promoting innovation

around rural knowledge clusters.Don’t try to go it alone – promote a regional

vision to guide strategies.

For further information contact:Lee W. Munnich, Jr.Director, State and Local Policy ProgramHubert H. Humphrey Institute of Public AffairsUniversity of Minnesota157 Humphrey Center301-19th Ave. S.Minneapolis, MN 55455 USAlmunnich@umn.eduhttp://www.hhh.umn.edu/centers/slp/index.html1-612-625-7357