Diane Primont, PhD Bruce Domazlicky, PhD Center for Economic & Business Research

The views expressed in this presentation are those of the authors and do not necessarily reflect the views of Southeast Missouri State University or the Economic Development Administration.

 Major New Employer-200 Employees  Typically Manufacturing: High-Paying Jobs  Population Increases  New Housing Construction  Tax Base Increases  Attracts Additional Firms and Population in a Virtuous Circle of Economic Growth

 Industrial Park that Largely Sits Empty  Growth is Slow and Uncoordinated  Little Thought Given to the Interdependencies between Firms  Inadequate Recognition of the Region’s Competitive Advantages  Go-It-Alone Philosophy: Other regions are Competitors

Region R.O.W.

 Global Economy  Technological Change: Innovate or Perish  Competitive Advantages are not Forever  Develop Region Based on its Competitive Strengths  Multiregional Approach May Often Be Necessary

 Political Boundaries Are Unimportant to Most Firms  Political Boundaries Not Very Important to People, Either  Access to Labor, Raw Materials, Inputs, Transportation, Markets Are the Keys  Counties Need to Cooperate, Not Compete with each Other

 Geographic concentration of interconnected companies and institutions in a particular field  A cluster includes  the core or driver industries  upstream industries (suppliers)  downstream industries (customers)  other institutions (such as, agricultural extension, research labs, trade associations, and so on)

 Definitions are adopted from Indiana Business Research Center, work done with  Center for Regional Development at Purdue University and Strategic Development Group  under grant from EDA

Industry Clusters Definitions 1. Advanced Materials 2. Agribusiness, Food Processing & Technology 3. Apparel & Textiles 4. Arts, Entertainment, Recreation & Visitor Industries 5. Biomedical/Biotechnical (Life Sciences) 6. Business & Financial Services 7. Chemicals & Chemical Based Products 8. Defense & Security 9. Education & Knowledge Creation 10. Energy (Fossil & Renewable) 11. Forest & Wood Products 12. Glass & Ceramics 13. Information Technology & Telecommunications 14. Transportation & Logistics 15. Primary Metal Mfg 16. Fabricated Metal Product Mfg 17. Machinery Mfg 18. Computer & Electronic Product Mfg 19. Electrical Equipment, Appliance & Component Mfg 20. Transportation Equipment Mfg 21. Mining 22. Printing & Publishing

Driver Industries: Pharmaceuticals and Medicines Mfg Medical Instruments/ Equipment/Supplies Mfg Customers: Health and personal care stores; Doctors’ offices; Hospitals Suppliers: Laboratory apparatus and furniture Mfg Support Industries: Scientific R&D Infrastructure: Waste management and remediation

 Industry clusters create a competitive advantage for the region.  The competitive advantage derives from four factors:  Factor conditions  Demand conditions  Related and supporting industries  Firm strategy, structure, and rivalry

 Used to measure the extent of a region’s specialization or concentration in an industry cluster  The location quotient (LQ) is:  Employment data for 2001 and 2007 from Minnesota IMPLAN Group LQ = Fraction of region’s employment in industry cluster Fraction of nation’s employment in industry cluster

 If the region employs 15% of its workforce in the industry cluster, while the nation employs 10% then  LQ = 0.15 / 0.10 =  Since LQ exceeds one  the fraction of the workforce employed in the region’s cluster exceeds the fraction employed in the cluster at the national level  the region specializes in the cluster 1.5

 Bubble chart is a three dimensional display  LQ in 2007 (vertical axis)  % Change in LQ (horizontal axis)  Employment in 2007 (size of bubble)

LQ in 2007 % chg in LQ Star EmergingTransforming Mature Hypothetical Data

LQ in 2007 % chg in LQ EmergingTransforming Hypothetical Data MatureStar 5 1

LQ in 2007 % chg in LQ Transforming Mature Hypothetical Data Star Emerging 10

 Four Quadrants  Northwest: Mature clusters  Specialization and slow or declining growth  Northeast: Star clusters  Specialization and fast growth  Southeast: Emerging clusters  Not specialized, but fast growth  Southwest: Transforming clusters  Not specialized and slow or declining growth

Source:

Mature

LQ Analysis Summary  Mature Clusters  Electrical Equipment Manufacturing; Glass & Ceramics  Star Clusters  Primary Metal Manufacturing; Agribusiness; Forest & Wood Products; Transportation Equipment Manufacturing; Transportation and Logistics  Emerging Clusters  Advanced Materials; Biomedical/Biotechnical; Fabricated Metal Product Manufacturing; Defense & Security

Uses of LQ Analysis  Picture of regional economy  Choosing clusters to target  LQ and its change  Employment size  Ability to create jobs  Ability to generate tax revenues  Availability of federal and state funding/grants  Ability to sustain economic stability of region

“Clusters arise because they increase the productivity with which companies can compete. The development and upgrading of clusters is an important agenda for governments, companies and other institutions.” Institute for Strategy and Competitiveness, Harvard Business School “…economic development leaders are urged to think of their future target industry as a portfolio containing a mix of industries that help grow and diversify the region’s economy over time.” Don Iannone & Associates

 North Carolina’s research Triangle  Austin’s Information Technology Cluster  Connecticut’s Insurance & Finance Markets  Hollywood’s Film Industry  Silicon Valley in California  Carpets in Northern Georgia

 Build on the unique strengths of their regions  Go beyond analysis and engage in dialogue with cluster members  Develop different strategies for different clusters  Foster an environment that helps new clusters to emerge and existing ones to grow rather than creating a cluster from scratch

 Business leaders  University representatives  Economic developers  Chambers of commerce  Support groups: law, marketing, etc.

 Catalog the cluster: identify firms and interrelationships  Craft a vision of what the cluster can become in the next 10 years  Identify opportunities for growing the cluster  Identify opportunities for more synergy within the cluster  Identify needs: labor force, resources, etc.

 Co-Inform to identify cluster members  Co-Learn: training programs  Co-Market: promote the cluster’s products  Co-Purchase: strengthen buyer-supplier linkages  Co-Produce: produce a product together or conduct R & D crucial to the cluster  Co-Build economic foundations

Thanks for your attention