Getting Down to Business A Practitioner’s Guide to Understanding Clusters-Based Approach to Regional Economic Development and Workforce Preparation

Theories About What Drives Economic Development Innovation –Schumpeter’s Creative Destruction –State Science and Technology Institute Entrepreneurship –Kauffman Foundation Access to Capital –Stages and Source Availability of Key Human Resources

Role of Geography Richardo’s Theory of Comparative Advantage Popularized more recently by Michael Porter Synergistic Effects of Geographic Proximity

Knowledge Spillovers Proximity or Research Institutions Proximity to Sophisticated and Discerning Customers Proximity to Competitors Supply Chain Integration –Proximity of Core Industry to Ancillary Industries –Proximity to Specialized Support Industries

Two Approaches Transactional (Qualitative) –Players –Resources –Communication Flows ? Limitations Traditional (Quantitative) –Location Quotients –Input/Output (I/O) Models ? Limitations

Innovation Commercialization Commoditization Abandonment Product Life Cycle Sales Profit Margin Sources Basic Sweat Angel Debt Mergers & Subsidies Fire of R&D F & F Venture IPO Acquisitions Bailouts Sales Capital Knowledge Tactic Formal Pirated & or Open Source Unbundled Codified Outsourced Automated Off Shored Exploitive and Incremental

Relevance of Location Over Time Importance of Location or Geographic Clustering Elapsed time since breakthrough Innovation Industrial Economy Global Knowledge-Based Economy ?

The World Is Flat Factors Eroding Importance of Geography Educational Gains in Emerging Nations Information Technology –Speed, Bandwidth, Reliability –Cost and Access –Codification and Diffusion of Knowledge Free Trade –Footloose Capital –Cheaper & Faster Transportation –Beachhead/Foothold in Foreign Markets –Price-Based Competition & Labor Cost Cuts

New Business Model Reduces Importance of Geography Physical Headquarters & Satellite Operations versus Virtual Platform Unbundling of Tasks and Tradability of Skills

Is Geography Making A Comeback? Backlash on Free Trade –Subsidies and Protectionism Saturation of Capacity –Talent, IT, Infrastructure, Transportation Foreign Direct Investment –Revaluation of Currency & Value of Assets –Foreign Foothold in U.S. Markets

Will the Greening of the Economy Make a Difference? Industry-Based Approach Firm-Based Approach Establishment-Based Approach Occupation-Based Approach Work Assignment/Duties-Based Approach Outcomes-Based Approach Impact on Energy Net reduction of energy consumption Reducing dependence on foreign oil Impact on emissions reduction Impact on employment UI benefit recipients TANF Recipients

Increase in BBLs Imported Decrease in BBLs Imported Increase in CO 2 Emissions Decrease in CO2 Emissions Proposal A Proposal B

Marc Anderberg (512)