1. CONNECTING INNOVATION, CLUSTERS, & REGIONAL DEVELOPMENT Mark Drabenstott Director Center for Regional Competitiveness University of Missouri-Columbia DrabenstottM@missouri.edu

2. Four Key Questions 1.Why is regional competitiveness the new framework for economic development? 2.What must regions do to compete? 3.How to connect innovation with clusters—and regional development? 4.What policy initiatives are needed?

3. Four Key Questions 1.Why is regional competitiveness the new framework for economic development? 2.What must regions do to compete? 3.How to connect innovation with clusters—and regional development? 4.What policy initiatives are needed?

4. Globalization makes regions the athletes in the global economic race. The impact of globalization is greater for regions than for nations.

5. 6.2% range

6. The impact of globalization is greater for regions than for nations. 17 % range

7. Globalization has changed the field of play in this race. Innovation now matters more than simply being a low-cost place.

8. Innovation is now a powerful economic driver. National Entrepreneurship Index and GDP Growth Total Entrepreneurship Activity Index (2003) Average GDP Growth (2004 to 2006) U.S. Russia India Source: Global Entrepreneurship Monitor, 2003 and International Monetary Fund China European countries Hong Kong Japan Source: Drabenstott & Henderson, 2006

9. Four Key Questions 1.Why is regional competitiveness the new framework for economic development? 2.What must regions do to compete? 3.How to connect innovation with clusters—and regional development? 4.What policy initiatives are needed?

10. To prosper, regions must: strategy 1. Craft a regional strategy. governance 2. Build robust regional governance. innovation 3. Deliberately pursue innovation. entrepreneurs 4. Grow a lot of entrepreneurs.

11. A New System for Regional Development RegionalProsperity

12. Four Key Questions 1.Why is regional competitiveness the new framework for economic development? 2.What must regions do to compete? 3.How to connect innovation with clusters—and regional development? 4.What policy initiatives are needed?

13. Connecting Innovation & Regional Development 1. Linking higher education. 2. Building effective clusters— especially SMEs, ensuring the whole is greater than the sum of the parts.

14. Universities Innovation scattered across separate researchInnovation scattered across separate research centers. centers. Economic benefits flow to unknown locations.Economic benefits flow to unknown locations. Competitive needs of regions not understood.Competitive needs of regions not understood.

15. Regions Competitive advantage poorly understood.Competitive advantage poorly understood. Do not know which innovations can help.Do not know which innovations can help.

16. Competitive Competitive advantages poorly advantages poorly understood understood Do not know which Do not know which innovations might innovations might help help Regions Innovation scattered Innovation scattered across separate across separate research centers research centers Economic benefits Economic benefits flow to unknown flow to unknown locations locations Competitive needs Competitive needs of regions not of regions not understood understood Universities The Problem Universities need regions… Regions need Universities… But there is no 21 st Century bridge connecting the two.

17. Competitive Competitive advantages poorly advantages poorly understood understood Do not know which Do not know which innovations would innovations would help help Regions Innovation centers Innovation centers pooled to create pooled to create synergies synergies Competitive needs Competitive needs of regions still not of regions still not understood understood Economic benefits Economic benefits flow to hometown flow to hometown Universities Intellectual Property & Technology transfer Research Parks Interdisciplinary Research Centers Hometown The Current Approach

18. Better understand Better understand competitive competitive advantages advantages Gain access to Gain access to innovations that innovations that leverage leverage competitive competitive advantages advantages Regions Engaged in helping Engaged in helping regions diagnose regions diagnose competitive competitive advantage advantage Research informed Research informed by competitive by competitive needs of regions needs of regions Universities New Institutional Mechanisms Innovation Bridge

19. MAKING THE MOST OF CLUSTERS… AND GOING BEYOND. There is a strong link between robust clusters and strong regional growth.There is a strong link between robust clusters and strong regional growth. That said, we must go further with “cluster analysis” as a development tool.That said, we must go further with “cluster analysis” as a development tool. It has key blind spots that must be corrected.It has key blind spots that must be corrected.

20. Cluster Analysis in a U.S. Region U.S. Department of Labor Study  37 counties in Alabama & Mississippi.  1.028 million people.  Most people (88%) work in the Region … 368,000 jobs.

21. Key Clusters in the AL/MS Region Over-represented: Wood products Have maintained presence, again despite stiff competition from abroad, But jobs are declining at a significant pace.

22. Outdoor recreation.Outdoor recreation. Cellulosic ethanol.Cellulosic ethanol. High-end housing.High-end housing. Paper & pulp is a strong cluster. But is it the only future use of the forest asset? The “right” future use only emerges from in-depth discussion in the region. You cannot underestimate the power of regional governance.

23. Four Key Questions 1.Why is regional competitiveness the new framework for economic development? 2.What must regions do to compete? 3.How to connect innovation with regional development? 4.What policy initiatives are needed?

24. Innovation & Regional Development Policy Issues for the Future 1.It is not enough to have a “research engine.” We must build “bridges” that connect innovation with regions, the new athletes in the global economic race.

25. Innovation & Regional Development Policy Issues for the Future 2.These “bridges” represent a frontier in all OECD countries.

26. Innovation & Regional Development Policy Issues for the Future 3.Policy must also focus on the tools necessary for a region to diagnose its competitive advantage. This will mean “pushing” cluster analysis much further than it currently goes—and complementing it with other tools.

27. Innovation & Regional Development Policy Issues for the Future 4.Taking both steps will allow regions to better tap into the innovation necessary to compete.  Increasing the capacity of regions to define competitiveness strategy— ”the ask.”  Cataloging & filtering innovation in a “development friendly” way— ”the bid.”  Providing incentives for researchers and regions to come together in effective business clusters— ”the regional market for innovation.”