Summary of a talk on "Developing Technology-Based Clusters for Competitiveness" presented by Prof. Dr. Michael Luger, an expert in urban and regional economics, and economic development and director of the Center for Competitive Economies at the Kenan Institute of Private Enterprise, University of North Carolina, USA, on the 24th of May 2006 at 6th fl. NESDB Auditorium.
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Research Triangle of North Carolina (RTNC)
1. There is a growing understanding that the U.S. cannot compete with low-cost, low-skilled countries for old economy jobs, but rather, must turn to high-skilled, high-value-added jobs appropriate for an advanced, increasingly high-tech economy. Therefore, the challenge is to find the right types of jobs that can transform communities into smart places.
2. Cluster-based planning is widely used to address those challenges. However, it must be different from the traditional "one size fits all" approach. Planning needs to be stepped down to fit the capacity of individual communities and align with the new economy of the 21st century. An example is the Research Triangle of North Carolina (RTNC), one of the country's "smart regions." The region's leaders commissioned cluster-based planning and formed a task force for a research consortium to implement the plan. The consortium redid and stepped-down Michael Porter's analysis to the sub-regional level which can be summarized as
follows:
2.1 Porter's recommended 4 clusters for the region which are environmental sciences; biotechnology and information technology; telecommunications and medicine; and biotech and agri-business; These
recommendations, however, did not get buy-in from many of the counties in the region. The consortium therefore redid the Porter's study and stepped it down to three sub-regional areas which they identified the most appropriate industry clusters based on their existing competitive advantage and their prospects for job growth.
2.2 Description of standard approach to cluster based planning:
(1) Start with national benchmark clusters, create via factor analysis of input-output coefficients, using 4-digit SIC/NAICS industries which can identify regional clusters that are growing in employment
nationally (constructs Location Quotients-LQs and changes in LQs).
(2) Then, allow discussion of pros and cons of different cluster priorities and supporting policies. For example, how many resources should be put into potential clusters? how should emerging clusters be encouraged? should declining clusters be saved? how?
(3) Seek ways to give economic developers in the region to recruit and retain businesses while minimizing the false positives and negatives coming out of the traditional process. For example, false positive: some businesses in the electronics component industry will have no linkages locally. False negative: businesses which are connected with other IT businesses and would value co-location are missed by the recruiters. This is due to the fact that the standard technical approach to cluster development is assumption-based, data specific, and subjective. This easily leads to false positives and false negatives in recruiting. Furthermore, it does not recognize differences within sub-regions in terms of infrastructure and labor force. There are often inconsistent with the realities of the 21st century new economy. These include rapid reorganization of firms, more efficient and dynamic capital markets, entrepreneurial dynamism, and relentless globalization.
Therefore, the two-way screen which combines industrial clusters and technology clusters is applied to reduce those false and flush out companies that could not have been foreseen prospects for
the region.
3. To sum up, the North Carolina example represents an outstanding model of business-government-university partnering in economic development based on the cluster concept. Moreover, small businesses
value and benefit most from the cluster services and support that are provided. For example, such firms gain from the provision of courses and training to potential entrepreneurs, the establishment of rural venture
funds and mechanisms to provide guidance and funds to displaced workers, and others, in regions.
Mini-hub Project (Kerr-Tar Hub)
1. Conceptual Idea:
1.1 The idea of Mini-hub is to create focused, critical masses of economic activity that can serve as "growth poles" for their region.
1.2 A mini-hub is a sizeable real estate development suitable for target businesses that use skilled labor to make advanced products, rather than advanced R&D. Such hubs can attract processing, manufacturing, and some back-office activities (sophisticated call centers, data processing and storage). Also, mini-hubs provide enhanced services and facilities appropriate for those businesses. A mini-hub is not a research facility and it is not typical industrial park which provide utilities and shell buildings for a broad range of low-to medium-skilled businesses. Generally, few other services are provided.
1.3 A mini-hub is a mid technology park appropriate for businesses which spin-off from the Research Triangle Regional Park-RTP or Central Hub seeking less expensive space and access to appropriate
labor. Special facilities are provided in order to connect them with the services of the main hub including incubators or accelerators, testing/research labs, advanced IT capability, shared meeting and conference space, as well as specialized services, like, industry-specific workforce training, marketing/export promotion, regulatory review/adherence, business assistance.
1.4 A mini-hub is a regional resource, not an economic development tool for a single county because if successful, it would generate benefits through the joint efforts of the counties, the state, Research Triangle Regional Park, and also consultants. The appropriateness of the model could initiate emerging business clusters, but also lead to more mini-hub locations.
1.5. Businesses locating in mini-hubs qualify for tax incentives, particularly in the lowest tier or most distressed zone. Furthermore, it serves clusters that are the focus of state policy and therefore can leverage
investments from the state or foundations. A successful mini-hub could generate demand for the traditional industrial parks such as the Research Triangle Park .
2. Making the Concept Work:
The most important thing is to get buy-in from counties in many aspects, such as, agreement on the management approach, selection of appropriate industrial foci, choice of appropriate sites, decisions on
enhancements and incentives and required incentives and other financial mechanisms in place, etc.
3. Success Case:
3.1 Vance-Granville is the first Min-hub site. It is comprised of 1,000 acres, adjacent to Vance-Granville Community College. It is owned and managed by a nonprofit entity in which each county shares costs and
revenues. Members of the board are county representatives who mostly are technical experts.
3.2 However, there are 2 studies that need to follow-up as follows: Cluster Implementation: what businesses to go out and target, what they need in terms of labor, infrastructure, amenities and incentives; and Workforce supply vs. demand
Comments and Remarks from Floor
1. Concept of Mini-hub is not one size fits all but depends on the attributes and needs of a specific geographic area. Its context is based on rural and real estate development which aims to promote self-reliant communities as well as to reduce labor migration and poverty. Furthermore, it can be applied to Thai OTOP Project.
2. The Mini-hub Project on North Carolina, USA is not a new idea, but it is important in its implementation particularly in making it develop, as a subset of an industrial cluster. However, it needs to get buy-in from local leaders. Mini-hub is a good example of promoting team work as it allows managers, scientists and engineers to work together, sharing ideas and experiences. This is because each facility (Mini-hub) has its own university or community college campus.
3. Michael Porter's recommendation on 4 regional clusters, therefore was a useful starting point. It got people engaged and interested. But to make any study work instead of putting it on the shelf, it needs to be updated, modernized, and used to encourage people to get involved as well as to promote it through websites, newspapers and other media.
4. The essence of cluster development is to understand our country's capacity, discover its competitive niche and benchmark it with others, nurturing it and set up appropriate measures to fit it, and also keep an eye on the future.
5. To deal with shortages of skilled labor and labor migration, it is necessary to look at the root-causes in order to find the right solution. To deal with those problems, North Carolina, for example, created training
programs for mid tech and biotech workers by connecting those programs with industrial demand projecting needs for new jobs. This has been done with the support of the county and its foundation.
Summary
The regional economic development of North Carolina, USA, is a direct example of using the cluster concept to implement a program to upgrade industry's competitiveness. It is an outstanding model of
business-government-university partnering in economic development in order to drive target industry to create higher value-added and grow dramatically by providing an appropriate environment in terms of shell
building, facilities, training, specialized business assistance, and tax incentives.
Government must be clear-cut and focus on target industries by applying a technical approach to identify the most appropriate clusters and it is very important to get buy-in from all parties involved. However, driving each industrial cluster to implementation, requires focus and specific data in order to suit development with its context in terms of people and geographic area.
It is noticeable that the forum with Dr. Luger attracted interest from both public and private sectors. There were almost 100 people in the audience (this exceeded those who replied) and there was enthusiasm addressing the speaker with lots of questions and comments. It can be said that the cluster concept and its implementation is high in the awareness of government and private sector officials.
--National Economic and Social Development Board--
-PM-
-------------------------------------------------------------------------------------------------------
Research Triangle of North Carolina (RTNC)
1. There is a growing understanding that the U.S. cannot compete with low-cost, low-skilled countries for old economy jobs, but rather, must turn to high-skilled, high-value-added jobs appropriate for an advanced, increasingly high-tech economy. Therefore, the challenge is to find the right types of jobs that can transform communities into smart places.
2. Cluster-based planning is widely used to address those challenges. However, it must be different from the traditional "one size fits all" approach. Planning needs to be stepped down to fit the capacity of individual communities and align with the new economy of the 21st century. An example is the Research Triangle of North Carolina (RTNC), one of the country's "smart regions." The region's leaders commissioned cluster-based planning and formed a task force for a research consortium to implement the plan. The consortium redid and stepped-down Michael Porter's analysis to the sub-regional level which can be summarized as
follows:
2.1 Porter's recommended 4 clusters for the region which are environmental sciences; biotechnology and information technology; telecommunications and medicine; and biotech and agri-business; These
recommendations, however, did not get buy-in from many of the counties in the region. The consortium therefore redid the Porter's study and stepped it down to three sub-regional areas which they identified the most appropriate industry clusters based on their existing competitive advantage and their prospects for job growth.
2.2 Description of standard approach to cluster based planning:
(1) Start with national benchmark clusters, create via factor analysis of input-output coefficients, using 4-digit SIC/NAICS industries which can identify regional clusters that are growing in employment
nationally (constructs Location Quotients-LQs and changes in LQs).
(2) Then, allow discussion of pros and cons of different cluster priorities and supporting policies. For example, how many resources should be put into potential clusters? how should emerging clusters be encouraged? should declining clusters be saved? how?
(3) Seek ways to give economic developers in the region to recruit and retain businesses while minimizing the false positives and negatives coming out of the traditional process. For example, false positive: some businesses in the electronics component industry will have no linkages locally. False negative: businesses which are connected with other IT businesses and would value co-location are missed by the recruiters. This is due to the fact that the standard technical approach to cluster development is assumption-based, data specific, and subjective. This easily leads to false positives and false negatives in recruiting. Furthermore, it does not recognize differences within sub-regions in terms of infrastructure and labor force. There are often inconsistent with the realities of the 21st century new economy. These include rapid reorganization of firms, more efficient and dynamic capital markets, entrepreneurial dynamism, and relentless globalization.
Therefore, the two-way screen which combines industrial clusters and technology clusters is applied to reduce those false and flush out companies that could not have been foreseen prospects for
the region.
3. To sum up, the North Carolina example represents an outstanding model of business-government-university partnering in economic development based on the cluster concept. Moreover, small businesses
value and benefit most from the cluster services and support that are provided. For example, such firms gain from the provision of courses and training to potential entrepreneurs, the establishment of rural venture
funds and mechanisms to provide guidance and funds to displaced workers, and others, in regions.
Mini-hub Project (Kerr-Tar Hub)
1. Conceptual Idea:
1.1 The idea of Mini-hub is to create focused, critical masses of economic activity that can serve as "growth poles" for their region.
1.2 A mini-hub is a sizeable real estate development suitable for target businesses that use skilled labor to make advanced products, rather than advanced R&D. Such hubs can attract processing, manufacturing, and some back-office activities (sophisticated call centers, data processing and storage). Also, mini-hubs provide enhanced services and facilities appropriate for those businesses. A mini-hub is not a research facility and it is not typical industrial park which provide utilities and shell buildings for a broad range of low-to medium-skilled businesses. Generally, few other services are provided.
1.3 A mini-hub is a mid technology park appropriate for businesses which spin-off from the Research Triangle Regional Park-RTP or Central Hub seeking less expensive space and access to appropriate
labor. Special facilities are provided in order to connect them with the services of the main hub including incubators or accelerators, testing/research labs, advanced IT capability, shared meeting and conference space, as well as specialized services, like, industry-specific workforce training, marketing/export promotion, regulatory review/adherence, business assistance.
1.4 A mini-hub is a regional resource, not an economic development tool for a single county because if successful, it would generate benefits through the joint efforts of the counties, the state, Research Triangle Regional Park, and also consultants. The appropriateness of the model could initiate emerging business clusters, but also lead to more mini-hub locations.
1.5. Businesses locating in mini-hubs qualify for tax incentives, particularly in the lowest tier or most distressed zone. Furthermore, it serves clusters that are the focus of state policy and therefore can leverage
investments from the state or foundations. A successful mini-hub could generate demand for the traditional industrial parks such as the Research Triangle Park .
2. Making the Concept Work:
The most important thing is to get buy-in from counties in many aspects, such as, agreement on the management approach, selection of appropriate industrial foci, choice of appropriate sites, decisions on
enhancements and incentives and required incentives and other financial mechanisms in place, etc.
3. Success Case:
3.1 Vance-Granville is the first Min-hub site. It is comprised of 1,000 acres, adjacent to Vance-Granville Community College. It is owned and managed by a nonprofit entity in which each county shares costs and
revenues. Members of the board are county representatives who mostly are technical experts.
3.2 However, there are 2 studies that need to follow-up as follows: Cluster Implementation: what businesses to go out and target, what they need in terms of labor, infrastructure, amenities and incentives; and Workforce supply vs. demand
Comments and Remarks from Floor
1. Concept of Mini-hub is not one size fits all but depends on the attributes and needs of a specific geographic area. Its context is based on rural and real estate development which aims to promote self-reliant communities as well as to reduce labor migration and poverty. Furthermore, it can be applied to Thai OTOP Project.
2. The Mini-hub Project on North Carolina, USA is not a new idea, but it is important in its implementation particularly in making it develop, as a subset of an industrial cluster. However, it needs to get buy-in from local leaders. Mini-hub is a good example of promoting team work as it allows managers, scientists and engineers to work together, sharing ideas and experiences. This is because each facility (Mini-hub) has its own university or community college campus.
3. Michael Porter's recommendation on 4 regional clusters, therefore was a useful starting point. It got people engaged and interested. But to make any study work instead of putting it on the shelf, it needs to be updated, modernized, and used to encourage people to get involved as well as to promote it through websites, newspapers and other media.
4. The essence of cluster development is to understand our country's capacity, discover its competitive niche and benchmark it with others, nurturing it and set up appropriate measures to fit it, and also keep an eye on the future.
5. To deal with shortages of skilled labor and labor migration, it is necessary to look at the root-causes in order to find the right solution. To deal with those problems, North Carolina, for example, created training
programs for mid tech and biotech workers by connecting those programs with industrial demand projecting needs for new jobs. This has been done with the support of the county and its foundation.
Summary
The regional economic development of North Carolina, USA, is a direct example of using the cluster concept to implement a program to upgrade industry's competitiveness. It is an outstanding model of
business-government-university partnering in economic development in order to drive target industry to create higher value-added and grow dramatically by providing an appropriate environment in terms of shell
building, facilities, training, specialized business assistance, and tax incentives.
Government must be clear-cut and focus on target industries by applying a technical approach to identify the most appropriate clusters and it is very important to get buy-in from all parties involved. However, driving each industrial cluster to implementation, requires focus and specific data in order to suit development with its context in terms of people and geographic area.
It is noticeable that the forum with Dr. Luger attracted interest from both public and private sectors. There were almost 100 people in the audience (this exceeded those who replied) and there was enthusiasm addressing the speaker with lots of questions and comments. It can be said that the cluster concept and its implementation is high in the awareness of government and private sector officials.
--National Economic and Social Development Board--
-PM-