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Tuesday, September 21, 2010

Brookings sees regional industry clusters gaining luster

It seems like such a no-brainer: Encourage the growth of the types of economic activity that are already going on in your region.

And yet, politicians often cannot resist the lure of attracting that shiny new auto assembly plant, shipyard, or aircraft factory, regardless of cost or real-world prospects.

In the absence of a strong regional industry cluster, those economic-development “wins” are bound to lose in the end.

What are clusters? The Brookings Institution defines them as “dense local assemblages of interrelated firms and supporting and coordinating organizations.” Think of Silicon Valley’s enviable technology sector or even Vermont’s artisanal cheesemakers.

Clustering isn’t a foreign concept to Philadelphia. If you know that the phrase “eds and meds” refers to the region’s concentration of higher education institutions, medical facilities, and life-sciences sector, then you understand the impact of clustering.

Select Greater Philadelphia markets the region as a good place to do business in the following clusters: life sciences, information technology and communications, financial and professional services, advanced manufacturing, higher education and, more recently, green and alternative energy.

But at a time of high unemployment and with many questioning America’s competitiveness, the concept of nurturing industry clusters deserves a big push now, according to Brookings, a Washington think tank.

Not because it’s akin to adopting national industrial policy. Rather, clusters are regional and reflect that the U.S. economy is really a collection of regional ones that often churn out products and services that a global economy can’t do without.

Mark Muro, senior fellow and policy director of the Metropolitan Policy Program at Brookings, wrote a paper called “The New ‘Cluster Moment,’” to be released Tuesday, that makes the point that clusters produce efficiencies and synergies that generate jobs, higher wages, innovation, and new companies.

When I think of Philadelphia’s life-sciences cluster, I start with Merck & Co. Inc., Pfizer Inc., and other big pharmaceutical companies and branch out to the drug development and biotechnology start-ups. But the industry has attracted all sorts of contract research organizations, marketing firms, engineering and construction specialists, data miners, and legal strategists.

The mere historical presence of an industry doesn’t mean that a cluster is worth continued investment. Muro said policymakers need to analyze hard data regarding the likelihood of growth in an industry before committing scarce resources.

That’s tricky when politicians or interest groups often seem to invent clusters and whip up statistics to justify public support, I told Muro.

What should help is an effort that the federal Economic Development Administration is working on to produce a “cluster map and registry” of the entire country, Muro said. It’s hoped the data-driven project will produce information that regional economic development officials could use to better evaluate the prospects of their clusters.

Because Pennsylvania had lost so much of its heavy industry, the state has experimented quite a bit with its economic development programs over the last 30 years to encourage “homegrown” businesses. If anything, state officials need the political will to kill initiatives that haven’t paid off as hoped.

Another point the Brookings report makes is that regions shouldn’t try to chase the latest hot industry in the hopes of building a cluster. As Muro said: “Systematic attempts at creating a new cluster are foolhardy.”
Posted by Mike Armstrong @ 11:31 AM  Permalink | File Under: Economic Development | Post a comment
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About Mike Armstrong
Mike Armstrong, a business editor and writer for nearly two decades, is the Inquirer's business columnist and PhillyInc blog editor. Contact Mike via e-mail or at 215-854-2980
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