Stephan Goetz Director, The Northeast Regional Center for Rural Development Pennsylvania State University

Transcription

1 Steven Deller Department of Agricultural and Applied Economics University of Wisconsin Madison/Extension Stephan Goetz Director, The Northeast Regional Center for Rural Development Pennsylvania State University Tom Harris Director, University Center for Economic Development University of Nevada Reno Targeted Regional Economic Development

2 Today s Objectives: Review the notion of cluster development; The concepts of industrial targeting; Overview some of the tools at our disposal.

3 Community and regional organizations vested with the promotion of economic growth and development are constantly searching for effective tools and methods to advance their efforts. The interest in cluster developments that has been spurred by the work of Michael Porter has renewed interest in targeted economic development efforts.

4 There hasbeena a concerted movement away from the old philosophy of shoot anything that flies and claim anything that lands to more strategic behavior in identifying the specific types of industry to promote at the local and regional levels. Policymakers and economic development practitioners are now asking the more focused question; inwhat typesof industrydoesour does our region have a competitive advantage?

5 1960s 1980s 1990s to early to mid to 1980s 1990s Today Attraction Tax Incentives Subsidies Lower production cost BRE Business startup support Targeted Investment Infrastructure Investment Targeted Investment Workforce Development Quality of Life Local Firm Growth Local & Regional Programs

6 What is a cluster? Porter (2000, p254) A cluster is a geographically proximate group of interconnected companies and associated institutions in a particular field, linked by commonalities and complementaries. Rosenfeld (1997, p4) A cluster is very simply used to represent concentration of firms that are able to produce synergy because of their geographic g proximity and interdependence, even though their scale of employment may not be pronounced or prominent.

7 What is a cluster? Roelandt and Den Hertog (1999, p9) Clusters can be characterized as networks of producers of strongly independent d tfi firms (including specialized ili suppliers), linked to each other in a value adding production chain. Feser (1998, p20) Economic clusters are not just ( p ) j related and supporting industries and institutions, but rather related and supporting institutions that are more competitive by virtue of their relationships.

8 What is a cluster? Governance Inter firm relationships Innovation/learning

9 Grapestock Fertilizer, Pesticides, Herbicides Grape Harvesting Equipment The California Wine Cluster State Government Agencies (e.g. Select Committee on Wine Production and Economy) Winemaking Equipment Barrels Bottles Caps and Corks Irrigation Technology Growers/Vineyards Wineries/Processing Facilities Labels Public Relations and Advertising Specialized Publications (e.g. Wine Spectator, Trade Journal) California Agricultural Cluster Educational, Research, & trade Organizations (e.g. Wine Institute, UC Davis, Culinary Institutes) Tourism Cluster Food Cluster

10 Why focus on clusters? 1. Strengthens Localization Economies 2. Facilitates Industrial Reorganization 3. Encourages Networking Among Firms 4. Results in Larger Local Economic Impacts 5. Facilitates Entrepreneurial Activity

11 Why focus on clusters? 1. Picking winners? 2. Late comers? 3. Overspecialized exposing the community to risk? 4. Regional approach difficult sell in a community setting.

12 Data Analysis Innovation Knowledge Information Data Creativity Pyramid (Fig 8.3 p.145 Shaffer, Deller and Marcouiller)

13 Data Analysis Mechanism to Stimulate Discussion Challenges Local Perceptions Identifies Strengths Identifies Weaknesses Identifies Threats Identifies Opportunities In the end helps you understand what is In the end, helps you understand what is happening locally..

14 Data Analysis Looking for Patterns Looking for Comparisons Looking for Challenges Surprises Looking over Time Looking for Insights, Not Precision Many Sources Formal and Informal

15 Data Analysis It is VITAL to keep in mind that undertaking a TRED analysis is part of a process and is NOT the foundation of a consultant s report. The community discussions that occur as the analysis unfolds can be just as important if not more so than the analysis itself.

16 Δ LQ Weakness and Growing Weakness and Declining Strength and Growing: Potential Cluster Strength and Declining LQ

17 Sources of Employment in Dane County LQ = % of local employment in sector i % national employment in sector

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21 Table 1: Location Quotients for Outagaime WI Percent Change in LQ Percent of LQ Employment Construction % 8.6% Manufacturing % 16.1% Retail trade % 13.7% Information % 1.8% Finance and insurance % 6.0% Real estate and rental and leasing % 2.2% Professional and technical services % 4.4% Management of companies and enterprises % 0.9% Administrative and waste services % 6.2% Educational services % 1.5% Health care and social assistance % 8.6% Arts, entertainment, ta e t, and recreation eat % 1.5% Accommodation and food services % 7.3% Other services, except public administration % 5.3% Government and government enterprises % 8.9% Federal, civilian % 0.4% Military % 0.4% State government % 0.3% Local government % 7.8%

22 Why focus on clusters? Can it really be that simple? NO

23 Regional Economic Development Research Laboratory (REDRL) of Clemson University This approach focuses on identifying industry clusters with (1) a high potential for prospering in the study area and (2) significant positive economic impacts on the local economy.

24 Regional Economic Development Research Laboratory (REDRL) of Clemson University Step 1. Identify industry concentrations for which the region has experienced recent employment growth. This could be the LQ analysis..

25 Regional Economic Development Research Laboratory (REDRL) of Clemson University Step 2. Construct value chains (linkages to input suppliers and product markets) for the industry clusters selected in Step 1, and identify industries in the value chains with the greatest linkages to the local industry concentrations.

26 Regional Economic Development Research Laboratory (REDRL) of Clemson University Step 3. Rank the selected industries from Steps 1 and 2 by expected economic and fiscal impacts on the local economy.

27 Import Substitution Originally developed as a national economic development tool post WWII primarily in Central andsouthamerica America. Generally dismissed over time: lack of evidence of success; protections stifled learning and innovation; Washington Consensus At sub national level the notion of Porter s clusters promotes stronger inter industry linkages, for example through h import substitutions

28 Input Output Based Models One approach is to look at imports and exports to follow an import substitution strategy through gap and disconnect analysis. IMPLAN based.

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30 Multi step educational process: 1. Identification of general economic trends using BEA REIS data. 2. Use IMPLAN base report to identify largest industries in region. 3. Use IMPLAN to identify import export levels. 4. Use IMPLAN to focus on group selected core industries.

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33 Grapestock Fertilizer, Pesticides, Herbicides Grape Harvesting Equipment The California Wine Cluster State Government Agencies (e.g. Select Committee on Wine Production and Economy) Winemaking Equipment Barrels Bottles Caps and Corks Irrigation Technology Growers/Vineyards Wineries/Processing Facilities Labels Public Relations and Advertising Specialized Publications (e.g. Wine Spectator, Trade Journal) California Agricultural Cluster Educational, Research, & trade Organizations (e.g. Wine Institute, UC Davis, Culinary Institutes) Tourism Cluster Food Cluster

34 Community-Business Matching (CBM) Model University of Neveda-Reno, WRDC A community can use CBM to prioritize their goals and identify the assets they have to help them achieve their goals. The CBM fits these goals and assets to business profiles in order to assist in development decisions that reflect the desires of community members.

35 Community-Business Matching (CBM) Model Involvement of community leaders is crucial It is important to incorporate environmental and social aspects of economic development Environmental Social Economic It is more than just jobs, jobs, jobs

36 Community-Business Matching (CBM) Model Desirability measures how likely a business is to meet community goals. Compatibility measures how likely the business is to locate-start-expand expand in the community.

37 Community-Business Matching (CBM) Model

38 Community-Business Matching (CBM) Model

39 Community-Business Matching (CBM) Model In short run, communities can attempt to attract investment in highly Compatible sectors Desirability score equips the community with negotiation power In long run, an examination of the components of the Compatibility scores can reveal assets for investment.

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46 In the end, Targeted Regional Economic Development (TRED) is as much a learning process as it is technical analysis. The analysis serves as the foundation for a broader community discussion. The end goal is to help local citizens better understand their local and regional economy.

47 THANK YOU FOR YOUR TIME AND ATTENTION WOULD YOU LIKE TO HAVE MORE WEBINARS ON THE DETAILS OF DIFFERENT EMPIRICAL METHODS?