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The Cluster Moment: Getting Real About the Economy

This Thursday we’ll contribute to the growing buzz around cluster practice and policy with a big event at the Mayflower Hotel, co-hosted with our friends at the Center for American Progress, the Council on Competitiveness, and the National Association of Development Associations. But leaving that aside, it’s interesting to note, and try to explain, the extent to which regional industry or innovation clusters are back in the mix this fall.

Readers of this blog have followed the extent to which clusters—geographic concentrations of interconnected firms and supporting and coordinating organizations—are now an important object of policymaking and debate in Washington, this 20 years after Michael Porter introduced the concept to policymakers. In a new paper we count at least six varied federal experiments in cluster policy in play in the 2011 budget cycle, ranging from planning grants and coordination programs from the Economic Development and Small Business Administrations to the Department of Agriculture’s Regional Innovation Initiative.

Yet beyond that, it also turns out that 10 years after the wide state adoption of cluster strategies a new group of governors and gubernatorial candidates of both parties are maintaining or stepping up their interest, often with strong public support.

In Arizona and Ohio, for example, both the Science Foundation Arizona effort and Ohio‘s Third Frontier initiative were initiated by governors of one party (Democratic in the former; Republican in the latter) as vehicles for cluster-based, innovation-oriented economic development yet have each recently received strong affirmations and even expansions under subsequent governorships by the other party.

Meanwhile, the bi-partisan consensus is being extended by leading candidates in the 2010 gubernatorial cycle. In Colorado, Michigan, New York and Tennessee, for example, John Hickenlooper, Rick Snyder, Andrew Cuomo and Bill Haslam all suggest tailoring state economic and workforce development strategies to the distinct business clusters of different regions. Hickenlooper and Cuomo are Democrats; Snyder and Haslam are Republicans. Haslam, the current mayor of Knoxville, has even called for regional jobs “base camps” to coordinate disparate investments in the service of unified strategies. In sum, the year 2010 is turning out to be an important juncture for the cluster paradigm.

Which raises the question of why—and why now? What explains clusters’ renewed popularity? We’ll have some more reflections in the coming days, and our private sector, regional and federal guests Thursday will have their own views. But for now let us just note that some of the concept‘s new and bipartisan relevance owes to its Republican lineage and sound non-partisan concern with the mechanics of value-creation in local economies, whether metropolitan or rural, high-tech or manufacturing, suburban or inner-city. And we might observe that it’s also true that as a matter of policy action clusters—ranging from the famous Silicon Valley technology cluster to the Vermont cheesemaking cluster—are all about generating synergies and efficiencies, and don‘t tend to cost too much.  That’s a good thing in bad times.

But what is most timely beyond all that may be the possibility that the new prominence of regional innovation clusters reflects something deeper: a positive interest in locating a more grounded, realistic way to think about the economy and development efforts so as to put both on a more productive footing.

Clusters, after all, represent the antithesis of the bubble economy of financial engineering, real estate games, and consumption that has now blown up and bitten us.

Comprised of regional assemblages of firms, suppliers, trade associations, educational institutions and related coordinating organizations working in the same field, clusters and cluster frameworks redirect attention, analysis and policymaking to the more grounded, day-to-day interactions by which real companies in real places complete transactions, share technologies, develop innovations, start new businesses—and yes, create jobs. To that extent, clusters—whether of airplane manufacturing in Wichita or cleantech in Colorado or biomedical innovation in Cleveland—represent an antidote to the nation‘s recent economic zeitgeist of bubbles and consumption and a framework for recognizing and bolstering the real-world variety and dynamism of America’s “real” economy. Hot spots of productivity and collaboration as well as competition, clusters are the locations most likely to deliver a new economy that is export-oriented, lower carbon, innovation-driven and so opportunity rich.

In short, cluster frameworks and strategies are all about getting real after a time of delusion.