May 11, 2015
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Clusters 101Advanced learning workshop on clusters
What is a cluster ?Why are clusters important ?
Élisabeth Waelbroeck-RochaPartner, BIPEMember of the Board of Directors of TCI
Delhi, November 29, 2010
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THE COMPETITIVENESS INSTITUTE is a non-profit,global network of cluster practitioners created in 1998, dedicated to facilitating the
spread and success of cluster-based and innovation competitiveness initiatives through networking, research and training activities
What is The Competitiveness Institute?
Inauguration of TCI facilities on Nov. 5th, 1998
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OBJECTIVES
Promote cluster-based competitiveness and development strategies
Improve the methodologies for enhancing the competitiveness of clusters
Raise the professional level of cluster development practitioners
“THE COMPETITIVENESS INSTITUTE’s mission is to improve living standards and local competitiveness of regions across
the world by enhancing cluster-based development initiatives”
Mission and Objectives
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TCI Network: A community of 1.700 practitioners in 98 countries
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TCI Organizational MembersNon-profit organizations, government agencies and multilateral organizations dedicated to fostering economicdevelopment participating as economic supporters of TCI Network.
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Annual Global Conferences
Regional Conferences
Networking
Research and knowledge dissemination
Cluster-related knowledge management services
Main Activities of TCI
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Our Values
Excellence TCI was founded to improve the quality and standards of excellence in competitiveness, cluster
development and regional and national economic development and is committed to preserving and continually raising the standards of excellence of its members and of the organization.
Transparency TCI conducts its affairs with professionalism, openness and transparency so that all members and the
outside world can clearly see its objectives, activities, events and working methods.
Participation TCI encourages member participation by fostering opportunities for learning and for presenting and sharing
their experience in TCI events.
Inclusiveness TCI actively reaches out and involves people of all continents (and islands), nationalities, cultures and
genders so that members can be enriched by global perspectives.
Respect With no diminishing of TCI’s commitment to quality and excellence, TCI has a high level of openness to
different strategies, techniques and non-traditional approaches and therefore accommodates a variety of schools of thought with an attitude of respect.
The Value of Networking TCI believes that networking--fostering linkages among people and facilitating the free exchange of ideas
among regions--is a both a powerful means and an end in itself in the new relationships formed and new initiatives undertaken.
Social Purpose and Impact Apart from immediate benefits to members, TCI has a higher social purpose of making a major impact on
theory and practice of economic growth contributing directly to improved human development and better standards of living—and to extending this impact to regions where this understanding is most needed.
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What is a cluster ?????
Clusters are geographic concentrations of inter-connected companies, specialised suppliers, service providers and associated institutions operating in a particular field
Michael Porter
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What is a cluster ?????
Clusters are geographic concentrations of inter-connected companies, specialised suppliers, service providers and associated institutions operating in a particular field
Clusters are groups of independent companies and associated institutions that are:Collaborating and competing (coo-petition)Geographically concentrated in one or several regions, even though the
cluster may have global extensionsSpecialized in a particular field, linked through common technologies
and skillsEither science based or traditionnalClusters can either be institutionalized –(there is a cluster management
structure, or « cluster initiative »), or non-institutionalized (informal)
Michael Porter
EU Expert Group
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The cluster pyramid
Export oriented industries/service
providers
Equipment, services and materials providers
Related and supporting industries & services
Economic infrastructure
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The cluster pyramid
Export oriented industries/service
providers
Equipment, services and materials providers
Related and supporting industries and services
Economic infrastructure
Education systemPublic research Regulatory
frameworkTransport Financial
system
Housing, communication, etc.
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Agglomeration
Emerging cluster
Developing cluster
Mature cluster
Transformation
Clusters are eco-systems: they naturally evolve and transformThe cluster life cycle
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Key points on clusters
Why do companies’ cluster ?What does clustering bring them ?
Why are regions / countries interested in clusters ?
What do you do with clusters ?If the process occurs naturally, why should one get
involved?Can clusters be « created » ?How can one help them grow ?
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Why do companies « cluster » ?The theoretical benefits of clustering
Companies’ objectivesCompanies’ objectives
Profits, GrowthProfits, Growth
Improved quality/price ratio
Improved quality/price ratio
Increased market volume
Increased market volume
Risk reduction and risk controlRisk reduction
and risk control
Cost reductionsCost reductions
Increase competitiveness
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Why do companies « cluster » ?The theoretical benefits of clustering
Economies of scaleEconomies of scale
Economies of scopeEconomies of scope
Vertical integrationVertical integration
Move up the learning curveMove up the learning curve
Differentiation / specialisation effectDifferentiation / specialisation effect
Creation of barriers to entryCreation of barriers to entry
New marketsNew markets
New productsNew products
Increased market shareIncreased market share
Increased third party trust Increased third party trust
Risk associated to competitionRisk associated to competition
Clusters can bring :Clusters can bring :Companies’ objectivesCompanies’ objectives
Profits, GrowthProfits, Growth
Improved quality/price ratio
Improved quality/price ratio
Increased market volume
Increased market volume
Risk reduction and risk controlRisk reduction
and risk control
Cost reductionsCost reductions
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Indirect benefits can also be generated
One needs to distinguish :Direct effects
Rise in sales, better financing conditions, mutualised costs, … Indirect (spill-over) effects
Easier access to specialised / trained staff thanks to increased attractiveness of region, increased sales through spill-over effects on clients / end-users, less strain on resources, …
Externalities Positive: entrepreneurial climate, informal knowledge exchanges,
image, resource creation, increased choice thanks to scale effects Negative: strain on resources (including HR), increased
environmental degradation, rising housing prices, congestion, loss of control of certain functions which have become mutualised…
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Practical experiences / feedback from companies
Experience shows that participating to a cluster enables companies to:Attain objectives that they would not have met individually, in
terms of profitability or growthExchange, share good practices Accelerate innovationIncrease self-confidenceDevelop trustShare resources / means to create, protect or improve rent
(profits)Reduce or eliminate certain costsImprove the price / quality ratioIncrease salesControl / reduce risk, including the risk from competition
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Different types of « clusters »
Types of clusters
IndustrialServicesUrbanRuralHigh technologyTraditionnalEtc…
Main objectives of clusters
Increase sales (exports)
Create jobs
Foster innovationDevelop new markets / new
products
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2. Why are governments’ interested in clusters ?
Although clustering is mostly about companies, regions and governments worldwide are increasingly fostering clusters
cluster policies as a natural evolution from traditional industrial policies ?
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What clustering brings to regions
Clustering processes are viewed as having the potential to :Restore / enhance competitivenessReinforce the innovation capabilityIncrease attractiveness to investorsTransform a vicious cycle into a virtuous cycle
Low growth little revenue generation poor quality infrastructure capital outflows, brain drain loss in competitiveness low growth
Reinforcement of competitiveness faster frowth revenue generation economic infrastructure development FDI, HR development improved competitiveness
Potential side-benefits : reduce vulnerability to downturns ?
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2001199719921980
Selected regions and countries withcluster-based development initiatives +
-
Emilia-RomagnaToscana(industrial-districts based policies) ....
EuskadiScotlandChihuahuaArizonaCatalunyaMassachussets
MoroccoNew ZealandCosta RicaCalifornia....
SwedenTurkeyLithuania
AustriaJordanMéxicoSouth Africa....
FranceEstoniaDenmarkSloveniaUKMinas Gerais (BR)...
1990 2003 2006
PakistanKazakhstanPoland….
(*) Data from “The Cluster Initiatives Greenbook – II edition”, 2006 (**) European Cluster Observatory, 2009
Cluster reinforcement initiatives worldwide
ParaguayRio Negro (AR)….
2009
ILLUSTRATIVENOT EXHAUSTIVE
Approx. more than 1.400 initiatives from countries and regions all over the world (*)
Over 1.100 clusterorganizations only in Europe (**)
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Companies and regions do not necessarily share the same objectives
RegionsDevelop the region’s « image »,
its identityEnhance the region’s
attractivenessCreate jobsSolve (existing or perceived)
problemsAllocate resources effectively
CompaniesGrow their business
Generate profits
Control/manage risks, reduce uncertainty
Managing a cluster means navigating in turbulent waters, with currents pulling the boat in different directions
This is what this conference is all about ….
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Measures of success are not the same for regions and for companies
Regions Increased competitiveness
(reduced prices/margins compared to competition)
Increased share of world market (irrespective of how many companies make-up this share)
Employment creation Income generation (taxes)New company creation
Future income creationMaintenance or establishment of
a healthy competitive climateMore fluid/flexible labour market
Companies Increased profit margins
Cost reductions Lower input costs, low HR costs
Ability to protect selling prices Pass cost increases into prices Reduce competition
Increased sales Improved price/quality ratio Opening of new markets
Geographical, product
Lower risk Operational, strategic HR related (mobility, skill
depletion)
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Source: Etzkowitz (2002)
The key stakeholders in a cluster initiativeThe triple helix …
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… or the quadruple helix
Finance
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Everywhere,the objective of cluster policies is to
increase competitiveness
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Increasingly, innovation is recognized as the key to competitiveness
Informal exchanges through clustering are tremendous facilitators of innovation
In mature economies, cluster policies have increasingly become « innovation » policies
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The importance of place and networks for inventions and innovation
Why is innovation important?
Because it is key to increases in productivity Higher productivity levels are the basis to real wages growth,
hence to a higher level of prosperity for a territory, a region or a nation
Because innovation and inventions make it possible to grow existing markets and create new ones
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The key to innovation (1)
Innovation is a “team sport” and a long term run
Innovation is a social process Social context and entrepreneurial oriented culture are key for
the development of innovation
Inventions and innovation rarely occurs in isolation
Innovation is place-based
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“It is not the ingredients, but the recipe” (P. Romer, A. Saxenian, ..)
… but the same recipe does not perform the same in different places, so it is important to work locally and to build local distinctive advantages
Tacit-knowledge interchange and face-to-face interaction are key to incremental innovation
Clusters are the place in which this happens easier; they are an ideal unit of work for policy makers
The key to innovation (2)
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The added-value of clusters in innovation process (*):
better perception of new buyers’ need early diffusion of new technologies strong rivalry among competitors quicker knowledge circulation (“cafeteria effect”) stronger support from external agents (government,
universities, etc.)
(*) partly based on M. E. Porter, On Competition, 1998.
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Some lessons and key points from previous conferences (I)
Very important to distinguish clearly:ClustersCluster policies Cluster initiativesCluster Associations
Cluster initiatives are growing dramatically:2003: More than 5002008: More than 2.500
It looks like if something good is happening around these clustering ideas!! (even if measurement and assesment are hard points)
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Some lessons and key points from previous conferences (II)
Clusters are about people, competition, cooperation, competitiveness, making money, surviving in the long term, emulating the big companies, trust, talent, heart, courage, …
Never underestimate the “human factor”!
Companies involvement is a key factor for success, as it is…
A good facilitator
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Some lessons and key points from previous conferences (III)
Governments play an important role in the implementation
Shared vision, without it is very difficult even to know the objectives to be reached
It’s better open than close, trust than distrust, sharing than being islands
Money is important, but it is not the main factor for the success (think about trust, coherence, …)
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Some lessons and key points from previous conferences (IV)
Failures come from a lack of consensus, weak shared frameworks, and bad facilitators.
It is important to maintain a strong sense of reality. Every starting point is different, every way is different.
It is a real long term job, that needs patiente and cannot be rushed (and what about political cycles??)
Strategy is the key!! Clusters are for what really matters.
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Contact usfor more information about TCI and our activities along the year
Patricia ValdenebroGeneral [email protected]