This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Competitiveness and Clusters:Implications for Government and Companies
Professor Michael E. PorterPorter Prize India 2016
Harvard Business School
This presentation draws on ideas from Professor Porter’s articles and books, in particular, The Competitive Advantage of Nations (The Free Press, 1990), “Building the Microeconomic Foundations of Competitiveness,” in The Global Competitiveness Report (World Economic Forum), “Clusters and the New Competitive Agenda for Companies and Governments” in On Competition (Harvard Business School Press, 2008), and ongoing research on clusters and competitiveness. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means - electronic, mechanical, photocopying, recording, or otherwise - without the permission of Michael E. Porter. Further information on Professor Porter’s work and the Institute for Strategy and Competitiveness is available at www.isc.hbs.edu
• Competitiveness depends on the long-run productivity of a location as a place to do business
- Productivity of existing firms and workers- Enabling high participation of citizens in the workforce
• Competitiveness is not:- Low wages- A weak currency- Jobs per se
• Successful economic development requires improving competitiveness
A nation or region is competitive to the extent that firms operating there are able to compete successfully in the national and global economy while maintaining or improving wages and living standards for the average citizen
• Productivity ultimately depends on improving the microeconomic capability of the economy and the sophistication of local competition, revealed at the level of firms, clusters, and regions
• Macroeconomic competitiveness sets the economy-wide context for productivity to emerge, but is not sufficient to ensure productivity
• Endowments, including natural resources, geographical location, population, and land area, create a foundation for prosperity, but true prosperity arises from productivity in the use of endowments
Assessing the Quality of the Business EnvironmentThe Diamond Model
Context for Firm Strategy and Rivalry
Related and Supporting Industries
Factor(Input)
ConditionsDemand
Conditions
• Sophisticated and demanding local needs– e.g., Strict quality, safety, and
environmental standards– Sophisticated demand in the private
sector or government
• Many things in the business environment matter for competitiveness• Successful economic development is a process of successive upgrading, in which the
business environment improves to enable increasingly sophisticated ways of competing
• Local rules and incentives that encourage investment and productivity– e.g. incentives for capital investment,
IP protection– Sound corporate governance
and accountability• Open and vigorous local competition
− Openness to competition− Strict competition laws• Improving access to high quality
business inputs– Qualified human resources– Capital availability– Physical infrastructure– Scientific and technological
infrastructure– Administrative and regulatory
infrastructure • Availability and quality of suppliers and supporting industries
• Clusters increase productivity, operational efficiency, and regional economic performance
• Clusters stimulate and enable innovations
• Clusters facilitate resilience, commercialization, and new business formation
• Clusters reflect the fundamental importance to productivity and innovation of linkages and spill-overs across firms and associated institutions that occur within geographic areas
• Clusters have a powerful impact on the range of strategic options that are available to firms in a given location
Boston, MA-NHEducation and Knowledge CreationFinancial ServicesIT and Analytical InstrumentsBiopharmaceuticals
Los Angeles, CAVideo Production & DistributionApparelMusic & Sound RecordingMedical Devices
San Jose-San Francisco, CAIT and Analytical InstrumentsBiopharmaceuticalsVideo Production & DistributionMarketing, Design & Publishing
New York, NY-NJ-CT-PAFinancial ServicesMarketing, Design and PublishingPerforming ArtsMusic and Sound Recording
Seattle, WAAerospace Vehicles and DefenseIT and Analytical InstrumentsWater TransportationFishing and Fishing Products
Chicago, IL-IN-WIDistribution & E-CommerceTransportation and LogisticsFinancial ServicesUpstream Metal Manufacturing
Denver, COBusiness ServicesMedical DevicesHospitality and TourismOil and Gas Production
Raleigh-Durham, NCLivestock ProcessingVulcanized and Fired MaterialsTextile ManufacturingEducation and Knowledge Creation
Source: Prof. Michael E. Porter, Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School; Richard Bryden, Project Director.
Pittsburgh, PAUpstream Metal ManufacturingCoal MiningElectric Power GenerationVulcanized and Fired Materials
San Diego, CARecreational & Small Electric GoodsBiopharmaceuticalsWater TransportationMarketing, Design & Publishing
Towards a New Economic Development Model• Focuses on competitiveness, not on jobs per se
• Cluster-based, reflecting the core drivers of jobs and wages in today’s global economy
• Bottom-up and regionally based, not only top-down
• Driven by an overall strategy rather than a list of actions
• Data driven and fact based, not political or based on wishful thinking
• Builds on existing and potential regional and local strengths, not just focus on reducing weakness
• Prioritized and sequenced, not treating all weaknesses equally
• Harnesses collaboration across a wide range of actors and institutions, including firms, educational institutions, and new types of economic development organizations, not driven by government
• The Indian government through the Ministry for SMEs has a history of supporting cluster initiatives
• The focus of these programs is the upgrading of SMEs in traditional sectors, using moderate funds to enable networking and key support activities
• Recently the Indian government has started to collaborate with IIMA and HBS in the systematic mapping of clusters across the country
• Cluster-based approaches are a powerful instrument to design and implement key elements of the Indian government’s agenda for competitiveness upgrading, including the ‘Make in India’ initiative
• Cluster-based development is significantly enhanced by connecting SMEs to larger companies and foreign investors, and engaging the science system
• Indian firms have a significant stake in improving India’s and state competitiveness
• Business needs to be an active partner with government at multiple levels– Cluster initiatives – Skill development– Supplier development– Collaboration with research institutions
• Engaging with public and private sector partners to create a better environment for productivity and innovation is a crucial strategic priority for Indian business leaders