Presentation done by Elizabeth Waelbroeck Rocha

TCIAnnualConference– Delhi– 2010 1

Clusters101Advancedlearningworkshoponclusters

Whatisacluster?Whyareclustersimportant?

ÉlisabethWaelbroeck-RochaPartner,BIPEMemberoftheBoardofDirectorsofTCI

Delhi,November29,2010


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

WhatisTheCompetitivenessInstitute?

Inauguration of TCI facilities on Nov. 5th, 1998


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”

MissionandObjectives


TCINetwork:Acommunityof1.700practitionersin98countries


TCIOrganizationalMembersNon-profitorganizations,governmentagenciesandmultilateralorganizationsdedicatedtofosteringeconomicdevelopmentparticipatingaseconomicsupportersofTCINetwork.


� Annual Global Conferences

� Regional Conferences

� Networking

� Research and knowledge dissemination

� Cluster-related knowledge management services

MainActivitiesofTCI


OurValues

� Excellence� TCIwasfoundedtoimprovethequalityandstandardsofexcellenceincompetitiveness,cluster

developmentandregionalandnationaleconomicdevelopmentandiscommittedtopreservingandcontinuallyraisingthestandardsofexcellenceofitsmembersandoftheorganization.

� Transparency� TCIconductsitsaffairswithprofessionalism,opennessandtransparencysothatallmembersandthe

outsideworldcanclearlyseeitsobjectives,activities,eventsandworkingmethods.

� Participation� TCIencouragesmemberparticipationbyfosteringopportunitiesforlearningandforpresentingandsharing

theirexperienceinTCIevents.

� Inclusiveness� TCIactivelyreachesoutandinvolvespeopleofallcontinents(andislands),nationalities,culturesand

genderssothatmemberscanbeenrichedbyglobalperspectives.

� Respect� WithnodiminishingofTCI’scommitmenttoqualityandexcellence,TCIhasahighlevelofopennessto

differentstrategies,techniquesandnon-traditionalapproachesandthereforeaccommodatesavarietyofschoolsofthoughtwithanattitudeofrespect.

� TheValueofNetworking� TCIbelievesthatnetworking--fosteringlinkagesamongpeopleandfacilitatingthefreeexchangeofideas

amongregions--isabothapowerfulmeansandanendinitselfinthenewrelationshipsformedandnewinitiativesundertaken.

� SocialPurposeandImpact� Apartfromimmediatebenefitstomembers,TCIhasahighersocialpurposeofmakingamajorimpacton

theoryandpracticeofeconomicgrowthcontributingdirectlytoimprovedhumandevelopmentandbetterstandardsofliving—andtoextendingthisimpacttoregionswherethisunderstandingismostneeded.


Whatisacluster?????

� Clustersaregeographicconcentrationsofinter-connectedcompanies,specialisedsuppliers,serviceprovidersandassociatedinstitutionsoperatinginaparticularfield

Michael Porter


Whatisacluster?????

� Clustersaregeographicconcentrationsofinter-connectedcompanies,specialisedsuppliers,serviceprovidersandassociatedinstitutionsoperatinginaparticularfield

� Clustersaregroupsofindependentcompaniesandassociatedinstitutionsthatare:� Collaboratingandcompeting(coo-petition)� Geographicallyconcentratedinoneorseveralregions,eventhoughtheclustermayhaveglobalextensions

� Specializedinaparticularfield,linkedthroughcommontechnologiesandskills

� Eithersciencebasedortraditionnal� Clusterscaneitherbeinstitutionalized–(thereisaclustermanagementstructure,or« clusterinitiative »),ornon-institutionalized(informal)

Michael Porter

EU Expert Group


Theclusterpyramid

Exportorientedindustries/service

providers

Equipment,servicesandmaterialsproviders

Relatedandsupportingindustries&services

Economicinfrastructure


Theclusterpyramid

Exportorientedindustries/service

providers

Equipment,servicesandmaterialsproviders

Relatedandsupportingindustriesandservices

Economicinfrastructure

Education systemPublic research Regulatory

frameworkTransport Financial

system

Housing, communication, etc.


Agglomeration

Clustersareeco-systems:theynaturallyevolveandtransformTheclusterlifecycle


Agglomeration

Emerging cluster



Agglomeration

Emerging cluster

Developing cluster



Agglomeration

Emerging cluster

Developing cluster

Mature cluster



Agglomeration

Emerging cluster

Developing cluster

Mature cluster

Transformation



Keypointsonclusters

� Whydocompanies’cluster?� Whatdoesclusteringbringthem?

� Whyareregions/countriesinterestedinclusters?

� Whatdoyoudowithclusters?� Iftheprocessoccursnaturally,whyshouldonegetinvolved?

� Canclustersbe« created »?� Howcanonehelpthemgrow?


1.Whydocompanies« cluster »?Thetheoreticalbenefitsofclustering

Companies’ objectives

Profits, Growth

Improved quality/price ratio

Increased market volume

Risk reduction and risk control

Cost reductions


Whydocompanies« cluster »?Thetheoreticalbenefitsofclustering

Companies’ objectives

Profits, Growth




Cost reductions

Increase competitiveness


Whydocompanies« cluster »?Thetheoreticalbenefitsofclustering

Economies of scale

Economies of scope

Vertical integration

Move up the learning curve

Differentiation / specialisation effect

Creation of barriers to entry

New markets

New products

Increased market share

Increased third party trust

Risk associated to competition

Clusters can bring :Companies’ objectives

Profits, Growth




Cost reductions


Indirectbenefitscanalsobegenerated

� Oneneedstodistinguish:� Directeffects

� Riseinsales,betterfinancingconditions,mutualisedcosts,…

� Indirect(spill-over)effects� Easieraccesstospecialised/trainedstaffthankstoincreasedattractivenessofregion,increasedsalesthroughspill-overeffectsonclients/end-users,lessstrainonresources,…

� Externalities� Positive:entrepreneurialclimate,informalknowledgeexchanges,image,resourcecreation,increasedchoicethankstoscaleeffects

� Negative:strainonresources(includingHR),increasedenvironmentaldegradation,risinghousingprices,congestion,lossofcontrolofcertainfunctionswhichhavebecomemutualised…


Practicalexperiences/feedbackfromcompanies

� Experienceshowsthatparticipatingtoaclusterenablescompaniesto:� Attainobjectivesthattheywouldnothavemetindividually,intermsofprofitabilityorgrowth

� Exchange,sharegoodpractices� Accelerateinnovation� Increaseself-confidence� Developtrust� Shareresources/meanstocreate,protectorimproverent(profits)

� Reduceoreliminatecertaincosts� Improvetheprice/qualityratio� Increasesales� Control/reducerisk,includingtheriskfromcompetition


Differenttypesof« clusters »

Typesofclusters

� Industrial� Services� Urban� Rural� Hightechnology� Traditionnal� Etc…


Differenttypesof« clusters »

Typesofclusters

� Industrial� Services� Urban� Rural� Hightechnology� Traditionnal� Etc…

Mainobjectivesofclusters

� Increasesales(exports)

� Createjobs

� Fosterinnovation� Developnewmarkets/newproducts


2.Whyaregovernments’interestedinclusters?

� Althoughclusteringismostlyaboutcompanies,regionsandgovernmentsworldwideareincreasinglyfosteringclusters

è clusterpoliciesasanaturalevolutionfromtraditionalindustrialpolicies?


Whatclusteringbringstoregions

� Clusteringprocessesareviewedashavingthepotentialto:� Restore/enhancecompetitiveness� Reinforcetheinnovationcapability� Increaseattractivenesstoinvestors� Transformaviciouscycleintoavirtuouscycle

� Lowgrowthè littlerevenuegenerationè poorqualityinfrastructureè capitaloutflows,braindrainè lossincompetitivenessè lowgrowth

� Reinforcementofcompetitivenessè fasterfrowthè revenuegenerationè economicinfrastructuredevelopmentè FDI,HRdevelopmentè improvedcompetitiveness

� Potentialside-benefits:reducevulnerabilitytodownturns?


2001199719921980

Selected regionsandcountrieswithcluster-baseddevelopmentinitiatives +

-

Emilia-RomagnaToscana(industrial-districtsbasedpolicies)....

EuskadiScotlandChihuahuaArizonaCatalunyaMassachussets

MoroccoNewZealandCostaRicaCalifornia....

SwedenTurkeyLithuania

AustriaJordanMéxicoSouthAfrica....

FranceEstoniaDenmarkSloveniaUKMinasGerais(BR)...

1990 2003 2006

PakistanKazakhstanPoland….

(*)Datafrom“TheClusterInitiativesGreenbook– IIedition”,2006(**)EuropeanClusterObservatory,2009

Clusterreinforcementinitiativesworldwide

ParaguayRioNegro(AR)….

2009

ILLUSTRATIVENOTEXHAUSTIVE

Approx. more than 1.400 initiatives from countries and regions all over the world (*)

Over 1.100 clusterorganizations only in Europe (**)


Companiesandregionsdonotnecessarilysharethesameobjectives

Regions� Developtheregion’s«image»,itsidentity

� Enhancetheregion’sattractiveness

� Createjobs� Solve(existingorperceived)problems

� Allocateresourceseffectively

Companies� Growtheirbusiness

� Generateprofits

� Control/managerisks,reduceuncertainty

Managing a cluster means navigating in turbulent waters, with currents pulling the boat in different directions

This is what this conference is all about ….


Measuresofsuccessarenotthesameforregionsandforcompanies

Regions� Increasedcompetitiveness

(reducedprices/marginscomparedtocompetition)

� Increasedshareofworldmarket(irrespectiveofhowmanycompaniesmake-upthisshare)

� Employmentcreation� Incomegeneration(taxes)� Newcompanycreation

� Futureincomecreation

� Maintenanceorestablishmentofahealthycompetitiveclimate

� Morefluid/flexiblelabourmarket

Companies� Increasedprofitmargins

� Costreductions� Lowerinputcosts,lowHRcosts

� Abilitytoprotectsellingprices� Passcostincreasesintoprices� Reducecompetition

� Increasedsales� Improvedprice/qualityratio� Openingofnewmarkets

� Geographical,product

� Lowerrisk� Operational,strategic� HRrelated(mobility,skill

depletion)


Source: Etzkowitz (2002)

ThekeystakeholdersinaclusterinitiativeThetriplehelix…


… orthequadruplehelix

Finance


Everywhere,the objective of cluster policies is to

increase competitiveness


Increasingly,innovationisrecognizedasthekeytocompetitiveness

� Informalexchangesthroughclusteringaretremendousfacilitatorsofinnovation

� Inmatureeconomies,clusterpolicieshaveincreasinglybecome« innovation »policies


Theimportanceofplaceandnetworksforinventionsandinnovation

Whyisinnovationimportant?

Ø BecauseitiskeytoincreasesinproductivityØ Higherproductivitylevelsarethebasistorealwagesgrowth,

hencetoahigherlevelofprosperityforaterritory,aregionoranation

Ø Becauseinnovationandinventionsmakeitpossibletogrowexistingmarketsandcreatenewones


Thekeytoinnovation(1)

Ø Innovationisa“teamsport”andalongtermrun

Ø InnovationisasocialprocessØ Socialcontextandentrepreneurialorientedculturearekeyfor

thedevelopmentofinnovation

Ø Inventionsandinnovationrarelyoccursinisolation

Ø Innovationisplace-based


Ø “Itisnottheingredients,buttherecipe” (P.Romer,A.Saxenian,..)

Ø…butthesamerecipedoesnotperformthesameindifferentplaces,soitisimportanttoworklocally andtobuildlocaldistinctiveadvantages

Ø Tacit-knowledgeinterchangeandface-to-faceinteractionarekeytoincrementalinnovation

Ø Clustersaretheplaceinwhichthishappenseasier;theyareanidealunitofworkforpolicymakers

Thekeytoinnovation(2)


Ø Theadded-valueofclustersininnovationprocess(*):

§ betterperceptionofnewbuyers’need§ earlydiffusionofnewtechnologies§ strongrivalryamongcompetitors§ quickerknowledgecirculation(“cafeteriaeffect”)§ strongersupportfromexternalagents(government,universities,etc.)

(*)partlybasedonM.E.Porter,OnCompetition,1998.


Somelessonsandkeypointsfrompreviousconferences(I)

� Veryimportanttodistinguishclearly:� Clusters� Clusterpolicies� Clusterinitiatives� ClusterAssociations

� Clusterinitiativesaregrowingdramatically:� 2003:Morethan500� 2008:Morethan2.500

� Itlookslikeifsomethinggoodishappeningaroundtheseclusteringideas!!(evenifmeasurementandassesmentarehardpoints)


Somelessonsandkeypointsfrompreviousconferences(II)

� Clustersareaboutpeople,competition,cooperation,competitiveness,makingmoney,survivinginthelongterm,emulatingthebigcompanies,trust,talent,heart,courage,…

� è Neverunderestimatethe“humanfactor”!

� Companiesinvolvementisakeyfactorforsuccess,asitis…

� Agoodfacilitator


Somelessonsandkeypointsfrompreviousconferences(III)

� Governmentsplayanimportantroleintheimplementation

� Sharedvision,withoutitisverydifficulteventoknowtheobjectivestobereached

� It’sbetteropenthanclose,trustthandistrust,sharingthanbeingislands

� Moneyisimportant,butitisnotthemainfactorforthesuccess(thinkabouttrust,coherence,…)


Somelessonsandkeypointsfrompreviousconferences(IV)

� Failurescomefromalackofconsensus,weaksharedframeworks,andbadfacilitators.

� Itisimportanttomaintainastrongsenseofreality.Everystartingpointisdifferent,everywayisdifferent.

� Itisareallongtermjob,thatneedspatienteandcannotberushed(andwhataboutpoliticalcycles??)

� Strategyisthekey!!Clustersareforwhatreallymatters.


ContactusformoreinformationaboutTCIandouractivitiesalongtheyear

[email protected]

ImaginaBuilding177DiagonalAv.,1stFloor08018Barcelona- [email protected].+34 93 309 48 34fax.+34935504469

Presentation done by Elizabeth Waelbroeck Rocha

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