Promising Practices in Promoting Regional Innovation
National Governors Association
Innovation America Initiative
Task Force Meeting
Randall Kempner
December 5, 2006
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What is Innovation?
the generation, development and and implementation of new ideas that create social value
Improves on the existing way of doing things
Can be a product, process, service, strategy, etc.
21st Century Innovation
Faster
Multidisciplinary
Democratized
Collaborative/Open
Global
A Simple Definition
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Why REGIONAL Innovation?
“ Paradoxically, even as innovation has globalized, the role of regions as the critical nexus for innovation-based economic growth has
increased. While national and state policies create a platform for innovation, the locus of innovation activities is at the regional level, where workers, companies, universities, research institutions, and
government interface most directly.” -- Regional Innovation-National Prosperity
Proximity
Diversification
Differentiation
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Regional Innovation Environment
Competitive Assets
Competitive Assets
Linking Institutons
and Networks
Linking Institutons
and Networks
Attitudes/Culture
Attitudes/Culture
Competitive Assets: Educational system, research and development base, technical and scientific concentration, qualified workforce, quality of life, concentration of firms, land and building availability
Formal and informal networks that generate key relationships and foster innovation:Associations, Chambers, Tech Transfer Offices
Attitudes that support innovation: willingness to partner, risk-taking, tolerance of diverse people and perspectives, openness to new ideas
Three levels of analysis are necessary to understand the dynamics that impact the success of regions and regional clusters.
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What is a Cluster?
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What is a Cluster?
A cluster is a geographically proximate group of interconnected companies and associated institutions
in a particular field
Source: Professor Michael E. Porter, Harvard Business School
OmahaTelemarketingHotel ReservationsCredit Card Processing
Wisconsin / Iowa / IllinoisAgricultural Equipment
DetroitAuto Equipmentand Parts
RochesterImaging Equipment
Western MassachusettsPolymers
BostonMutual FundsMedical DevicesMgmt. ConsultingBiotechnologySoftware and NetworkingVenture CapitalHartfordInsurance
ProvidenceJewelryMarine Equipment
New York CityFinancial ServicesAdvertisingPublishingMultimedia
Pennsylvania / New JerseyPharmaceuticals
North CarolinaHousehold FurnitureSynthetic FibersHosiery
Dalton, GeorgiaCarpets
South FloridaHealth Technology Computers
Nashville / LouisvilleHospital Management
Baton Rouge / New OrleansSpecialty Foods
Southeast Texas / LouisianaChemicals
DallasReal Estate Development
WichitaLight AircraftFarm Equipment
Los Angeles AreaDefense AerospaceEntertainment
Silicon ValleyMicroelectronicsBiotechnologyVenture Capital
Cleveland / LouisvillePaints & Coatings
PittsburghAdvanced MaterialsEnergy
West MichiganOffice and Institutional Furniture
MichiganClocks
TucsonOptics
MinneapolisCardio-vascularEquipmentand Services
Warsaw, IndianaOrthopedic Devices
ColoradoComputer Integrated Systems / ProgrammingEngineering ServicesMining / Oil and Gas Exploration
Las VegasAmusement / CasinosSmall Airlines
OregonElectrical Measuring EquipmentWoodworking EquipmentLogging / Lumber Supplies
SeattleAircraft Equipment and DesignSoftwareCoffee Retailers
BoiseInformation TechFarm Machinery
Where are Clusters?
Everywhere...
Source: Adapted from Professor Michael E. Porter, Harvard Business School
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What’s So Good About Clusters?
Increase Efficiency– Efficient access to information, specialized inputs and employees,
institutions, and “public goods”– Easier to achieve complementarities across businesses
Facilitate New Business Formation– Easier to identify opportunities for new businesses– Lowers barriers to entry (including perceived risk)
Spur Innovation– Improved ability to perceive and respond to innovation opportunities– More rapid diffusion of improvements
Source: Professor Michael E. Porter, Harvard Business School
A good way to organize firms for increased productivity A good way to organize economic development policy efforts
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How are cluster-based strategies different than traditional ED strategies?
“ Let’s get a GM plant”FirmFirm
IndustryIndustry
Supply ChainSupply Chain
ClusterCluster
“ Let’s get a Ford plant, too”
“ Let’s get the auto part suppliers”
“ Hey, let’s get all the related and supporting institutions”
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What Are Some Potential Difficulties with Clusters?
As Analytical Tools– Many different ways to measure clusters
Need national benchmarks AND local measures to reflect regional conditions
Sometimes regions get stuck in analysis paralysis
As Organizational Method for Economic Development Policy Initiatives
– What if you aren’t in a chosen cluster? Need to convince local businesses that traded clusters will benefit all May lead to lack of focus on fundamentals (education, quality of life)
As Indicators of Economic Growth Areas– Much innovation takes place at the intersection of clusters
You might miss it– Bioinformatics, Agribusiness
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How Do Clusters Develop?
Initial (Natural) Resource Base– Pittsburgh’s Steel
Historical Legacy (Large Local Markets)– New York’s Financial Services
Luck/Serendipity – Galveston’s Insurance
Supportive Business/Regulatory Environment – Wilmington’s Credit Cards
Consciously Designed Initiatives – Austin’s semiconductors
Now, usually a mix of reasons
San Diego Pharmaceuticals / Biotech Cluster
National Leader Nationally Competitive Less Developed
Legal Services
Legal Services
Specialized Support Services
AccountingFirms
AccountingFirms
BanksBanks
Specialized Risk Capital
Venture Capital Firms
Venture Capital Firms
Angel Networks
Angel Networks
UCSDUCSD
Community CollegesCommunity Colleges
SDSUSDSU
Human Capital Providers
Cluster/University/
Government Relationship
Providers
Research
BIOCOMBIOCOM
UCSD CONNECT
UCSD CONNECT
Science and Technology
Council
Science and Technology
Council
Specialty Chemicals
Specialty Chemicals
Inputs Pharmaceuticals and Related Products
Pharmaceutical Products
(Manufacturing)
Pharmaceutical Products
(Manufacturing)
Equipment
Medical Devices
Medical Devices
Laboratory Instruments and Process Equipment
Laboratory Instruments and Process Equipment
Other Products
Consumer Goods
Consumer Goods
ContainersContainers
PackagingPackaging
UCSD Labs and Hospitals
UCSD Labs and Hospitals
SalkSalk
ScrippsScripps
BurnhamBurnham
KimmelKimmel
Private FirmsPrivate Firms
Source: Harvard Institute on Strategy & Competitiveness, Cluster Mapping Project , U. S. County Business Pattern Data; Council on Competitiveness, ontheFRONTIER interviews
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Keys to Cluster Success: Five “shoulds” What should state government do to support clusters?
1. Recognize the Primacy of Human Capital– Focus on building world-class Pre through 16 educational system – Retraining and lifelong learning programs are critical
2. Understand Regional Competitive Advantages and Build on Existing Strengths– Build programs around regional partnerships and strengths– Matters more how the cluster competes than in what industry the cluster
competes (innovation-based strategies)
3. Develop Integrated Economic and Workforce Programs focused on Clusters– Private sector should lead the creation of cluster efforts that leverage
government programs– Government should address barriers, encourage cross-sector collaboration,
and know when to say NO
4. Seek the Participation of Firms Seeking to Innovate in the Region– Promote retention, expansion, and entrepreneurship before attraction– If any preferential treatment to be given, make sure firms commit as well ( job
targets, wage levels)
5. Seek to Win Globally– In this global economic environment, competition can come from anywhere– Seek to invest in sectors where firms can have a leading position globally
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Thank You!
Randall Kempner
Vice President
Email: [email protected]
Website: www.compete.org
Randall Kempner
Vice President
Email: [email protected]
Website: www.compete.org
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Five Pitfalls of Regional Economic Development Initiatives
– Failure of Perspective Failure to understand position of region within a GLOBAL context Failure to identify/accept root causes of problems and barriers to change
– Failure of Consensus Failure to develop a shared economic development vision Failure to translate vision into specific economic development goals
– Failure of Design Failure to include participant learning as key aspect of project success Failure to include “short-term wins” within plans
– Failure of Leadership Failure to involve right people throughout the process Failure to energize broad community support for action initiatives
– Failure of Nerve Failure to make tough choices about priorities Failure to proceed with implementation in the face of criticism
Source: adapted from Jeep (1993) and Segedy (1994) by Prosperity Strategies
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Keys to Cluster Success: Five “shoulds” What should state government do to support clusters?
1. Recognize the Primacy of Human Capital as primary source of advantage– Short term: Competitive advantage rests ultimately on the development and
deployment of highly skilled human capital– Retraining and lifelong learning programs are critical
2. Understand Regional Competitive Advantages and Build on Existing Strengths– Build programs around regional partnerships and strengths– Matters more how the cluster competes than in what industry the cluster
competes – innovation-based is best
3. Develop Integrated Economic and Workforce Programs focused on Clusters– Private sector should lead the creation of cluster efforts that leverage
government programs– Government should address barriers, encourage cross-sector collaboration,
and know when to say NO
4. Seek the Participation of Firms Seeking to Innovate in the Region– Promote retention, expansion, and entrepreneurship before attraction– If any preferential treatment to be given, make sure firms commit as well ( job
targets, wage levels)
5. Seek to Win Globally– In this global economic environment, competition can come from anywhere– Seek to invest in sectors where firms can have a leading position globally
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Checklist for Developing Innovative Clusters
– Inventory your Regional Assets (Networks and Attitudes)
– Think Economically, Not Politically– Identify Private Sector Champions
– Build on your Strengths– Develop the Talent– Invest in Research– Provide Seed and Venture Capital– Sustain your Infrastructure– Create Connections– Take the Long View
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Regional Innovation InitiativesKey Cross-Regional Issues
Building and Retaining Talent
Transitioning to Advanced Manufacturing
Networking Knowledge Assets
Energizing the Entrepreneurial Economy
Regionalism
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“Ideal” Regional Integration
Present Situation
Workforce DevelopmentOrganizations
Economic Development
Education
Community Development
Multiple organizations, at various geographies, focused on their specific areas
General agreement on ultimate goal of community prosperity, but differing objectives
Insufficient integration of strategies, with some conflicting or duplicative programs at local, regional, and state levels
Multiple organizations, at various geographies, focused on their specific areas
General agreement on ultimate goal of community prosperity, but differing objectives
Insufficient integration of strategies, with some conflicting or duplicative programs at local, regional, and state levels
Desired Situation
Workforce Development
Economic Development Education
Community Development
Develop coordinated regional level strategies for promoting prosperity
Create alignment between the various organizations about objectives and roles
Promote innovative responses to local challenges by removing government barriers and promoting public-private-non-profit collaboration
Develop coordinated regional level strategies for promoting prosperity
Create alignment between the various organizations about objectives and roles
Promote innovative responses to local challenges by removing government barriers and promoting public-private-non-profit collaboration
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Representative Comments: The Regional Collaboration Challenge
“We need streamlined permitting and zoning processes at the cities and counties. Less feuding among governmental fiefdoms would make this easier.”
“Lack of collaboration among numerous overlapping community organizations is dividing our leadership and our dollars.”
“We need our local media (TV and Radio) to heavily promote a unified regional community in sports, business, economics, education, and other activities. We need their support and a ‘positive outlook” literally pushed into our community”
“Keep Washington politics out of Northern Idaho. This survey should be broken into Washington and Idaho,not count the region as one.”
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The Good News: Regionalism is taking hold
INTEC
West Michigan Strategic Alliance
St. Louis Regional Chamber
NextJobs-New Mexico
Greater Rochester Enterprise
Team NEO
Fund for our Economic Future
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The Global Innovation EconomyRegional Development Imperatives
Focus on Building Talent, Not Attracting New Companies
Protect Quality of Life, Vigilantly
Get Connected: (Regional) Partnerships and Networks are Required
Focus on Incorporating Technology, Not Technology Industries
Attracting Talent is Easy, Developing it is Hard (But Worth It)
Cultivate a Dynamic, Tolerant Culture
What Does a Cluster Look Like? Atlanta Information Technology Cluster
Other Electronic Components
Instruments
Communications Services
Software
Peripherals
Electronic Componentsand Assemblies
Computers
Source: Clusters of Innovation Initiative Report: Council on Competitiveness, Harvard Institute on Strategy & Competitiveness, Cluster Mapping Project , U. S. County Business Pattern Data; ontheFRONTIER interviews
Distribution Related Services
Parts
CommunicationsEquipment
Universities and Training Institutions
Georgia Tech, Emory Community Colleges
Cluster OrganizationsTechnology Alliance of GA; Georgia Research
AllianceAmong National Leaders (1–5)Competitive (6–20)
Position Established (21–40)
Less Developed (41+)
Research Organizations Georgia Research
Alliance, Georgia Tech Institutes,
GCATT
Specialized Risk CapitalVC firms, Angel Networks
Specialized Services(Banking, Accounting,
Legal,)
Government Policy and Government Policy and Regulatory Environment Regulatory Environment GRA, Yamacraw, ICAPPGRA, Yamacraw, ICAPP
