Industrial Insight

Clusters and competitiveness… | July 18, 2011

http://www.washingtonpost.com/national/on-innovations/industry-clusters-the-modern-day-snake-oil/2011/06/19/gIQAMtx3EI_story.html
Vivek Wadhwa Columnist

Industry clusters: The modern-day snake oil

The formula for creating these clusters is always the same: Pick a hot industry, build a technology park next to a research university, provide incentives for businesses to relocate, add some venture capital and then watch the magic happen. But, as I have noted before, the magic never happens. Most of the top-down cluster-development projects in the United States and around the world have died a slow death in relative obscurity. Politicians who held the press conferences to claim credit for advancing science and technology are long gone. Management consultants have cashed in their big checks. Real estate barons have reaped fortunes, and taxpayers are left holding the bag.

….

Harvard Professor Michael Porter’s outdated cluster theory lies at the heart of what is wrong with these common prescriptions. He observed that geographic concentrations of interconnected companies, specialized suppliers, and service providers gave certain industries a productivity and cost advantage. His legions of followers postulated that by bringing these ingredients together into a “cluster,” regions could artificially ferment innovation. They just needed to build the right infrastructure and bring together chosen industries.

A recent analysis of 1,604 companies in the five largest Norwegian cities underscores what’s missing from this prescription for a knowledge economy: people. The prerequisite for a regional innovation system is knowledgeable people who have the motivation and ability to start ventures. To succeed, these people need to be connected to one another by information-sharing networks. Basic infrastructure is always needed, but fancy science parks and big industry are just nice to have.

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About author

I'm the executive vice president for a steel casting trade association, the Steel Founders' Society of America. I've got a crazy wife, five crazy children, three crazy people that married into the family, and two crazy fun little grandsons.

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