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Implications For Regional Industrial Development Policy
Our findings indicate that the development of an industry cluster can provide significant advantages to local firms and the area economy. The principal shortcomings inherent with a clusters strategy relate to the difficulty of establishing a cluster in a location where an industry grouping is not present. The key for policy prescription, therefore, is to compare the costs of initiating or expanding a cluster with the potential benefits of a successful cluster development. Based on these potential costs and benefits, we believe that most regions will fall into one of the three categories with respect to the
advisability of adopting a clustering strategy.
One, regions with well developed industry clusters will likely find that programs to expand these clusters will be reasonable strategies for industrial development. Three program initiatives are recommended by Rosenfeld. Regions can support the development of industry organizations that help firms develop a shared vision, identify similar interests, and pursue new opportunities. Regions can assist in creating broker services that help firms discover what they need and where to find it. Services include analyzing market and technology trends; encouraging cooperation and collaboration in the areas of marketing, sales, and input purchases; and providing applied research, labor training, and business assistance programs. Regions can provide a subsidized center that focuses on the needs of a specific industry cluster. Services of such centers include training in technologies and management techniques, sponsoring research, and providing access to information.
Two, regions with small industry clusters may wish to pursue a cluster promotion strategy if such a strategy is not too costly. Smaller clusters generally will be at a disadvantage in competing with larger, established industry clusters. To be competitive, regions with smaller clusters may need to offer financial inducements to prospective firms, invest in specialized infrastructure, and/or subsidize labor training programs. The costs of these programs may be small or large depending on the specific industry, area characteristics, and the head start attained by earlier clusters. Thus, assessments of the costs of overcoming latecomer disadvantages must be undertaken on a case by case basis.
Three, regions with no distinct industry clusters (or clusters of declining sectors) will likely find little success from a clustering strategy. In this case, state and local governments should focus their efforts on efficiently providing local public services and improving the quality of the regional labor force. Such efforts, in conjunction with an active small business development program, will provide these areas with a receptive environment for the “historical accident” that could possibly be nurtured into a new industry cluster.
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In summary, the promotion of industry clusters is not an industrial development solution for all areas. The clustering approach is most promising for areas with existing, well-developed clusters in growing industries. Regions with concentrations in declining sectors or areas with diverse industrial bases probably should continue to concentrate their industry development resources in the more traditional program areas -- recruitment, small business development, retention and expansion. The difficulties and costs associated with developing new industry clusters in these regions render clustering an impractical employment generation strategy.