Monday, 28 October 2013

Microclusters: a more targeted economic development model?


Aaron Renn gets the concept of 'clusters' bang on here:

If you look at the list of target industries for any given city or state, you usually find several from the same list of five common items: high technology, life sciences (under various names), green tech, advanced manufacturing, logistics. Take a few from this list, and add a legacy industry if there’s one or two where you are already particularly strong, and there you have it.

The problem is, as Aaron points out, that everybody is chasing the same clusters using the same strategies. And this means that most of the time the winners in the 'cluster battle' are those with a broad economic base, more businesses and greater variety. In the UK that's London and the South East.

The cluster strategies of Yorkshire Forward and the other northern Regional Development Agencies (RDAs) failed to deliver on their general clusters (which, of course, were drawn straight from Aaron's list). However, the concept of 'microclusters' - much more specific business ecosystems - may make more sense for driving economic development:

One way to stand out is a concept I’ve called “microclusters”. That is, rather than simply saying “We’re high tech”, you have some specialty within the broader tech industry where you can be a real national leader.

Indeed the idea of 'high technology' applies to almost every industry so being the place at the forefront in a specific element of on-line business (e.g. encryption or, in the example Aaaron cites, Internet marketing technology) means a more genuine 'cluster' that just having a clutch of businesses that are vaguely connected by the tag: "high tech".

I don't think these 'microclusters' will respond to planning - given the variety of start-up businesses - but they should benefit from inward investment and place marketing. In Bradford -  people are welcome to add to this list - we've two (possibly three) microclusters: the South Asian food business (both running restaurants and also making/distributing meals or ingredients) and blinging up cars. These are growing, have a local economic base as well as a wider appeal and draw on Bradford's distinct advantages.

Perhaps this gives us a different way of thinking about - and perhaps supporting the development of - local economies? What I do know is that it's a better bet than the 'cluster theory' that dominated the economic development strategies of the RDAs - that definitely failed.


1 comment:

Nigel Sedgwick said...

Creating clusters would be less important if there were more workforce mobility.

Stamp Duty Land Tax penalises mobility for those on middle and higher levels of pay (as is common in hi-tech and especially for the more experienced staff).

This affects not only the individual workers, but also their new companies - relocation packages are more expensive. So companies will favour setting up where there is less need for relocation than would be the case if relocation were not taxed.

So cluster formation is a local government response to a problem created at least partially by a national government tax.

Best regards