The U.S.ClusterMappingProject: A New Tool For Regional Economic DevelopmentMercedes Delgado, Temple University and ISC Scott Stern, MIT Sloan and NBERU.S. Cluster Mapping Launch EventUniversity of Minnesota, Minneapolis, MNSeptember 29th, 2014Please cite: U.S. Cluster Mapping, Institute for Strategy and Competitiveness, Harvard Business School. Copyright © 2014 President and Fellows of Harvard College. All rights reserved. Research funded in part by the U.S. Department of Commerce, Economic Development Administration.Outline•Clusters Are Everywhere•Clusters Matter•Cluster Mapping as a Tool for Economic Development•Clusters Going Forward2Clusters Are EverywhereAutomotive cluster in OntarioWine cluster in South AustraliaMedical Devices in MinneapolisMotion Picture cluster in LA(Universal Studios, 1915)Aclusterisaregionalconcentrationofrelatedindustriesconnectedthroughvarioustypesoflinkagesandspilloversandsupportinginstitutions3How Important are Clusters? •Morethan50%ofU.S.privatepayrollaregeneratedineconomicsectorsthat‘cluster’•Inthetradedeconomy,productivity,wage,andpatentingaresignificantlyhigherthanintheaverageoftheeconomy•Roughly44%oftradedemploymentisinstrongclusters(i.e.regionalclusterswithsignificantcriticalmass)•Regionsatallstagesofdevelopmentbenefitfromclusterpresence•ThereissignificantvariationintermsofclusterpresenceandclusterportfoliocompositionacrossU.S.regions4Traded vs. Local Share of the U.S. EconomyEMPLOYMENTINCOMEPATENTS36%64%51%49%91%9%Clusters Across US Regions Boston,MA-NHFinancialServicesIT&AnalyticalInstrumentsBiopharmaceuticalsSanJose-SanFrancisco,CAITandAnalyticalInstrumentsVideoProduction&DistributionMarketing,Design&PublishingNewYork,NY-NJ-CT-PAFinancialServicesPerformingArtsMusic&SoundRecordingSeattle,WAAerospaceVehicles&DefenseIT&AnalyticalInstrumentsChicago,IL-IN-WIDistribution&E-CommerceTransportationandLogisticsUpstreamMetalMfgRaleigh-Durham,NCLivestockProcessingVulcanized&FiredMaterialsEducation&KnowledgeCreationSource: Prof. Michael E. Porter, Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School; Richard Bryden, Project Director.Pittsburgh,PAUpstreamMetalMfgCoalMiningElectricPowerGenerationSanDiego,CARecreational&SmallElectricGoodsBiopharmaceuticalsWaterTransportationAtlanta,GATextileMfgApparelCommunicationsEquipmentHouston,TXOilandGasProductionConstructionProducts&SvcEnvironmentalServices5Do Clusters Matter?6Do Regions Specialized in Clusters Grow Faster?•Datachallenge•Clustersareeverywhere,buthowdowemeasurethem?•Weneedbenchmarkclusterdefinitionsthatallowustocompareclustersacrossallregions•Methodologicalchallenge•Clustertheorysuggestsagglomerationarisesacrossrelatedeconomicunits(Porter1990,1998)•Weneedamethodthatallowsustocaptureagglomerationthatarisesamongrelatedindustries•Importantpriorwork(e.g.,Glaeseretal.1992,2010)focusedontestingtheimpactofspecificagglomerationchannelssuchaslocalizationorurbanizationeconomies7•IndustriesintheCountyBusinessPatternsdataaregroupedempiricallyinto3types:•Local•Natural Resource Dependent•Traded•Traded industriesare grouped into 41 Traded Clusters•Basedonco‐locationpatternsofindustryemploymentacrossregionstocapturerevealedlinkagesofvarioustypes•Finalclustergroupingsinformedbyexpertjudgment•ClustersoftencontainmanufacturingandserviceindustriesandindustriesfromdifferentpartsoftheSICsystemAddressing the Data ChallengeThe US Cluster Mapping Project V 1.0 (Porter, 2003)8Do Clusters Matter?•Clustertheorysuggestsagglomerationarisesacrossrelatedeconomicunits(Porter,1990,1998,2003)•OurApproach:Ifclustersmatter,thenthegrowthofanindustryinaregionwillbeincreasinginthestrengthoftheregionalclusterwithinwhichthatindustryoperates•Cluster‐driven agglomeration could arise in different channels:•Across related industries Within a Cluster•Across Related Clusters•Across the Same Cluster in Neighboring Regions9Clusters and JobsNote:AverageRegion-IndustryAnnualizedEmploymentGrowthover1990-2005.Region(EA)andIndustry(4-digitSIC).N=55083.ClusterspecializationvariableismeasuredbyLocationQuotient.Highmeansabovethemedianofthevariables.INDUSTRY SPECIALIZATIONLowHighCLUSTERSPECIALIZATIONStrength of Regional Clusters (presence of related industries)Low+13%0%High+20%+1%•Industries within stronger clusters are associated with higher levels of job growth from the early 1990s to the mid‐2000s10•Wetesttheroleofclustersbyestimatingregion‐industryemploymentgrowthover1990‐2005asafunctionoftheinitialIndustrySpecializationandClusterSpecialization(outsidetheindustry)inaregion,andasetofregionandindustryfixedeffectsClusters and EntrepreneurshipGrowth in Start‐up EmploymentLevel of Employment in Start‐up SurvivorsLevel of New Business FormationSource: Delgado/Porter/Stern, Clusters and Entrepreneurship, Journal of Economic Geography, 2010CLUSTERENVIRONMENT Within a Cluster Related Clusters Neighboring ClustersIndustries that are part of a strong cluster environment register •higher growth ofstart‐up activity•higher level ofstart‐up activity•higher