Innovation America Innovation America Accelerating the growth of the GLOBAL entrepreneurial innovation economy
Founded by Rich Bendis

Imperative for Regional Connectivity 

Given the increasing globalization of technology, regions must consider new strategies in addressing regional competitiveness and economic growth, and their primary response since the 1980s has been industry cluster development. The art of cluster development was formally introduced, articulated and made famous by Harvard Business School Professor and renowned business strategist Michael Porter in 1990. Traditional cluster development theory is the notion that all the assets, value chains and required skills must be contained within a proximate geographical location. Economic development is then promoted within the cluster by improving the competitiveness of one or several specific business sectors. Bendis had the opportunity to implement a cluster development strategy with Porter as part of the Council on Competitiveness Clusters of Innovation Project (Porter et al, 2001). This strategy helped to build aerospace and defence vehicle and plastics manufacturing clusters in Wichita, Kansas.

However, the evolution of distributed and networked business models compels us to examine the cluster model of ED. For instance, the growth of outsourcing means that larger, fully-integrated corporations are now becoming divested both operationally and geographically. A large pharmaceutical or defence company can be thought of as a network of smaller enterprises, divisions and suppliers. In this context, cluster development acts as a mechanism to provide focus and advise strategy through the alignment of industries and technologies into thematic areas to address growth. However, further tools must be developed to capitalize on strategies that promote innovation not just to support clusters, but to galvanize innovative activity throughout a region.

In today’s environment, regions need to alter their approach from technology-based ED to innovation-based ED. The local knowledge base – including local researchers, scientists, entrepreneurs, government officials and representatives of business and industry – constitutes the region’s critical assets in fostering innovation. The regional talent base often reflects the location’s legacy industries. For example, Detroit’s knowledge base has been historically centred on the automotive industry. With the automotive industry faltering, a new ED approach must be implemented beyond the development of industry clusters. Innovation-based economic development requires Detroit to leverage its regional human capital, but for the purpose of achieving innovative outcomes beyond the automotive industry. Detroit has well-educated people with specialized skills, but to the region’s detriment they have been focused on a single, failing market.

The next component to be understood is how technology is emerging in the region’s industry and local research activities. The regional alignment of key enabling technologies and the local knowledge-base forms competencies that can then be directed towards innovation. Innovation-based ED solutions, then, lie in understanding the connections among these key assets in the regional economy: value must be extracted systematically and the available resources aligned as part of a regional strategy.

Co-author Richard Seline has worked in numerous US regions over the past decade through his consultancy New Economy Strategies. This experience has led to the conclusion that determining whether a region is a hub (that is, a significant concentration of most of the necessary assets and attributes for a given industry) or a node (a concentration of one or two highly critical elements of an industry’s value chain) in specific unique regional competencies fosters appropriate discussion and debate on its ability to concentrate resources, leadership and ultimately collaborative responses on fostering innovation-based ED. Due to the efforts of Seline and New Economy Strategies Greater Detroit, for example, now has a roadmap for collaborative initiatives that will promote innovation in the region (see, for example, NES, 2006). Figure 1 illustrates the New Economy Strategies perspective on global hubs and nodes.

 

The New Economic Strategies perspectives on global hubs and nodes

 

Figure 1. The New Economy Strategies perspective on global hubs and nodes

 

Our knowledge of science, technology and the current global paradigm with respect to numerous regions in the USA highlights the need for regional connectivity. To achieve the full potential of a regional economy, all assets and players in knowledge industries, scientific advancement and technological innovation must be connected. These assets and players include researchers, institutes, companies, investors, business leadership and government officials. Innovation-based ED programmes must be developed to provide mechanisms that accelerate this connectivity.