Targeting a Portfolio of Clusters (cont.)

Selecting clusters

Figure 1.

Using the two levels of analysis, market strength and market activity, a simple foursquare matrix helps provide a framework for selecting and targeting clusters. Plotting inputs of market strength on a vertical axis and outputs of market activity on a horizontal axis describes the position of any particular industry in terms of the strength of the local economy to support it and the concentration and activity of the industry. This methodology provides a framework for understanding the mix of industry clusters and how they relate to each other in terms of development and positioning.

The resulting diagram (Figure 1) describes the lifecycle stages of industry clusters. Industry clusters can grow, mature and fade in local economies over the long-term, and understanding that positioning is critical to applying targeted cluster strategies to the right industries and for selecting a portfolio of industries that will provide long-term economic development. The primary cluster lifecycle phases include: 1) developing clusters, 2) maturing clusters, 3) established clusters, and 4) declining clusters. The matrix identifies the lifecycle of each cluster by plotting its key inputs and outputs.

• Developing clusters: Clusters that fall in the bottom left square are developing. These industries show early signs of strength and activity but lack critical inputs of support to drive robust outputs of jobs and wage growth. These industries have long-term potential to be major clusters in a region.

• Maturing clusters: Maturing clusters, in the top-left quadrant, have high market strength but relatively low market activity. For these industries, the local economy presents a strong opportunity for development. For example, a region may have emerged only recently as a player in a certain research field, but the private sector has not yet discovered the region. This sector presents longerterm opportunities to leverage the regional market’s strengths to develop a strong industry cluster.

• Established clusters: Industries falling in the top-right square have high market strengths and high market activity, established clusters with a strong local presence. These clusters provide for job growth through job retention and expansion plans.

• Declining clusters: Declining clusters, in the bottomright square, show high levels of market activity but declining levels of market strength. Generally, these clusters have an increasingly difficult time competing based on macro-level changes in the competitive environment.

Once industries are plotted based on their market strength and market activity, it becomes easier to select a diverse range of industries for specific targeting. How should economic developers use this information in selecting their clusters? First, be selective. A list of 10 to 15 industries is too many. Even for the largest economic development offices, a long cluster list presents significant challenges for targeting and communicating to constituents and prospective companies. Clusters should be examined critically to assess the long-term prospects of supporting a comprehensive cluster program; focusing specifically on a few clusters will have higher returns than just grazing the surface of many.

Second, select a diverse roster of clusters both in terms of the lifecycle stage and the types of jobs created. The following section is dedicated to a discussion of cluster lifecycles and how selecting a diverse set of clusters can build a stable economy and help the economic development organization to allocate resources efficiently and strategically.

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