Promising Practices in Promoting Regional Innovation

1
Promising Practices in Promoting Regional
Innovation

• National Governors Association
• Innovation America Initiative
• Task Force Meeting
• Randall Kempner
• December 5, 2006

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What is Innovation?
21st Century Innovation
A Simple Definition

• the generation, development and and
  implementation of new ideas that create social
  value
• Improves on the existing way of doing things
• Can be a product, process, service, strategy, etc.

• Faster
• Multidisciplinary
• Democratized
• Collaborative/Open
• Global

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Why REGIONAL Innovation?

• Paradoxically, even as innovation has
  globalized, the role of regions as the critical
  nexus for innovation-based economic growth has
  increased. While national and state policies
  create a platform for innovation, the locus of
  innovation activities is at the regional level,
  where workers, companies, universities, research
  institutions, and government interface most
  directly.
• -- Regional Innovation-National Prosperity
• Proximity
• Diversification
• Differentiation

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Regional Innovation Environment
Competitive Assets
Competitive Assets Educational system, research
and development base, technical and scientific
concentration, qualified workforce, quality of
life, concentration of firms, land and building
availability
Linking Institutons and Networks
Formal and informal networks that generate key
relationships and foster innovation Associations,
Chambers, Tech Transfer Offices
Attitudes that support innovation willingness to
partner, risk-taking, tolerance of diverse people
and perspectives, openness to new ideas
Attitudes /Culture
Three levels of analysis are necessary to
understand the dynamics that impact the success
of regions and regional clusters.
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What is a Cluster?
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What is a Cluster?
A cluster is a geographically proximate group of
interconnected companies and associated
institutions in a particular field
Source Professor Michael E. Porter, Harvard
Business School
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Where are Clusters? Everywhere...
Boise Information Tech Farm Machinery
Boston Mutual Funds Medical Devices Mgmt.
Consulting Biotechnology Software and
Networking Venture Capital
Wisconsin / Iowa / Illinois Agricultural Equipment
Minneapolis Cardio-vascular Equipment and Services
West Michigan Office and Institutional Furniture
Western Massachusetts Polymers
Omaha Telemarketing Hotel Reservations Credit
Card Processing
Seattle Aircraft Equipment and Design Software Cof
fee Retailers
Rochester Imaging Equipment
Michigan Clocks
Warsaw, Indiana Orthopedic Devices
Detroit Auto Equipmentand Parts
Hartford Insurance
Oregon Electrical Measuring Equipment Woodworking
Equipment Logging / Lumber Supplies
Providence Jewelry Marine Equipment
New York City Financial Services Advertising Publi
shing Multimedia
Silicon Valley Microelectronics Biotechnology Vent
ure Capital
Pennsylvania / New Jersey Pharmaceuticals
Las Vegas Amusement / Casinos Small Airlines
Pittsburgh Advanced Materials Energy
North Carolina Household Furniture Synthetic
Fibers Hosiery
Los Angeles Area Defense Aerospace Entertainment
Wichita Light Aircraft Farm Equipment
Cleveland / Louisville Paints Coatings
Tucson Optics
Baton Rouge / New Orleans Specialty Foods
Dalton, Georgia Carpets
Dallas Real Estate Development
Southeast Texas / Louisiana Chemicals
Nashville / Louisville Hospital Management
Colorado Computer Integrated Systems /
Programming Engineering Services Mining / Oil and
Gas Exploration
South Florida Health Technology Computers
Source Adapted from Professor Michael E. Porter,
Harvard Business School
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Whats So Good About Clusters?

• Increase Efficiency
• Efficient access to information, specialized
  inputs and employees, institutions, and public
  goods
• Easier to achieve complementarities across
  businesses
• Facilitate New Business Formation
• Easier to identify opportunities for new
  businesses
• Lowers barriers to entry (including perceived
  risk)
• Spur Innovation
• Improved ability to perceive and respond to
  innovation opportunities
• More rapid diffusion of improvements

A good way to organize firms for increased
productivity A good way to organize economic
development policy efforts
Source Professor Michael E. Porter, Harvard
Business School
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How are cluster-based strategies different than
traditional ED strategies?
Cluster
Hey, lets get all the related and supporting
institutions
Supply Chain
Lets get the auto part suppliers
Industry
Lets get a Ford plant, too
Firm
Lets get a GM plant
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What Are Some Potential Difficulties with
Clusters?

• As Analytical Tools
• Many different ways to measure clusters
• Need national benchmarks AND local measures to
  reflect regional conditions
• Sometimes regions get stuck in analysis paralysis
• As Organizational Method for Economic Development
  Policy Initiatives
• What if you arent in a chosen cluster?
• Need to convince local businesses that traded
  clusters will benefit all
• May lead to lack of focus on fundamentals
  (education, quality of life)
• As Indicators of Economic Growth Areas
• Much innovation takes place at the intersection
  of clusters
• You might miss it
• Bioinformatics, Agribusiness

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How Do Clusters Develop?

• Initial (Natural) Resource Base
• Pittsburghs Steel
• Historical Legacy (Large Local Markets)
• New Yorks Financial Services
• Luck/Serendipity
• Galvestons Insurance
• Supportive Business/Regulatory Environment
• Wilmingtons Credit Cards
• Consciously Designed Initiatives
• Austins semiconductors

Now, usually a mix of reasons
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San Diego Pharmaceuticals / Biotech Cluster
Research
Inputs
Pharmaceuticals and Related Products
UCSD Labs and Hospitals
Specialty Chemicals
Pharmaceutical Products (Manufacturing)
Salk
Containers
Scripps
Burnham
Kimmel
Packaging
Private Firms
Human Capital Providers
Cluster/University/Government Relationship
Providers
Specialized Risk Capital
Specialized Support Services
BIOCOM
Banks
Venture Capital Firms
Community Colleges
Legal Services
Angel Networks
UCSD
UCSD CONNECT
Accounting Firms
SDSU
Science and Technology Council
Source Harvard Institute on Strategy
Competitiveness, Cluster Mapping Project , U. S.
County Business Pattern Data Council on
Competitiveness, ontheFRONTIER interviews
National Leader
Nationally Competitive
Less Developed
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Keys to Cluster Success Five shoulds What
should state government do to support clusters?

• 1. Recognize the Primacy of Human Capital
• Focus on building world-class Pre through 16
  educational system
• Retraining and lifelong learning programs are
  critical
• 2. Understand Regional Competitive Advantages and
  Build on Existing Strengths
• Build programs around regional partnerships and
  strengths
• Matters more how the cluster competes than in
  what industry the cluster competes
  (innovation-based strategies)
• 3. Develop Integrated Economic and Workforce
  Programs focused on Clusters
• Private sector should lead the creation of
  cluster efforts that leverage government programs
• Government should address barriers, encourage
  cross-sector collaboration, and know when to say
  NO
• 4. Seek the Participation of Firms Seeking to
  Innovate in the Region
• Promote retention, expansion, and
  entrepreneurship before attraction
• If any preferential treatment to be given, make
  sure firms commit as well ( job targets, wage
  levels)
• 5. Seek to Win Globally
• In this global economic environment, competition
  can come from anywhere

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Thank You!
Randall Kempner Vice President Email
rkempner_at_compete.org Website www.compete.org
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Five Pitfalls of Regional Economic Development
Initiatives

• Failure of Perspective
• Failure to understand position of region within a
  GLOBAL context
• Failure to identify/accept root causes of
  problems and barriers to change
• Failure of Consensus
• Failure to develop a shared economic development
  vision
• Failure to translate vision into specific
  economic development goals
• Failure of Design
• Failure to include participant learning as key
  aspect of project success
• Failure to include short-term wins within plans
• Failure of Leadership
• Failure to involve right people throughout the
  process
• Failure to energize broad community support for
  action initiatives
• Failure of Nerve
• Failure to make tough choices about priorities
• Failure to proceed with implementation in the
  face of criticism

Source adapted from Jeep (1993) and Segedy
(1994) by Prosperity Strategies
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Keys to Cluster Success Five shoulds What
should state government do to support clusters?

• 1. Recognize the Primacy of Human Capital as
  primary source of advantage
• Short term Competitive advantage rests
  ultimately on the development and deployment of
  highly skilled human capital
• Retraining and lifelong learning programs are
  critical
• 2. Understand Regional Competitive Advantages and
  Build on Existing Strengths
• Build programs around regional partnerships and
  strengths
• Matters more how the cluster competes than in
  what industry the cluster competes
  innovation-based is best
• 3. Develop Integrated Economic and Workforce
  Programs focused on Clusters
• Private sector should lead the creation of
  cluster efforts that leverage government programs
• Government should address barriers, encourage
  cross-sector collaboration, and know when to say
  NO
• 4. Seek the Participation of Firms Seeking to
  Innovate in the Region
• Promote retention, expansion, and
  entrepreneurship before attraction
• If any preferential treatment to be given, make
  sure firms commit as well ( job targets, wage
  levels)
• 5. Seek to Win Globally
• In this global economic environment, competition
  can come from anywhere

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Checklist for Developing Innovative Clusters

• Inventory your Regional Assets (Networks and
  Attitudes)
• Think Economically, Not Politically
• Identify Private Sector Champions
• Build on your Strengths
• Develop the Talent
• Invest in Research
• Provide Seed and Venture Capital
• Sustain your Infrastructure
• Create Connections
• Take the Long View

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Regional Innovation InitiativesKey
Cross-Regional Issues

• Building and Retaining Talent
• Transitioning to Advanced Manufacturing
• Networking Knowledge Assets
• Energizing the Entrepreneurial Economy
• Regionalism

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Ideal Regional Integration
Present Situation
Desired Situation
Community Development
Workforce Development Organizations
Economic Development
Education
Community Development
Workforce Development
Education
Economic Development

• Multiple organizations, at various geographies,
  focused on their specific areas
• General agreement on ultimate goal of community
  prosperity, but differing objectives
• Insufficient integration of strategies, with some
  conflicting or duplicative programs at local,
  regional, and state levels

• Develop coordinated regional level strategies for
  promoting prosperity
• Create alignment between the various
  organizations about objectives and roles
• Promote innovative responses to local challenges
  by removing government barriers and promoting
  public-private-non-profit collaboration

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Representative Comments The Regional
Collaboration Challenge

• We need streamlined permitting and zoning
  processes at the cities and counties. Less
  feuding among governmental fiefdoms would make
  this easier.
• Lack of collaboration among numerous overlapping
  community organizations is dividing our
  leadership and our dollars.
• We need our local media (TV and Radio) to
  heavily promote a unified regional community in
  sports, business, economics, education, and other
  activities. We need their support and a positive
  outlook literally pushed into our community
• Keep Washington politics out of Northern Idaho.
  This survey should be broken into Washington and
  Idaho,not count the region as one.

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The Good News Regionalism is taking hold

• INTEC
• West Michigan Strategic Alliance
• St. Louis Regional Chamber
• NextJobs-New Mexico
• Greater Rochester Enterprise
• Team NEO
• Fund for our Economic Future

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The Global Innovation EconomyRegional
Development Imperatives
Focus on Incorporating Technology, Not Technology
Industries
Focus on Building Talent, Not Attracting New
Companies
Attracting Talent is Easy, Developing it is Hard
(But Worth It)
Protect Quality of Life, Vigilantly
Cultivate a Dynamic, Tolerant Culture
Get Connected (Regional) Partnerships and
Networks are Required
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What Does a Cluster Look Like? Atlanta
Information Technology Cluster