industry cluster approach to workforce and economic development rcci annual conference october 7,...
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Industry Cluster Approach to Workforce and
Economic Development RCCI Annual Conference
October 7, 2003
Lee W. Munnich, Jr.State and Local Policy Program
WithLiz Templin
Extension Educ. - Community EconomicsUniversity of Minnesota
Why this presentation?
Link between workforce development and economic development
A trained workforce is critical for success
Articulating the regions industry clusters can focus community economic development efforts
Objectives
Definition of industry clusters
Adaptation to rural communities
How industry clusters start (case studies)
Role of higher education
Michael Porter’s“Diamond of Advantage”
DemandConditions
Factor
Conditions
Related andSupported Industries
Firm Strategy,Structure,
and Rivalry
Chance
Government
“The Knowledge Economy”
In today’s economy, innovation is survival, no matter what your product or service line is.
Any innovation requires knowledge about the technologies, processes, markets, etc., that make it work
The economic development challenge:providing a fertile environment for innovation
Rural knowledge clusters defined
Innovative, interrelated groups of firms
Located outside metropolitan areas
Deriving competitive advantages through accumulated, embedded, and imported knowledge among local actors and institutions.
Rural Knowledge Clusters: What Matters?
Competitive advantage – e.g. a rich base of skilled workers, access to proximate market opportunities, local entrepreneurial cultureHistorical development and evolution of local knowledge base – rarely appears out of thin airInstitutions – formal and informal; foster the creation, diffusion, and renewal of the local knowledge base
State and Local Policy ProgramIndustry Cluster Studies
Twin Cities Southeast Minnesota
Southwest Minnesota
Northwest Minnesota
NortheastMinnesota
Printing and Publishing
Computers and
Software
Medical Devices
Machinery andMetalworking
Financial Services
Composites
Food Processing
Printing, Publishing, and
Software
Industrial
Machinery and
Computer Manufacturing
Computer and Electrical Components
Manufacturing
Value-Added Agricultural
Cooperatives
Agricultural Equipment Manufacturing
Dairy Processing
Recreation and Transportation
Equipment Manufacturing
Value-Added Agricultural Processing
Wood Products
Tourism
Forest Products
Information Technology
Health Services
Tourism
Industry Clusters Research Steps
1. Economic data on region’s industries
2. Local leaders determine industries to study
3. Focus groups of industry to identify:A. Competitive advantage
B. History
C. Institutional support / needs
4. Policy recommendations
Identifying Clusters:Location Quotient
Measures employment concentration in a particular industry in a particular region
Measure of specializationLQ is calculated as a ratio of the industry’s share of
employment in the region to the industry’s share of employment in the nationLQ > 1 means that concentration of employment in the
industry in the region is higher than concentration of employment in same industry in the nation; i.e. the region specializes in that industry
Case Study Evidence of Rural Knowledge Clusters in Minnesota
Recreational transportation equipment (Northwest Minnesota)
Automation and motion control technologies (Alexandria)
Advanced composite materials (Winona)
Precision Agricultural Machinery (Southwest Minnesota)
Case Example 1:Competitive advantage
Factors that give local firms a market advantage:
Supply or demand in the marketplace
Related industries
Local rivalry
Northwest Minnesota: Key FactsPopulation (2000): 88,472*Major Cities:
Crookston: 8,192East Grand Forks: 7,501Roseau: 2,756Thief River Falls: 8,410
Population Density (pop/sq mi): 11 (Twin Cities: 601; MN state: 62)Population Growth (1990-2000): -2%(MN non-metro: 4%; US non-metro: 9%)Job Growth (1990-2000): 16% (MN non-metro: 25%; US non-metro: 18%)
*Kittson, Marshall, Norman, Pennington, Polk, Red Lake, Roseau counties (Region 1)
Source: Census Bureau; Bureau of Economic Analysis
Thief River Falls
Northwest Minnesota: Recreational Transportation Equipment
Key IndustriesOther transportation
equipment manufacturing (NAICS: 3369/SIC: 3799)
2000 Employment: 2,197, 20,500% more concentrated than U.S. overall
Source: County Business Patterns
Thief River Falls
Competitive Advantage:Recreational Transportation Equipment
Key EmployersArctic Cat (Thief River Falls) 1,500 employeesMachinewell (Grygla) 110 employeesPolaris Industries (Roseau) 2,100 employeesTEAM Industries (Bagley) 250 employees
Source: MN Dept of Trade and Economic Development
Thief River Falls
Northland Community and Technical College
Customized training for engineers
Certificate programs
Continuous quality improvement training
HistoryFarm equipment mfg base
Need for transportation in snow
Heteen et al develop first modern snowmobile, start Polaris
Spins off, starts Arctic Cat
Recreational transportation equipment
NW Minnesota: Rural Knowledge Cluster Profile
Competitive Advantages
Demanding local customersIntense interfirm rivalryDiffusion to new products and industries
Firms and Industries
Snowmobile manufacturing
All-terrain vehicles
Equipment suppliers and machine shopsInstitutions
Northland Community & Technical CollegeMinnesota Job Skills Partnership “Racing culture” – snowmobile racing circuit
Case Example Two:History
An historical base of knowledge about an industry or technology that is used to create new products or services
Alexandria: Key FactsPopulation (2000): 210,059*Major Cities:
Alexandria: 8,820Fergus Falls: 13,471Moorhead: 32,177
Population Density (pop/sq mi): 26(Twin Cities: 601; MN state: 62)Population Growth (1990-2000): 6% (MN non-metro: 4%; US non-metro: 9%)Job Growth (1990-2000): 25% (MN non-metro: 25%; US non-metro:
18%)*Becker, Clay, Douglas, Grant, Otter Tail, Pope, Stevens,
Traverse, and Wilkin counties (Region 4).Source: Census Bureau; Bureau of Economic Analysis
Alexandria
Alexandria: Automation and Motion Control Technologies
Key IndustriesPackaging Machinery
(NAICS: 3339/SIC: 3565)2000 Employment: 1,209, 446% more concentrated than U.S. overall
Machine Shops and Related (NAICS: 3327/SIC: 3599, 3451, 3452)
2000 Employment: 844, 210% more concentrated than U.S. overall
Source: County Business Patterns
Alexandria
Alexandria: Automation and Motion Control Technologies
Key Employers3M (Alexandria) 317 employeesAlexandria Extrusion (Alexandria) 274 employeesBrenton Engineering (Alexandria) 127 employeesDouglas Machine (Alexandria) 492 employeesMinnesota Automation (Crosby) 120 employeesMassman Automation (Villard) 100 employeesSchott Automation (Garfield) 35 employeesThiele Engineering (Fergus Falls) 81 employees
Source: MN Dept of Trade and Econ Development
Alexandria
Alexandria Technical College:
Fluid Power Technology major
Center for Automation and Motion Control (CAMC)
Manufacturing Automation Research Laboratory (MARL)
Customized training
HistoryAg region, craft-like machine shops and equipment mfg
Proximity to markets for packaging equipment
Automation and motion
control technologies
Alexandria: Rural Knowledge Cluster Profile
Competitive Advantages
Industry collective action around shared needsShortage of skilled labor in related industries
Firms and Industries
Industry packaging and material handling machinery
Other light manufacturing industries
Institutions
Alexandria Technical College, Ctr for Automation & Motion ControlMN Mfg Automation CoalitionTri-State Manufacturer’s Assoc.Minnesota Technology Inc.West Central Initiative
Case Example Three:Institutions
formal and informal; foster the creation, diffusion, and renewal of the local knowledge base
Winona: Key FactsPopulation (2000): 112,517*Major Cities:
Winona: 27,069Lake City: 5,054
Population Density (pop/sq mi): 44 (Twin Cities: 601; MN state: 62)Population Growth (1990-2000): 5% (MN non-metro: 4%; US non-metro: 9%) Job Growth (1990-2000): 21%(MN non-metro: 25%; US non-metro:
17%)*Blue Earth, Nicollet and Waseca counties Source: Census Bureau; Bureau of Economic Analysis
Winona
Winona: Advanced Composite Materials
Key IndustriesCustom compounding of
purchased resin (NAICS: 325991/SIC: 3087)
2000 Employment: 517, 537% more concentrated than U.S. overall
All other plastics products manufacturing (NAICS: 326199/SIC: 3089)
2000 Employment: 241, 30% more concentrated than U.S. overall
Source: County Business Patterns
Winona
Winona: Advanced Composite Materials
Key Employers
RTP Company (Winona) 407 employeesCytec Engineering (Winona) 175 employeesTicona Celstran (Goodview) 69 employeesWe-no-nah Canoe (Winona) 75 employeesWatlow Polymer Technologies (Winona) 24 employeesAFC Strongwell (Chatfield) 200 employeesComposite Products Inc. (Winona) 50 employeesCodaBow Composites (Winona) 15 employeesMiken Composites (Caledonia) 15 employeesGeotek (Stewartville) 35 employees
Source: MN Dept of Trade and Economic Development
Winona
Higher Education:Winona State University
The only composites engineering undergraduate program in U.S.Composite Materials Technology Center (COMTEC)
Southeast Technical CollegeCustomized training in process and quality improvement
Advanced composite materials
mfg
Winona: Rural Knowledge Cluster Profile
Competitive AdvantagesDiverse local industry baseSkilled worker base around composite engineeringCooperative relationships Firms and Industries
•Composite materials producers
•Existing products improved through use of composite materials (i.e. canoes, heated plastics, automotive products, violin bows)
Institutions•SAMPE – professional society•Winona St – composite eng•COMTEC – applied R&D/testing•Winona Composites Consortium•Technical college – custom training, technical education
History•Miller Brothers – formed Fiberite after WWII•Initial growth in aerospace, military applications•Spin-off/startup activity to new firms
Case Study Four:Industry Cluster at Risk
Southwestern Minnesota:Precision Agricultural Equipment
Southwestern Minnesota:Precision Agricultural Equipment
Agricultural sprayer technology
Pitfall -- companies doing the same thing, rather than diverse activities around the same technology
Vulnerability from non-local ownership
Needed: New products using existing knowledge
RTS Snapshots of Rural Innovation: Rural Cluster Vignettes
Auto Industry Supply ChainAutomotiveCarpet ManufacturingCraftsFurniture (Household)GamingHosieryHosieryHouseboat ManufacturingOil and Gas
Pottery
Central TennesseeNorthwestern South CarolinaDalton, GeorgiaWestern North CarolinaNortheastern, MississippiTunica County, MississippiCatawba Valley, North CarolinaFort Payne, AlabamaSomerset, KentuckySouthern LouisianaSeagrove, North Carolina
Source: Stu Rosenfeld, RTS http://www.rtsinc.org/rc/rc_home.html
Key Findings of Case StudiesHistory and context are important Core knowledge base can drive multiple industries and applications.Difficulty developing comparable quantitative indicators Non-local ownership risky if production-only“Institutional” and “entrepreneurial” strategies boost rural knowledge clusters
Implications for Economic Development
1. Understand your local knowledge base.A. Identify specialized knowledge (job
classifications)
B. Note firms in similar industry
C. Note underlying technology
D. Consider cluster industry study or Business Retention and Expansion program
2. Foster linkages between firms and local institutions
A. Map linkages and stakeholder relationships; note gaps
B. Emerging workforce training: school-to-work, apprenticeships
C. Incumbent workforce training: customized job training, continuing education, training partnerships
3. Develop strategies for promoting innovation around rural knowledge clusters
A. Research centers
B. Technical assistance to entrepreneurs
C. Risk capital
4. Don’t try to go it alone – promote a regional vision to guide local strategiesA. Labor market is regional
For further information:
Go to
http://www.ruralvitality.org
http://www.hhh.umn.edu/centers/slp/
For further information contact: Lee W. Munnich, Jr. Senior Fellow and Director, State and Local Policy Program Humphrey Institute of Public Affairs University of Minnesota
http://www.ruralvitality.org
http://www.hhh.umn.edu/centers/slp/
(612) 625-7357