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

Lmunnich@hhh.umn.edu

http://www.ruralvitality.org

http://www.hhh.umn.edu/centers/slp/

(612) 625-7357