1. New Industries and the Process of Regional
Diversification – The Role of Clusters
Prof. Christian Ketels
Harvard Business School, Stockholm School of Economics, and EBS

2. A New Era for Cluster Policy
Old Industrial Policy Current Cluster Policy The Challenge Ahead
• Creating winners? • Enabling new
• Backing winners!
• Backing losers! winners to emerge
FAILURE PARTIAL SUCCESS
European Commission
Enterprise and Industry 26.04.2012 2

3. Sources of Cluster Emergence
POLICY
Location Existing Clusters
Business Environment
Natural Resources Entrepreneurs
Context for competition across regions
European Commission
Enterprise and Industry

4. Clusters and Entrepreneurship
The stronger the
cluster , the higher
CLUSTER the survial rate of Survial Rates
new businesses of New Businesses (+)
The stronger the
cluster, the more
New Industries (+) New Business Formation (+) dynamic is the
process of new
business formation
The stronger the cluster, the more
likely new industries within the cluster
are to emerge
The stronger
the cluster, the Job Growth
higher the job In New Businesses (+)
growth in new
businesses
European Commission
Enterprise and Industry
Source: Porter, The Economic Performance of Regions, Regional Studies, 2003; Delgado/Porter/Stern, Clusters and Entrepreneurship, Journal of Economic Geography, 2010;
Delgado/Porter/Stern, Clusters, Convergence, and Economic Performance, mimeo., 2010.

5. Transformation of Clusters:
Gothenburg Automotive Cluster
Textiles
1907
Roller bearings
1924
Vehicles
1956
Vehicle safety
Telematics 2001
European Commission
Enterprise and Industry
Source: Sölvell, 2009
Source: Sölvell, Lindqvist,,2011

6. Related Clusters and Regional
Diversification
Textiles
Sporting,
Footwear Construction
Recreation Plastics
Leather Materials
and Children’s Furniture
and Goods Building
Sporting Oil and Fixtures,
Goods Chemical
Gas Equipmen
Products
Financial t and
Apparel Services Services
Pharma- Heavy
ceuticals Construction
Forest
Products Education Services
Publishing Prefabricated
and Printing and Medical
Knowledge Devices Enclosures
Agricultural Creation
Products Aerospace
Analytical
Information Instruments Vehicles & Aerospace
Fishing &
Technology Defense Engines
Fishing Automotive
Processed Products
Food Lightning &
Transportation Communi-
Electrical Metal
and Logistics cations
Equipment Manufacturing
Equipment Production
Hospitality Power Technology
Heavy
and Tourism Generation Machinery
Jewelry &
Entertainment Motor Driven
Tobacco Precious
Products
Metals Business Distribution
Services Services
European Commission
Enterprise and Industry
Note: Clusters with borders or identical colors/shading except gray
Source: Porter, The Economic have at least 20% overlap of industries by number in both directions and Entrepreneurship, Journal of Economic Geography, 2010;
Performance of Regions, Regional Studies, 2003; Delgado/Porter/Stern, Clusters
Delgado/Porter/Stern, Clusters, Convergence, and Economic Performance, mimeo., 2010.

7. Transformation of Regional Economies:
San Diego, California
The San Diego Economy
• Existing cluster Hospitality and Tourism
portfolios have a Sporting and
Climate and
significant impact on the Leather Goods
Geography Transportation
evolutionary path of and Logistics
regional economies
Power Generation
(Neffke et al, 2009; Aerospace Vehicles Communications
Boschma et al. 2011) and Defense Equipment
U.S. Military Information Technology
• Clusters provide a Analytical Instruments
powerful analytical tool
Education and
to understand Knowledge Creation
Medical Devices
diversification and the
emergence of new Bioscience Biotech / Pharmaceuticals
economic activities Research
Centers
1910 1930 1950 1970 1990
Source: Porter, Monitor Company, Council on Competitiveness (2003)
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Enterprise and Industry

8. Specialization Patterns and Economic
Policy: Two Views
“What you do” “How you do it”
Structural
Transformation
(Lin)
Clusters
Economic
Complexity
(Hausmann et al.)
• To get rich, do what • To get rich, do what
European Commission
rich locations do you do best
Enterprise and Industry

9. Specialization Patterns and Economic
Policy: Smart Specialization in the EU
The Challenge:
How to support structural change towards higher value-added activities?
The Old Answer: The New (Smart Specialization) Answer:
• Identify growing markets and try to enter • Identify your assets, including your existing
them (bio, nano, eco, …) cluster base
• Actively pursue opportunities in areas
adjacent to current strengths and leading
towards higher value added
• Failure to succeed in intensely • Longer-term development of sustainable
competitive markets without unique competitive advantages
European Commission
assets Enterprise and Industry

10. Enabling Emergence:
How Cluster Mapping Data can help
…the EU and national governments …regional governments
In which regions is a What new clusters
new cluster category are likely to emerge
likely to emerge? in our region?
• Identify regions with growing industries or • Identify opportunities within existing
firms in the emerging clusters regional clusters
• Identify regions with existing strong • Identify clusters adjacent to existing
clusters in related cluster categories regional clusters
• Identify regions with relevant business • Identify growing industries and firms
environment strengths outside of existing regional clusters
• Identify regional business environment
strengths not leveraged by current clusters
European Commission
Enterprise and Industry 26.04.2012 10

11. A New Type of Cluster Program
Backing Winners Enabling Emergence
Cluster effort success factors
• Strong cluster √ x
• Strong cluster organization √ ~
• Clear strategy √ ~
• Require funding for • Require seed funding for
large scale investments exploration
• Moderate risk; • Require technical support
evaluation to keep for collaboration
implementation process • High risk; evaluation to
on plan weed out nonperforming
efforts
European Commission
Enterprise and Industry 26.04.2012 11

12. Emerging Industries and Clusters
• This is hard
• Clusters are a powerful diagnostic and policy tool
• Effective policy needs
to integrate three Linkages
dimensions: Cluster
Mobilization
Supply Demand
Knowledge Market
Creation Creation
European Commission
Enterprise and Industry 26.04.2012 12