By Christian Ketels, Harvard Business School, USA and TCI President, presented at the 16th TCI Global Conference, Kolding 2013.

1. 1 Copyright 2013 © Christian Ketels
Regions, Competitiveness, and Clusters
Christian Ketels
Business Summit: Strategic Innovation Partnerships
4 September 2013

2. Regions, Competitiveness, and Clusters
Dr Christian H. M. Ketels
TCI, HBS
2013 TCI Conference
Kolding, Denmark

3. 3 Copyright 2013 © Christian Ketels

4. 4 Copyright 2013 © Christian Ketels
Why the Traditional Focus on Central Government?
Nation = Laws
Nation = Money
Nation = Markets

5. 5 Copyright 2013 © Christian Ketels
Supporting Economic Growth
Macroeconomic
Management
(DEMAND)
Microeconomic
Upgrading
(SUPPLY)
Sustainability
Stimulus
Policy Framework
Policy Action

6. 6 Copyright 2013 © Christian Ketels
What Action to Take – and Where
Capital
Knowledge
Institutions
Evolution of
Classical Approaches
Emerging
New Insights
• A range of factors matters;
there is no ‚silver bullet‘
• Individual factors are
interdependent in their
impact on prosperity
• The location-specific
context is critical to identify
key levers to enable growth

7. 7 Copyright 2013 © Christian Ketels
Why the New Focus on Regions?
Region = Linkages
Region = Local Knowledge
Region = Cluster

8. 8 Copyright 2013 © Christian Ketels
Why Regions Should Be Concerned about Clusters

9. 9
Clusters Drive Regional Economic Performance
Prosperity Entrepreneurship Structural Change
Positive correlation between
share of regional
employment in strong
clusters (breadth of clusters;
related cluster strength) and:
• Wages
• Productivity
• Job growth
Positive correlation between
share of regional
employment in strong
clusters (strength of related
cluster) and:
• New business formation
in new/existing industries
• Survival of new firms
• Job growth in new firms
Path of structural change
(emergence of new clusters)
in regional economies is
driven by legacy of
composition (portfolio of
existing clusters)
e.g. Porter (2003), Greenstone (2008).
Delgado/Porter/Stern (2012),
e.g., Delgado/Porter/Stern (2011),
Lindqvist/ Wennerberg (2008)
e.g., Neffke et al (2009);
Boschma et al. (2013)

10. 10 Copyright 2013 © Christian Ketels
Clusters Enhance the Value of
Good Business Environments
0%
2%
4%
6%
8%
10%
Industry Cluster Industry Cluster
WEAK
Business Environment
STRONG
Business Environment
Specialization measured by employment LQ
Impact of higher
employment LQ
on wages
Source: Ketels/Protsiv, 2013

11. 11 Copyright 2013 © Christian Ketels
Performance
Functional
Type/Density
Cluster Networks Provide Social Capital
Business
Environment
Quality
Government
Capacity
Cluster
Size
Geographic
Location
Natural
Assets
Culture/
Social Capital

12. 12 Copyright 2013 © Christian Ketels
In What Ways Can Regions Leverage Clusters?

13. 13 Copyright 2013 © Christian Ketels
The Role of Different Levels of Government
The Old View
National Government
Regional Government
SETS THE
LEGAL CONTEXT
MAKES
INVESTMENTS
PROVIDES
TOOLS
EXECUTES

14. 14 Copyright 2013 © Christian Ketels
The Role of Different Levels of Government
The New View
National Government
Regional Government
SETS THE
LEGAL CONTEXT
MAKES
INVESTMENTS
PROVIDES
TOOLS
EXECUTES
LEVERAGES
ATTRACTS MOBILIZES

15. 15 Copyright 2013 © Christian Ketels
How Regional Government Can Leverage Clusters
LEVERAGE
• What dimensions of the business
environment to strengthen?
• Use cluster data to identify critical mass
• Use cluster groups to get insights
MOBILIZE
• What networks to mobilize? How?
• Use cluster data to identify presence
• Use clusters to define a scope that
matters to companies
ATTRACT
• What skills, firms, investors to attract? How?
• Use clusters to identify targets
• Use clusters to sharpen the message

16. 16 Copyright 2013 © Christian Ketels
Lessons
• For national government – acknowledge regional diversity
• For regional government – have a comprehensive strategy
• For companies – take the initiative
• For cluster initiatives – use and serve (also) the region

17. National Government:
Align Cluster Policies With Regional Characteristics
Competitiveness
• Business environment quality
• Company Sophistication
• Cluster presence
Capacity
• Social capacity
• Technical skills of the public
administration
Political power
• Size
• Legal competences
Profile
• Geographic location
• Sectoral specialization
Select objectives
• Mobilize existing clusters
• Test potential of emerging clusters
• Channel to upgrade business
environment/companies
• Strengthen trust
Create or use policies
• Design regional policies
• Draw on EU/national policies
Set the scope
• Set number of clusters
• Set financial budget
Characteristics
of the Region
Characteristics
of the Cluster Policy

18. 18 Copyright 2013 © Christian Ketels
Regions: Integrate Clusters into a Broader Strategy
Business
Environment
Cluster
Portfolio
Positioning
• Identifies, communicates, and strengthens
the specific value proposition of the location
• Accelerates growth in
those fields where the
location has strengths
• Enables the emergence
of new clusters from
existing clusters
• Improves the
economic platform
for all clusters and
companies

19. 19 Copyright 2013 © Christian Ketels
Companies: Drive Cluster Initiatives
• Initiate/
Convene
• Co-Finance
• Participate in
activities
• Propose
relevant
clusters
• Define cluster
action
priorities
• Drive activities
Government
may
Firms
should

20. 20 Copyright 2010 © Christian Ketels
Cluster Initiatives:
See the Region Behind the Cluster
Context for
Firm
Strategy
and Rivalry
Related and
Supporting
Industries
Factor
(Input)
Conditions
Demand
Conditions
• Sophisticated and demanding
local customers and needs
– e.g., Strict quality, safety, and
environmental standards
– Consumer protection laws
• Local rules and incentives that
encourage investment and
productivity
– e.g. incentives for capital investments, IP
protection, corporate governance
standards
• Open and vigorous local
competition
− Openness to foreign competition
− Strict competition laws
• Access to high quality business
inputs
– Human resources
– Capital availability
– Physical infrastructure
– Administrative
infrastructure (e.g., business
registration, permitting,
transparency)
– Scientific and technological
infrastructure
• Availability and depth of suppliers and
supporting industries
• Presence of Institutions for
Collaboration (IFCs) that support
productive coordination and
collaboration among actors
Plastic
s
Oil and
Gas
Chemi
cal
Produc
tsPharm
a-
ceutica
ls
Power
Generation
Aerospace
Vehicles &
Defense
Lightning &
Electrical
Equipment
Financial
Services
Publishing
and Printing
Entertainment
Hospitality
and Tourism
Transportation
and Logistics
Information
Technology
Communi-
cations
Equipment
Medica
l
Device
s
Analytical
Instruments
Education
and
Knowledge
Creation
Appare
l
Leather
and
Sportin
g
Goods
Agricultural
Products
Proces
sed
Food
Furnitur
e
Buildin
g
Fixture
s,
Equipm
ent and
Service
s
Sporting,
Recreation
and Children’s
Goods
Busine
ss
Service
s
Distribution
Services
Fishing
&
Fishing
Produc
ts
Footwe
ar
Forest
Produc
ts
Heavy
Construction
Services
Jewelr
y &
Precio
us
Metals
Construction
Materials
Prefabricated
Enclosures
Textile
s
Tobacc
o
Heavy
Machinery
Aerospace
Engines
Automotive
Production
Technology
Motor Driven
Products
Metal
Manufacturing
Business Environment Qualities Regional Cluster Portfolio

21. 21 Copyright 2013 © Christian Ketels
• There is a new role for regions that gives them a central
responsibility in upgrading competitiveness
• Clusters are a critical tool and organizing principle for regions to
play this role
• National government, regional government, companies, and
cluster initiatives have key tasks to make clusters work for
regions