20 July 2011

Clusterstuck: Are Industry Clusters Really the Holy Grail?

Image from Stinque.com
Last week's report by the Brookings Institution and Battelle Technologies on the clean economy was greeted with much fanfare.  I even wrote about how it ranked the Greater Philadelphia region (where I live) number 5 in the nation.

One of the key success factors the Brookings-Battelle study points to is the creation of industry hubs or clusters, such as the Greater Philadelphia Innovation Cluster for Energy Efficient Buildings. 

I was pleased to see the reference having been a fan and supporter of the GPIC effort.  (As founder of the business network, Cleantech Alliance Mid-Atlantic, I wrote a letter of support to the DOE for Philadelphia's initial application.)

But then I came across a Washington Post opinion piece by Vivek Wadhwa titled "Industry Clusters: The Modern-Day Snake Oil."   My skeptic bone, which is located just to the right of the funny bone, in case you are wondering, started to tingle.

Wadhwa points to a recent study conducted by Rune Dahl Fitjar, of Norway’s Centre for Innovation Research at the International Research Institute of Stavanger, and Andres Rodriguez-Pose of the London School of Economics and Political Science, which found that regional and national clusters are, in fact, "irrelevant for innovation."

Rather, Wadhwa relates, "the key drivers of innovation in Norway are the communication channels that local entrepreneurs maintain to the outside world and their open-mindedness toward foreign cultures, change and new ideas.  Companies that are 'regionally minded' -- that maintain ties only with players within the same cluster -- are four times less likely to innovate than the globally connected."
What do the researchers say is the determining factor for success?  People.

Not just any people: "knowledgeable people who have the motivation and ability to start ventures," writes Wadhwa.  Knowledgeable, risk-taking people who are connected by extensive information-sharing networks.

"The same dynamics at play in Norway give Silicon Valley its advantage," according to Wadhwa.  "It is a giant, globally connected network in which sharing information and risk-taking are the norm."

Rather than patting ourselves on our backs for developing clusters of innovation, we need to focus on people.  And we need to continuously ask the following questions:

  • Do we have the right people and are we connecting them in ways that will help them start companies?  
  • Are we connecting them with the right mentors and networks and access to financing?   
  • Are we getting government out of the way of their success?  
  • Are we making the pathways to commercialization clear and efficient enough to encourage repaid growth?

If not, we may be creating nothing more than a government-sponsored enduring clusterf*ck that will lead to nothing more than an academic exercise and more fodder for reports.

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