The US Economic Development Administration, in partnership with Harvard Business School and MIT Sloan, have recently released an interactive database which maps ‘clusters’ throughout the country right down to the county level (see clustermapping.us). Clusters are agglomerations, or a critical mass, of business activity in a given industry (e.g. Wall Street, Hollywood, Silicon Valley). The major benefit from clusters are productivity improvements and knowledge spillovers from having businesses located in the same area. According to the website:
“Companies in clusters gain access to specialized regional suppliers, service providers, and institutions, and can also benefit from deep pools of skilled employees and shared infrastructure dedicated to their needs.”
Clusters have a snowballing effect in that once a critical mass of business activity is reached, it catalyses more businesses and associated industries to locate in a particular region. In this way, can be a powerful driver of economic growth. The clusters in the website reveal the competitive advantages of local, regional and state economies throughout the US. The data is aimed at providing a basis for economic development strategies throughout the country. For example, in Boston there is specialised strategic infrastructure, particularly in terms of the world-class universities. This has allowed specialised hospitals and research institutions to develop, meaning that there is a large innovation in biological and pharmaceutical products (see the Boston Biopharmaceutical Cluster in Figure 1). This strategic infrastructure has attracted complementary industries such as specialised business services and risk capital, which facilitate the development of goods such as health and beauty products, and specialised medical goods and services.
Figure 1. Boston Biopharmaceuticals Cluster
Source: Harvard Business School, US Economic Development Administration 2014, US Cluster Mapping < http://clustermapping.us/content/clusters-101>
Many parallels could be drawn to the cluster at the Murdoch specialised centre, or the QEII medical centre, which has the strategic infrastructure of universities and hospitals in order to attract other health and pharmaceutical related industries (e.g. medical equipment, optometrists, physio etc). Cluster mapping can be used to facilitate economic development as it focuses policy makers to target specific types of industries in order to facilitate cluster growth.
This type of economic development can also be referred to as industrial ecology analysis. This analysis involves determining the industrial ecology of a region and determining where the gaps in the supply chain are evident. Highlighting the upward and downward streams of economic activity (e.g. suppliers and customers) for major industries in a particular region shows where these gaps are evident.
Pracsys has undertaken industrial ecology mapping for a major resource firm in the Karratha region. The results revealed that a very large proportion of the supply chain was lost outside of the region, to Perth and international markets. This formed the basis for a strategy to attract particular industries and facilitate economic normalisation. By building clusters, economic growth and productivity can increase dramatically, while building the resilience of a regional economy.
Figure 2. Woodside Industrial Ecology Mapping
Source: Pracsys (2014)