The Competitive Advantage of Regions Professor Michael E Porter Institute for Strategy and Competitiveness Harvard Business School Presentation at The Indiana Leadership Summit Indianapolis, Indiana May 13th, 2003 This presentation draws on ideas from Professor Porter’s articles and books, in particular, The Competitive Advantage of Nations (The Free Press, 1990), “The Microeconomic Foundations of Economic Development,” in The Global Competitiveness Report 2001, (World Economic Forum, 2001), “Clusters and the New Competitive Agenda for Companies and Governments” in On Competition (Harvard Business School Press, 1998), and the Clusters of Innovation Initiative, a joint effort of the Council on Competitiveness, Monitor Group, and Professor Porter No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means - electronic, mechanical, photocopying, recording, or otherwise without the permission of Michael E Porter Additional information may be found at the website of the Institute for Strategy and Competitiveness, www.isc.hbs.edu Innovation and Prosperity Prosperity Prosperity Productivity Productivity “Competitiveness” Innovative Innovative Capacity Capacity z Innovation is more than just scientific discovery z There are no low-tech industries, only low-tech firms Indiana Leadership Summit 05-13-2003 RB Copyright © 2003 Professor Michael E Porter Productivity, Innovation, and the Business Environment Context Contextfor for Firm Firm Strategy Strategy and andRivalry Rivalry z Factor Factor (Input) (Input) Conditions Conditions z Presence of high quality, specialized inputs available to firms –Human resources –Capital resources –Physical infrastructure –Administrative infrastructure –Information infrastructure –Scientific and technological infrastructure –Natural resources z z z z A local context and rules that encourage investment and sustained upgrading –e.g., Intellectual property Demand protection Demand Conditions Meritocratic incentive systems Conditions across all major institutions Open and vigorous competition z Sophisticated and demanding local among locally based rivals customer(s) z Local customer needs that anticipate those elsewhere Related and Related and z Unusual local demand in specialized Supporting segments that can be served Supporting Industries nationally and globally Industries Access to capable, locally based suppliers and firms in related fields Presence of clusters instead of isolated industries • Successful economic development is a process of successive economic upgrading, in which the business environment in a nation or region evolves to support and encourage increasingly sophisticated ways of competing Indiana Leadership Summit 05-13-2003 RB Copyright © 2003 Professor Michael E Porter Sources of Innovation Good vs Poor Innovation Environments 100% Your Region Has an Ample Supply of High Quality Your Region Has a Low Cost of Doing Business Specialized Research Centers Cost of Business (e.g., real estate, wages, utilities) 80% 60% Percent of Respondents in Agreement 40% 20% 0% Advanced Educational Progams Poor Innovation Environment Specialized Suppliers Good Innovation Environment Source: Clusters of Innovation Initiative, Regional Survey (all regions) Indiana Leadership Summit 05-13-2003 RB Copyright © 2003 Professor Michael E Porter Clusters and Competitiveness California Wine Grapestock Grapestock State StateGovernment GovernmentAgencies Agencies (e.g., Select Committee (e.g., Select Committee on on Wine Wine Production Production and and Economy) Economy) Fertilizer, Fertilizer, Pesticides, Pesticides, Herbicides Herbicides Barrels Barrels Bottles Bottles Caps Caps and and Corks Corks Grape GrapeHarvesting Harvesting Equipment Equipment Irrigation Irrigation Technology Technology Winemaking Winemaking Equipment Equipment Wineries Wineries // Processing Processing Facilities Facilities Growers Growers // Vineyards Vineyards Labels Labels Public Public Relations Relations and Advertising and Advertising Specialized Specialized Publications Publications (e.g., (e.g., Wine Wine Spectator, Spectator, Trade Journal) Trade Journal) California California Agricultural Agricultural Cluster Cluster Educational, Educational, Research, Research, and and Trade Trade Organizations (e.g., Wine Institute, Organizations (e.g., Wine Institute, UC UC Davis, Davis, Culinary CulinaryInstitutes) Institutes) Tourism Tourism Cluster Cluster Food Food Cluster Cluster Source: California Wine Institute, Internet Search, California State Legislature Based on Research by MBA 1997 Students R Alexander, R Arney, N Black, E Frost, and A Shivananda Indiana Leadership Summit 05-13-2003 RB Copyright © 2003 Professor Michael E Porter Institutions for Collaboration General General •• •• •• •• •• •• Chambers Chambers of of Commerce Commerce Professional Professional associations associations School School networks networks University University partner partner groups groups Religious Religious networks networks Joint Joint private/public private/public advisory advisory councils councils •• Competitiveness Competitiveness councils councils • Institutions for collaboration (IFC) are formal and informal organizations that - facilitate the exchange of information and technology - conduct joint activities - foster coordination among firms • IFCs can improve the business environment by - creating relationships and levels of trust that make them more effective - defining of common standards Cluster -specific Cluster-specific - conducting or facilitating the organization of collective action in areas such as procurement, information gathering, or international marketing •• •• Industry Industry associations associations Specialized Specialized professional professional associations associations and and societies societies •• Alumni Alumni groups groups of of core core cluster cluster companies companies •• Incubators Incubators Indiana Leadership Summit 05-13-2003 RB - defining and communicating common beliefs and attitudes - providing mechanisms to develop a common economic or cluster agenda Copyright © 2003 Professor Michael E Porter Institutions for Collaboration Selected Institutions for Collaboration, San Diego General General Cluster-Specific Cluster-Specific zz San San Diego Diego Chamber Chamber of of Commerce Commerce Telecommunication Telecommunication zz San San Diego Diego MIT MIT Enterprise Enterprise Forum Forum zz zz Corporate Corporate Director’s Director’s Forum Forum zz San San Diego Diego Dialogue Dialogue Biotech Biotech zz Service Service Corps Corps of of Retired Retired Executives, Executives, San San Diego Diego zz Hybritech Hybritech Alumni Alumni zz San San Diego Diego Regional Regional Economic Economic Development Development Corporation Corporation zz Scripps Scripps Research Research Institute Institute Alumni Alumni zz BIOCOMM BIOCOMM zz UCSD UCSD Connect Connect zz Center Center for for Applied Applied Competitive Competitive Technologies Technologies zz San San Diego Diego World World Trade Trade Center Center zz UCSD UCSD Alumni Alumni zz San San Diego Diego Regional Regional Technology Technology Alliance Alliance zz San San Diego Diego Science Science and and Technology Technology Council Council zz Office Office of of Trade Trade and and Business Business Development Development Source: Clusters of Innovation project (www.compete.org) Linkabit Linkabit Alumni Alumni Influences on Competitiveness Multiple Geographic Levels World Economy Groups of Neighboring Nations Nations States, Provinces Indiana Leadership Summit 05-13-2003 RB e.g NAFTA e.g U.S e.g Indiana Metropolitan Areas e.g Indianapolis Metro Area Cities and Counties e.g Knox, Daviess, Martin, Greene, Lawrence counties Copyright © 2003 Professor Michael E Porter Composition of Regional Economies United States Traded Traded Clusters Clusters Local Local Clusters Clusters Natural Natural Endowment Endowment-Dependent Dependent Industries Industries 31.8% 31.8% 1.7% 1.7% 67.4% 67.4% 2.8% 2.8% 0.8% 0.8% 1.0% 1.0% $45,040 $45,040 137.0% 137.0% 5.0% 5.0% $27,169 $27,169 82.6% 82.6% 3.6% 3.6% $32,129 $32,129 97.7% 97.7% 1.9% 1.9% 144.1 144.1 79.3 79.3 140.1 140.1 Patents per 10,000 Employees 21.1 21.1 1.3 1.3 7.0 7.0 Number of SIC Industries 590 590 241 241 48 48 Share of Employment Employment Growth Rate, 1990 to 2000 Average Wage Relative Wage Wage Growth Relative Productivity Note: 2000 data, except relative productivity which is 1997 data Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School Indiana Leadership Summit 05-13-2003 RB Copyright © 2003 Professor Michael E Porter Specialization of Regional Economies Select U.S Geographic Areas Seattle-BellevueSeattle-BellevueEverett, Everett,WA WA Aerospace AerospaceVehicles Vehiclesand and Defense Defense Fishing Fishingand andFishing Fishing Products Products Analytical AnalyticalInstruments Instruments Denver, Denver,CO CO Leather Leatherand andSporting SportingGoods Goods Oil and Gas Oil and Gas Aerospace AerospaceVehicles Vehiclesand andDefense Defense Chicago Chicago Communications CommunicationsEquipment Equipment Processed ProcessedFood Food Heavy HeavyMachinery Machinery Wichita, Wichita,KS KS Aerospace AerospaceVehicles Vehiclesand and Defense Defense Heavy HeavyMachinery Machinery Oil Oiland andGas Gas Pittsburgh, Pittsburgh,PA PA Construction ConstructionMaterials Materials Metal MetalManufacturing Manufacturing Education Educationand andKnowledge Knowledge Creation Creation San San FranciscoFranciscoOakland-San Oakland-San Jose Jose Bay Bay Area Area Communications Communications Equipment Equipment Agricultural Agricultural Products Products Information Information Technology Technology Los Los Angeles Angeles Area Area Apparel Apparel Building Building Fixtures, Fixtures, Equipment Equipment and and Services Services Entertainment Entertainment Boston Boston Analytical AnalyticalInstruments Instruments Education Educationand andKnowledge KnowledgeCreation Creation Communications CommunicationsEquipment Equipment Raleigh-Durham, Raleigh-Durham,NC NC Communications CommunicationsEquipment Equipment Information InformationTechnology Technology Education Educationand and Knowledge KnowledgeCreation Creation San SanDiego Diego Leather Leatherand andSporting SportingGoods Goods Power Generation Power Generation Education Educationand andKnowledge Knowledge Creation Creation Houston Houston Heavy HeavyConstruction ConstructionServices Services Oil and Oil andGas Gas Aerospace AerospaceVehicles Vehiclesand andDefense Defense Atlanta, Atlanta,GA GA Construction ConstructionMaterials Materials Transportation Transportationand andLogistics Logistics Business Services Business Services Note: Clusters listed are the three highest ranking clusters in terms of share of national employment Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School Indiana Leadership Summit 05-13-2003 RB 10 Copyright © 2003 Professor Michael E Porter Determinants of Regional Competitiveness Research Triangle Context for Firm Strategy and Rivalry Factor (Input) Conditions Government Government Advantages: Advantages: z z High High levels levels of of federal federal funding funding for for basic basic and and applied applied research research z z High High level level of of state state support support for for UNC UNC and NCSU, Info Hwy and NCSU, Info Hwy Institutions Institutions for for Collaboration Collaboration Advantages: Advantages: z z Strong Strong informal informal networks networks and and institutions institutions for for collaboration collaboration z z Good Good institutions institutions supporting supporting entrepreneurial firms Demand entrepreneurial firms Conditions Disadvantages: Disadvantages: z z Lack Lack of of many many cluster-specific cluster-specific institutions institutions Related and Supporting Industries Disadvantages: Disadvantages: z z Need Need for for greater greater coordination coordination among among multiple multiple local local political political jurisdictions jurisdictions z z K–12 K–12 education education only only average average Indiana Leadership Summit 05-13-2003 RB 24 Copyright © 2003 Professor Michael E Porter Government’s Impact on the Determinants of Regional Productivity San Diego Element of the Diamond Federal Government Factor Inputs (+) High levels of R&D funding (SPAWAR, NIH), both past and present (+) Defense cuts released talent for high-tech start-ups Demand Conditions (+) U.S Navy is a sophisticated customer of wireless technology Related and Supporting Industries Context for Firm Strategy and Rivalry (+) Defense cuts refocused firms on civilian markets Indiana Leadership Summit 05-13-2003 RB State Government (+) Founded UCSD (+) Funds San Diego State University, and Community Colleges (+) Increasing funds for engineering school (–) Energy policies deter building of new capacity (–) Average K-12 education (–) CA Coastal Commission regulations discourage facilities expansion (–) State FDA regulations different from Federal FDA regulations Local Government (+) Zoned Torrey Pines Mesa for research (+) Provided land on favorable terms (e.g., Salk, General Atomics) (–) Lack of coordination and leadership prevents maintenance and improvements of infrastructure (e.g., roads, schools, airport) (–) Inadequate state and local tax incentives to encourage R&D investment 25 Copyright © 2003 Professor Michael E Porter Leading Sub-Clusters By National Rank Indiana, 2000 Cluster Subcluster Auto mo tive P a rts Fo rg ing s a nd S ta mp ing s Auto mo tive Co mp o ne nts Auto mo tive P ro d uctio n Eq uip me nt Ma rine , Ta nk a nd S ta tio na ry Eng ine s S ma ll Ve hicle s a nd Tra ile rs Iro n a nd S te e l Mills a nd Fo und rie s Me ta l P ro ce s s ing Me ta l Ma nufa cturing P re cis io n Me ta l P ro d ucts Enviro nme nta l Co ntro ls P rima ry Me ta l P ro d ucts R e cre a tio na l Ve hicle s a nd P a rts Trucks a nd Tra ile rs Ho us e ho ld R e frig e to rs a nd Fre e ze rs Mo b ile Ho me s P re fa b rica te d Enclo s ure s Office Furniture Ca s ke ts Aluminum P ro ce s s ing Ele va to rs a nd Mo ving S ta irwa ys Me ta l a nd Gla s s Co nta ine rs P ro ce s s e d Fo o d Bo a t R e la te d S e rvice s Ho s p ita lity a nd To uris m Ente rta inme nt Ve nue s Ente rta inme nt Ente rta inme nt Eq uip me nt Wo o d Ca b ine ts , Fixture s a nd Othe r P ro d ucts Fa b rica te d Ma te ria ls Build ing Fixture s , Eq uip me nt a nd S e rvice s P lumb ing P ro d ucts Co ncre te , Gyp s um a nd Othe r Build ing P ro d ucts Ba ll a nd R o lle r Be a ring s P ro d uctio n Te chno lo g y Ind us tria l Trucks a nd Tra cto rs R e frig e tio n a nd He a ting Eq uip me nt S p e cia lize d P ump s Mo to r Drive n P ro d ucts S p e cia lize d Ma chine ry Dia g no s tic S ub s ta nce s Me d ica l De vice s Ma chine ry Co mp o ne nts He a vy Ma chine ry Wo o d Ma te ria ls a nd P ro d ucts Furniture R ub b e r P ro d ucts Co ns tructio n Ma te ria ls Aircra ft Eng ine s Ae ro s p a ce Eng ine s Wa te r Fre ig ht Tra ns p o rta tio n S e rvice s Oil a nd Ga s P ro d ucts a nd S e rvice s National Rank 1 5 1 1 3 4 3 4 National Share (%) 11.8 9.7 10.4 5.8 11.0 14.9 18.1 6.3 5.9 8.7 8.7 29.0 14.0 27.7 10.0 18.4 37.0 7.7 18.7 5.5 4.9 5.1 8.1 4.3 7.2 5.7 5.2 6.8 7.4 6.1 28.4 9.1 9.1 6.7 6.8 5.2 7.4 10.8 Employment 80,577 12,741 8,891 8,452 6,636 5,130 48,622 17,360 7,216 1,750 749 18,621 12,327 7,500 6,433 5,526 2,559 2,090 1,750 2,678 4,280 21,099 3,652 8,930 4,335 4,034 2,296 2,380 2,072 8,979 1,750 801 3,855 5,559 5,417 2,747 6,197 1,458 Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School Indiana Leadership Summit 05-13-2003 RB 26 Copyright © 2003 Professor Michael E Porter Definition of the Life Sciences Super-Cluster Life Sciences Super-Cluster Hospitals Health Providers Local Health Services Perfumes, cosmetics, other toilet prep Health & Beauty Consumer Products Pharmaceuticals & Biotechnology Medical Devices Ophthalmic goods Ophthalmic Goods X-ray apparatus & tubes Electromedical equipment Medical Equipment Diagnostic substances Diagnostic Substances Plastics bottles Containers Surgical appliances & supplies Dental equipment & supplies Surgical & medical instruments Noncommercial research organizations Medical & Dental Instruments Medicinal chemicals & botanicals Pharmaceutical preparations Biopharmaceutical Products Commercial physical & biological research Biological products except diagnostic Biological Products Patent owners & lessors Patent Owners & Lessors Research Education & Knowledge Creation Legend: Industries Note: Colored backgrounds represent clusters in life sciences; dotted rectangles represent sub-clusters in life sciences; circles represent industries in life sciences Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School Indiana Leadership Summit 05-13-2003 RB 27 Cluster Sub-cluster Copyright © 2003 Professor Michael E Porter Competitive Position in Life Sciences Research Triangle Economic Area Consumer Consumer Health Health and and Beauty Products Beauty Products Biological Biological Goods Goods 1,470 1,470 3,562 3,562 Specialized Specialized Packaging Packaging 1,089 1,089 Specialized Specialized Containers Containers Pharmaceutical Pharmaceutical Products Products 4,869 4,869 70 70 Specialized Specialized Services Services Banking, Banking,Accounting, Accounting,Legal Legal Instruments Instruments and and Equipment Equipment 1,049 1,049 Medical Medical Devices Devices 1,485 1,485 Distribution Distribution Research Research Organizations Organizations Research ResearchTriangle TriangleInstitute, Institute,Duke Duke University Medical Center, University Medical Center,University University of -Chapel Hill Carolina ofNorth NorthCarolinaCarolina-Chapel Hill 7,075 7,075 1,240 1,240 Specialized Specialized Risk Risk Capital Capital VC VCFirms, Firms,Angel AngelNetworks Networks Specialized Specialized Chemicals Chemicals 421 421 Among National Leaders (1–5) Training Training Institutions Institutions Duke DukeUniversity, University,University University of North CarolinaChapel Carolina of North Carolina-ChapelHill Hill Cluster Cluster Organizations Organizations North NorthCarolina CarolinaBiotech BiotechCenter, Center, Center for Entrepre Center for Entrepreneurial neurial Development Development Competitive (6–20) Position Established (21–40) Less Developed (41+) Note: Employment numbers are given inside boxes where available Source: Regional Survey Data, Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School and In-person Interviews Indiana Leadership Summit 05-13-2003 RB 28 Copyright © 2003 Professor Michael E Porter Performance of Leading Life Sciences Clusters CAGR of Life Sciences Employment in Leading States: 2.3% 20 California 16 2000 Life Sciences Employment 12 (in 10,000 workers) New York Average Life Sciences Illinois Pennsylvania Massachusetts North Carolina Texas EmployVirginia Florida ment in Ohio Maryland Leading Michigan Washington Connecticut Minnesota States: Colorado Georgia 42,800 New Jersey Tennessee Indiana -2% 0% 2% 4% 6% Compound Annual Growth Rate (CAGR) of Life Sciences Employment, 1990–2000 *Note: Leading life science states defined as those among the top twenty in life sciences employment; averages shown are weighted averages based on total life sciences employment Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School Indiana Leadership Summit 05-13-2003 RB 29 Copyright © 2003 Professor Michael E Porter Structure of Leading Life Sciences Clusters Number and Growth of Establishments, 2000 4,500 Average Establishment Growth: 4.8% 4,000 California 3,500 3,000 Number of 2,500 Establishments, 2,000 2000 1,500 New York Massachusetts Illinois Indiana 500 Michigan 1% 2% 3% Colorado Minnesota Tennessee 4% Maryland Virginia Washington Georgia Ohio Connecticut 0% Florida Pennsylvania New Jersey 1,000 Texas Average Number of Establishments: 1,243 5% 6% 7% North Carolina 8% 9% 10% Growth in Number of Establishments, 1990–2000 = 0–24,999 Total Employment, 2000: = 25,000–49,999 = 50,000+ Note: Average of number of establishments and establishment growth are computed as a weighted average based on employment in life sciences; leading life science clusters defined as being among the top twenty in life sciences employment Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School Indiana Leadership Summit 05-13-2003 RB 30 Copyright © 2003 Professor Michael E Porter Innovation Output of Leading Life Sciences Clusters Life Science Patents and Patent Growth, 1990–2001 California (15.9%, 10,567) 8,000 Average Life Sciences Patent Growth: 13.1% 6,000 Life Science Patents, 1998–2001 Average Life Science Patents: Massachusetts 2,998 4,000 New Jersey New York 2,000 Indiana Illinois Michigan Florida Pennsylvania Ohio Minnesota Texas Maryland Connecticut Washington North Carolina Wisconsin Colorado Missouri Iowa (29.6%, 556) 0% 4% 8% 12% 16% 20% Growth in Number of Life Science Patents, 1990–2001 Note: (x-axis, y-axis); Cluster national average life science patents and patent growth are computed as a weighted average based on employment in life sciences; Leading life science clusters defined as being among the top twenty in life science employment Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School Indiana Leadership Summit 05-13-2003 RB 31 Copyright © 2003 Professor Michael E Porter Public / Private Cooperation in Cluster Upgrading Minnesota’s Medical Device Cluster Context Contextfor for Firm Strategy Firm Strategy and andRivalry Rivalry z Factor Factor (Input) (Input) Conditions Conditions z z z z z z Aggressive trade associations (Medical Alley Association, High Tech Council) Effective global marketing of the cluster and of Minnesota as the “The Great State of Health” Full-time “Health Care Industry Specialist” in the department of Trade and Economic Development Joint development of vocationaltechnical college curricula with the medical device industry Minnesota Project Outreach exposes businesses to resources available at university and state government agencies Active medical technology licensing through University of Minnesota State-formed Greater Minnesota Corp to finance applied research, invest in new products, and assist in technology transfer Indiana Leadership Summit 05-13-2003 RB z Related Relatedand and Supporting Supporting Industries Industries 32 Demand Demand Conditions Conditions State sanctioned reimbursement policies to enable easier adoption and reimbursement for innovative products Copyright © 2003 Professor Michael E Porter The Australian Wine Cluster History 1991 to 1998 1930 1965 1980 First oenology course at Roseworthy Agricultural College 1955 Australian Wine Bureau established Australian Wine and Brandy Corporation established 1990 1970 New organizations created for education, research, market information, and export promotions Winemaker’s Federation of Australia established Winemaking school at Charles Sturt University founded Australian Wine Research Institute founded 1950s 1960s 1970s 1980s 1990s Import of European winery technology Recruiting of experienced foreign investors, e.g Wolf Bass Continued inflow of foreign capital and management Creation of large number of new wineries Surge in exports and international acquisitions Source: Michael E Porter and Ưrjan Sưlvell, The Australian Wine Cluster – Supplement, Harvard Business School Case Study, 2002 Indiana Leadership Summit 05-13-2003 RB 33 Copyright © 2003 Professor Michael E Porter The Australian Wine Cluster Recently Founded Institutions for Collaboration Winemakers’ Winemakers’ Federation Federation of of Australia Australia Cooperative Cooperative Centre Centre for for Viticulture Viticulture zz Established Established in in 1990 1990 zz Established Established in in 1991 1991 zz Focus: Focus: Public Public policy policy representation representation of of companies companies in in the the wine wine cluster cluster zz Focus: Focus: Coordination Coordination of of research research and and education education policy policy in in viticulture viticulture zz Funding: Funding: Member Member companies companies zz Funding: Funding: other other cluster cluster organizations organizations Australian Australian Wine Wine Export Export Council Council Grape Grape and and Wine Wine R&D R&D Corporation Corporation zz Established Established in in 1992 1992 zz Established Established in in 1991 1991 as as statutory statutory body body zz Focus: Focus: Wine Wine export export promotion promotion through through international international offices in London and San Francisco offices in London and San Francisco zz Focus: Focus: Funding Funding of of research research and and development development activities activities zz Funding: Funding: Government; Government; cluster cluster organizations organizations zz Funding: Funding: Government; Government; statutory statutory levy levy Wine Wine Industry Industry National National Education Education and and Training Training Council Council Wine Wine Industry Industry Information Information Service Service zz Established Established in in 1998 1998 zz Established Established in in 1995 1995 zz Focus: Focus: Information Information collection, collection, organization, organization, and and dissemination dissemination zz Focus: Focus: Coordination, Coordination, integration, integration, and and standard standard maintenance maintenance for for vocational vocational training training and and education education zz Funding: Funding: Cluster Cluster organizations organizations zz Funding: Funding: Government; Government; other other cluster cluster organizations organizations Source: Michael E Porter and Ưrjan Sưlvell, The Australian Wine Cluster – Supplement, Harvard Business School Case Study, 2002 Indiana Leadership Summit 05-13-2003 RB 34 Copyright © 2003 Professor Michael E Porter The Evolution of Regional Economies San Diego Hospitality and Tourism Climate Climate and and Geography Geography Sporting and Leather Goods Transportation and Logistics Power Generation Communications Equipment Aerospace Vehicles and Defense U.S U.S Military Military Information Technology Analytical Instruments Education and Knowledge Creation Medical Devices Bioscience Bioscience Research Research Centers Centers 1910 Indiana Leadership Summit 05-13-2003 RB 1930 1950 Biotech / Pharmaceuticals 1970 35 1990 Copyright © 2003 Professor Michael E Porter Creating and Implementing a Regional Economic Strategy z A shared economic vision helps elicit broad support and coordinate activities z An economic development strategy requires statewide plans as well as strategies for each subregion z Economic strategy must explicitly address inequality and economically distressed areas z Strong public and private leadership is a necessary part of any successful economic development strategy z Broad-based collaboration across institutions is needed for economic development initiatives to succeed z An overarching organization for economic development helps coordinate and routinize the process z Regions need to overcome transition points in the development of their economies Indiana Leadership Summit 05-13-2003 RB 36 Copyright © 2003 Professor Michael E Porter Organizing to Compete Massachusetts Governor’s Council on Economic Growth and Technology Governor’s Governor’s Council Council on on Economic Economic Growth Growth and and Technology Technology Industry Industry Cluster Cluster Committees Committees Functional Functional Task Task Forces Forces Issue Issue Groups Groups z Advanced Materials z International Trade z Cost of Doing Business z Biotechnology and Pharmaceuticals z Marketing Massachusetts z Financing Emerging Companies z Defense z z Health Care z Marine Science and Technology Tax Policy and Capital Formation z Western Massachusetts z Business Climate z Competitive Benchmarking z Medical Devices z Software z Telecommunications z Textiles z Information Technology Indiana Leadership Summit 05-13-2003 RB z Technology Policy and Defense Conversion 37 Copyright © 2003 Professor Michael E Porter Cluster Mapping Project data website is available from the home page of the Institute, www.isc.hbs.edu Indiana Leadership Summit 05-13-2003 RB 38 Copyright © 2003 Professor Michael E Porter