Guest Column: Thoughts on Industrial Clusters

By George Erickcek, W.E. Upjohn Institute for Employment Research

I have never been completely won over by the idea of industrial clusters as a pathway to economic growth and sustainability.  History is full of examples of struggling industrial clusters: steel in the Youngstown-Pittsburgh region; textiles, first in New England and then in the Carolinas.

Closer to the Institute’s home, the paper industry in Kalamazoo, Michigan is a great example of a cluster that started out as a highly innovative, locally-owned set of firms and suppliers. Due to its presence, Western Michigan University established its Department of Paper Engineering which is still one of the most respected paper technology research centers in the world. However, with the passage of time, the industry lost its edge.  Employment in the industry in Kalamazoo County has dropped from over 10,000 in the 1950s to 1,800 today.

However, I want to believe in the potential of industrial clusters. Mark Muro and Bruce Katz at the Brookings Institution helped me with their paper The New “Cluster Moment”: How Regional Innovation Clusters Can Foster the Next Economy,  which highlights the potential benefits and recommend policy options that could help promote the growth of existing cluster.  One of the author’s most valuable observations is that communities should not try to create clusters.  Either they exist or they do not: public policy will rarely be effective in connecting firms to create a new cluster.

Yet, the authors seem to neglect my major concern about clusters: their sustainability.  As an economic developer once told me, “Cluster analysis tells me where the region has been, not where it is going.”   As a community works to support its existing clusters, it should also be aware that, much like steel in Pittsburgh and paper in Kalamazoo, clusters can deteriorate or even disappear.

I would like to see a checklist of factors to watch that could warn local regional stakeholders that their regional cluster is in trouble.  A couple of factors could be:

  1. The loss of local ownership
  2. The loss of Research and Development activity
  3. The loss of market share
  4. An increased focus on production cost.

George Erickcek can be reached at Erickcek@upjohn.org.  Originally posted April 20, 2011 on the Upjohn Institute blog.