Cluster-based local economic development in the context of smart specialisation

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Cluster-based local economic development in the context of smart specialisation

In the frame of the InFocus project, TASO co-organizes the thematic workshop “Cluster-based local economic development in the context of smart specialisation”. The meeting (Frankfurt, November 24-25, 2016) aims to bring together cluster managers, practitioners at city level working on cluster development, academics and teams leading RIS3 strategies at regional level. Topics for discussion are the following:

  • Smart specialisation as a booster for cluster-based economic development.
  • Matching regional priorities with ones from the city level. How to do it?
  • Cluster-based segmentations of urban economies: methods and experiences.
  • Emerging clusters with a special link to the urban space. From the creative economy to the smart city.
  • From sector prioritization to specialized diversification.
  • From clusters of activities to clusters of competences.
  • Promoting cross-innovation and sector hybridisation. Intercluster strategies (cluster-cluster cooperation).
  • What do business clusters need from the local/metropolitan government? Reviewing the role of cities in cluster development.
  • Cluster development today: role of cities and city-to-region alignment.
  • Joining cluster branding and city branding efforts. How urban diplomacy can support to cluster internationalisation and vice-versa.

 

Scoping note for the meeting

Last year the Basque Country celebrated the 25th anniversary of the Basque cluster policy. According to Michael Porter, it was the first region in the world in applying massively the cluster concept. Today, the cluster approach is acknowledged as the most fluent one in modern industrial policy worldwide, and the arrival of smart specialisation to the European Union has even emphasized this influence.

Thus, since RIS3 (Research and Innovation Strategies for Smart Specialisation) is largely about sector prioritization, cluster policies are at the very heart of the smart specialisation paradigm. Consequently, both the smart specialisation concept and the RIS3 method have worked as a booster for cluster-based industrial policies, notably in those contexts where the cluster approach was still barely assumed – we mean where cluster is little more than a buzzword and lacks of a sound work approach behind.

Hence, cities (local/metropolitan authorities and their subsidiaries working on innovation and business-led economic developments) should also take advantage of this to enhance their role in cluster development. At this point, it is worth noticing RIS3 is here to overcome fragmentation and provide single alignment within the regions (or/and member states) with regard to sector development. Therefore, getting relevant city-to-region articulation is a must-do, especially in those cities and metropolitan areas with a significant background in cluster development.

For instance, that is the case of Frankfurt, where the cluster approach is so dominant that the own organizational chart of Frankfurt Economic Development GmbH, the local development agency, mirrors the city´s cluster segmentation. Bordeaux, in France, is other city case with a background in cluster development, which nonetheless should be best connected to cluster policy at regional level, especially right now when Nouvelle-Aquitaine is born as a merger of Aquitaine, Limousin and Poitou-Charentes. A region as large as Austria.

In fact, vertical multi-level governance is absolutely a key issue to all implementation frameworks concerning modern industrial policy and business-led economic development. That is why matching between RIS3 priorities at regional level (often mega-clusters and wide-scope knowledge domains) and the cluster dynamics that are running at city/metropolitan level is an exercise that should be done sooner or later. The question is, How to do it? What method to address such a matchmaking exercise?

Emerging clusters with a special link to the urban space.

Nonetheless, due to the fact that agglomeration economies (which are at the basis of clustering, at least at early stages) work particularly at local and metropolitan levels, cluster-based local economic development is mainstream. Today, most of the main innovative cities have adopted a more or less accurate cluster-based segmentation of themselves as urban economies. For instance, in Bordeaux, like in all France, business-led economic development is largely influenced by the cluster approach. Bordeaux is currently working with a range of clusters that are categorized into three groups: world-class clusters or pôles de compétitivité (aerospace and laser & photonics), clusters of national scale (health and financial & advanced services) and other sectors of excellence like wine, chemistry, boating-sailing and tourism.

Cluster-based readings of the urban/metropolitan economy often have a revitalizing effect by themselves. They are a precious opportunity to unveil new emerging activities or simply highlight those activities with a special link to the city. We mean, for instance, activities with a special impact on central urban spaces, from the creative economy to advanced tertiary. Regarding the latter, according to a European Cluster Observatory´s report, regions and cities with a strong KIBS sector (Knowledge Intensive Business Services) exhibit higher prosperity and it affects positively innovation performance. It is a cluster with a strong “urban character” and some cities perform better than others. The emerging FinTech scene (which in Frankfurt is very active and fuelled by several cluster-type networks) is part of it. KIBS is one of the six priority clusters in Bilbao, and Bordeaux is making a big bet for its advanced tertiary sector (70,000 jobs, 200 head offices and the 4th services and financial marketplace in France with a specialisation in trading and risk) that includes a new central business district as part of Bordeaux Euratlantique, which is the largest urban regeneration project now in France.

We also mean activities connected to future´s urban management. Thus, the progressive digitalization of both urban management and the urban experience is creating continuous business opportunities. New clusters around the smart city concept are emerging now in many cities, from Turin (Torino Wireless, which is also coordinating a country-wide agenda on smart cities) to Bucharest (Different Angle cluster). Those clusters are closely linked to their corresponding smart city projects. Another good example is Bilbao Urban Solutions, which is a cross-sector business network aims to capitalize the brand Bilbao as a world-class reference in urban transformation and renovation.

From sector prioritization to specialized diversification.

All in all, as said above, smart specialisation should be seen as driver to boost cluster policies. It opens a window of opportunity for cluster policies to be revised and improved. So, while the cluster approach is pretty well assumed as a must-do segmentation of regional and urban economies, smart specialisation puts now the spotlight on the connections among those priority clusters. This may give some keys about how to adjust the course of cluster policies today.

In this new framework, where cluster policies and smart specialisation strategies live together, the main purpose of cluster-based segmentations is basically providing a backbone for urban economies. A roadmap to the “specialized diversification”, in RIS3 jargon. That is the real meaning of prioritizing a specific short range of clusters and production-oriented knowledge domains (the smart choices). They should work, along with the beneficial influence of a number of “key enabling technologies” (KETs), as levers to a more solid economic growth.

Because of this, relevant clusters are increasingly defined by a key industrial or technological competence, instead of a simple sum of sectors and industrial branches. The trend is going from clusters of activities to clusters of competences, when that is possible. Actually, the concept of competence-cluster is already mainstream in Germany for years. Envisioning clusters based on a key and distinctive competence enables linking to other different value chains and product markets more easily. That is, those key competences may work as spillovers, as cross-cutting connectors.

The Bordeaux-based cluster on photonics is a paradigmatic case of a business system organized around a specific technological competence. Branded as Route des Lasers, the cluster (1,400 direct jobs) offers advanced solutions on innovative optics, laser and photonics to a variety of industrial sectors, such as aeronautics, health, chemistry, electronics and even food industry. In a way, the same as ProduTech, the Porto-based Production Technologies Cluster, which brings together manufacturing technology providers in fields ranging from mechanical engineering to embedded software.

The digital revolution and related concepts like industry 4.0, advanced manufacturing and industrial internet are broaden more and more the industry-services continuum, as a fertile ground for new emerging activities. In this context, cluster identification is not enough. It is the age of hybridization, and S3/RIS3 should be seen as a pathway to fully activate the potential of a short range of core competences and sectoral specialisations, expanding them to other value chains and existing sectors. This will arise new business opportunities.

Certainly, concepts like cross-innovation and intercluster (cluster-cluster cooperation) were already being used before smart specialisation came up. Nevertheless, what smart specialisation brings for the first time is a single structuring guidance to envision as a whole all the key productive components of a spatial economy (call them clusters, technology domains…). Existing components and those still to shape.

How urban diplomacy can support to cluster internationalisation and vice-versa.

Last but not least, cluster-based segmentation is commonly accepted as the most effective way to organize the work of promoting the city as business location. In turn, the communication dimension of cluster initiatives has always been underlined as fundamental, and having excellent communication skills is therefore key for cluster organizations and their managers. Hence, innovative placebranding can be very helpful supporting the internationalization of local clusters. And vice-versa, city branding & marketing strategies can find in the international activity of business clusters a great supporting channel. It is about joining both cluster branding and city branding efforts, which mutually reinforce.

 

Thematic paper by TASO

 

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