Australian Project Developments Pty Ltd, Canberra
& member of the Australia-NZ Alliance on Clustering (ANZAC)
Phone/fax 02 – 62317261, email email@example.com
SEGRA Conference, Ballarat
©Australian Project Developments Pty Ltd
The Australia New Zealand Alliance on Clustering (ANZAC) has been operating on an informal basis for two years. It has twenty core members. As the name suggests, its primary interest is in developing and sharing knowledge about clusters, and in collaborating with others with similar aims. We are the Asia Pacific chapter of TCI.
ANZAC is currently a 'virtual' operation - it has no physical home, but could in the longer-term aim become the Australia-NZ version of the Aspen Institute in Washington DC. We are in discussions with various agencies about the development of a hub and spoke arrangement.
While our work delves into many public policy issues, and goes well beyond the individual interests of members, we have operated without any government support or external sponsorship. However given that our activities are now in expansion mode, we are actively seeking financial support.
ANZAC circulates a free monthly newsletter to 180 organisations across the world. You are most welcome to receive this newsletter. If you have an interest in our work, why not join ANZAC too - see Attachment 1 for more background.
ANZAC membership is currently:
Development Organisations (representing companies)
To improve the competitiveness of localities and industries within Australia and New Zealand by enhancing cluster-based development initiatives.
Influence policymaking at all levels of industry and government about the importance of 1-3 above. (INFLUENCE)
Prepare submissions, provide consultancy expertise, and undertake lobbying on behalf of ANZAC members to secure funds for projects to build economic capacity at the local level. (FUNDING)
Provision of regular ANZAC networking opportunities including seminars in conjunction with key companies.
TCI is a gathering of industry/regional development practitioners with a common interest in clustering concepts.
It grew out of a World Bank-sponsored conference in Chihuahua (1997) where it was agreed to establish a body with the following mission statement:
"To improve the living standards
and local competitiveness of regions
across the world, by enhancing
cluster-based development initiatives"
There have been three conferences since Chihuahua:
The Glasgow conference was organised by Scottish Enterprise. Attendance was around 140, and comprised experts from 33 countries. The strength of TCI conferences is the high-level attendees and the mix of expertise - trade and investment officials, industry association executives, academics, telecommunications executives, consultants and a range of other businesses.
Scotland is a small economy and the commercialisation of R&D is one of its biggest problems, together with the weak level of firm creation
The rules of competitiveness are being rewritten almost daily. In this context, the New Parliament has recently announced a parliamentary enquiry into the New Economy.
The public sector represents approximately 40% of GDP in Scotland, which is considered far too high. Scottish Enterprise sees clustering as a means of increasing private sector dynamics to increase its share of GDP. Clustering also helps the players to understand the bigger picture.
There had been a clear disconnect between the Scottish cluster work and outcomes in the field – this is now being addressed. The Scots stressed that the important thing is for agencies to not get distracted when implementing cluster agendas – ‘stick with them’. The problem with development agencies is hat they spread their resources too thinly. Cluster agendas also differ – they do not all operate the same. They also mentioned the risk of failure.
Professor Michael Porter was commissioned in 1993 to advise on where and how cluster strategies might be introduced in Scotland. However his report had sat on a shelf until 1997 when it was decide to introduce cluster-based action in respect of semi-conductors, food and drink, biotechnology and oil and gas. The main criterion used to determine which industries would be the first cabs off the rank was their ability to compete globally.
In 1999, a new wave began, with criteria that focussed more on identifying where future competitive might lie – the industries selected from this process were creative industries, forestry, opto-electronics and tourism. Currently, chemicals and financial services are being added.
Scottish Enterprise (SE) is one of 13 development agencies across the UK – others include the Welsh Development Agency, Tynewear Development, Bristol etc. They are formally within the portfolio of the UK Department of Trade and Industry (DTI).
Each agency sets its own priorities and selects its own Board (members mostly from the private sector). Their budgets are a mix of concurrent funding, supplemented by one-off grants from the EC and UK avenues.
Scottish Enterprise spends around 5 million pounds per year (this is being checked) on various cluster analyses. They are currently undertaking an in-house evaluation based on snapshots of successes. This will enable the private sector to sell the importance of their cluster work to the politicians.
One of the key drivers for the establishment of this cluster agenda was fact that three quarters of the worldwide food and drink industry is controlled by 200 firms, and none of these are Scottish. Some of the identified trends that will affect the food market in the developed world are:
The vision is that, within 10 years, Scotland will have:
The targets that have been developed for the 2000-2010 period include:
This cluster followed 18 months of discussions with the Scottish biotechnology community. The cluster is made up of the following:
Scottish Enterprise has committed 38 million pounds ($A95m) to double the size of the cluster over the next four years. This figure has been used as a carrot in the consultation and engagement process with industry, academia and government. This has taken 18 months, and has involved 200 organisations. ‘Getting people on board’ has been the key activity. The fact that the European biotechnology industry is growing at 15% per year has been an important factor.
Scotland accounts for 7% of the EC’s semiconductor capacity (47% of UK capacity). Several of the top 20 worldwide semiconductor companies have fabrication plants in Scotland. Scotland also manufactures 40% of the UK’s personal computers. This is of concern to some concern i.e. they think Scotland is too weighted in this area.
In terms of key companies, NEC is active – its focus is on integrated circuits and it has made particular efforts to build its skills base. Motorola is also present, as is Kymata which is the fastest growing Scottish company – it specialises in optical semi-conductors. National Semiconductor was facing closure, but is now consolidating with an emphasis on design and product development.
The R&D community is currently being mapped. There are approx. 380 researchers spread across this industry e.g. Glasgow (80), Heriot-Watt (75), Edinburgh (70), Strathclyde (55) etc. The university-based research and design is focused on silicon devices, MEMS, sensors, MMICs, opto-electronics, novel materials/processes and analysis/spectroscopy.
Scottish Enterprise is building the cluster community through a variety of means – breakfast briefings, an annual conference, and “making sure there enough occasions to give people the opportunity to mingle”. See www.microelectronics.org.uk
The Industry Plan goes for 5 years, and there is a budget of 46 million pounds ($A115m) available over this period – it is a notional budget in the sense that bids need to made each year. (I take this to mean that if progress is not sufficient, funding is reduced.)
Scotland’s experience with clusters is quite new – in fact two years behind the cluster agendas in place in Adelaide. However the Scottish model appears to have considerably more political push and funding. The particularly noteworthy aspects of the Scottish clusters are:
Re Role of Government
‘The absolute no-no is for government to intervene in competition, by subsidising’ (Prof. Michael Porter, Harvard)
The orthodox line is that government should operate above the level of the firm, and not become key players in the development of clusters. However the governments we are getting today (e.g. The Scottish Government) are a different entity….. Worry about the role of government (Prof. Charles Sabel, Univ. of Columbia)
We are concerned that clusters are being understood differently by governments. (Michael Porter)
Governments don’t give much attention to clusters in the context of labour markets, but they should because the development of clusters addresses all aspects of an industry (Stuart Rosenfeld, USA)
Re competitive advantage at the local level
The most common advantage in locational decisions is access to intelligence – companies can source inputs from anywhere, but they need intelligence. (Stuart Rosenfeld)
Large businesses create their own economies of scale, scope and location. SMEs are different – their benefits revolve more around regional clusters. (Dr. Steve Brady, British Telecom)
Don’t try to build trust – get people to solve a problem (trust is an outcome of problem-solving)….don’t look to build networks for their own sake. (Charles Sabel)
Initiatives have been important in driving the process (Chris van der Kuyl, VIS Entertainment)
Cisco develops simple structures and clusters (John Mearns, Cisco)
My final message - 'get out there and do it' (Mr. Nicol Stephen, Deputy Minister for Enterprise, Scotland)
There needs to be some market-based critical mass to start with – some sort of market test must be applied. (Michael Porter)
Classic Comment No. 1
The easier way to approach the question of where to start is to look at market failings, and cluster analysis helps in this regard. Market failure might include:
(Mike Enright, Univ. of Hong Kong)
The business sector wants results – that is the bottom line. (Stefan Salej, Brazil)
Formulate clear goals, use sensible criteria for identifying and prioritising clusters, use analysis to educate and build urgency in the minds of participants, and identify leaders (Mike Enright)
Clusters will therefore grow in importance in the New Economy, given that it requires the revitalisation of old sectors, knowledge transfer and creativity, collective learning, untraded interdependence (favours), spill-over effects from new business formation, and project-based collaboration (Prof. Philip Cooke, Univ. of Wales)
Globalisation is true, but it has neutralised many things. For example, if capital is available widely, then it is of advantage to nobody. Likewise the Internet has reduced the gap between those with full access to information and those without. This means that other things count – local factors come more important. Michael Porter)
The uptake of R&D is increased by access to advice and support services, as well as knowledge sharing. Clusters deliver economies of scale for infrastructure, create Centres of Excellence, facilitate informal transfer, attract/retain high calibre employees and facilitate links to R&D establishments. (Dr. Steve Brady, British Telecom)
There have been specific benefits to universities as well, in terms of…making connections to high tech industry, assisting with technology transfer and spinning off technology more quickly, and building a community of support for innovation. (Brian Catts, Arizona)
In BT’s experience, incubators have acted as a magnet to build clusters, to attract SMEs and investors. A public/private partnership is very important – this also encourages investment. (Dr. Steve Brady)
People and investors want to know what places will be most attractive in terms of investment – space matters more than ever….Firms benefit from action to build clusters because it builds more attractive locations – this is a combination of immovable and intangible assets. (Josef Konvitz, OECD)
Supply chains are moving on-line. The computer and electronics industries are strengthening their supply chains via on-line technology. Industries to follow are utilities, shipping, pharmaceuticals. ‘It’s the job of clusters to move these industries into e-commerce’. (Bob Downes, BT)
The biggest shortcoming in developing countries is the lack of cluster synergies along the supply chain – however these improve as the cluster develops (Dr. Ted Egan, ICF Consulting)
To talk about clusters properly, one needs to build in ‘localised enterprise support infrastructure’ which helps the organic growth of firms. (Prof. Philip Cooke)
The place also has to be well-connected - not just communications, but airports. (Dr. Andreu Mas-Colell, Minister, Catalonia)
Don’t fool yourself – once you have moved to a point where people are being given the opportunity to transform their operations and relationships, you cannot avoid disturbing things and people. (Charles Sabel).
The links between the players are critical. BT wants to better understand how to build economies and help regional players to connect via clustering techniques and online/electronic networks. Although BT is becoming increasingly global, it needs to extract revenues from local markets, and this can be done via cluster-led regional development. (Bob Downes, BT)
Firms are actually complementary – if they do compete, they do so in narrow circumstances. There is a natural solidarity and alignment. (Charles Sabel)
Clusters help business find a common interest, and thereby organise themselves (Danny O’Brien, NCR)
Classic Comment No.2
Clusters lead to people ‘spilling the beans’.
(Stuart Rosenfeld, USA)
My attendance at TCI in Glasgow conference, apart from reporting back on cluster technology being introduced in other countries, was to raise international awareness of the ANZAC Alliance - and to then use this as a springboard for building a network between Australia-NZ clusters and those in other countries.
Given that TCI and the OECD are the key sources of information of cluster models and techniques, ANZAC has consciously sought to build links with them.
The possibility of linking clusters across countries has been spoken about from time to time. We believe the time has come to progress it. While the reasoning behind the idea is straight forward, some background in terms of the underlying need will assist the reader.
My own interest in clustering concepts was sparked because of their potential to address market failure in respect of industrial investments. This interest had been honed by my former responsibilities for the Australian Government’s inwards investment program as it related to Japan, the regional infrastructure program, the raw materials processing agenda, and numerous multilateral and bilateral groups with a brief to promote investment and research cooperation.
The fact of the matter is that numerous investment proposals and related initiatives fail not because they are inherently bad, but because of ‘qualitative’ factors. They are the seven deadly sins:
1. Insufficient information for the potential investor
2. Lack of confidence and trust between the parties
3. Lack of rigour and doggedness of the proponents
4. Weak connection or breakdown between the players
5. Inadequacy (real or perceived) of supporting infrastructure
6. Weak marketing, attention-grabbing, and strategic skills
7. Reluctance of SMEs to joint venture
Most of these problem areas also apply to R&D commercialisation – in fact the R&D and the investment dimensions can be viewed as being at different ends of the same spectrum.
Anyway, the point is that clusters are significant – because they are proving to be effective in dealing with virtually all of the above problem areas, most of which are manifestations of market failure (note Professor Michael Enright’s 4-way encapsulation of market failure - Lack of information, Managerial myopia, Under-provision of public goods, Coordination failure).
It is the ability of cluster agendas, when properly implemented, to build trust and provide a vehicle for improved coordination of the activities of otherwise unconnected players that represents the competitive advantage of clustering.
Example 1 – Arizona
Example 2 – Brazil
There was good discussion on this. At a workshop, there a consensus reached that it would be possible. A discussion was held on what types of indicators should form the basis of a benchmarking exercise. It was thought that around 4-5 reasonably straightforward indicators might be best.
The TCI Conference provided a rich source of ideas about clustering technologies currently being introduced. They go to the heart of industry and regional development policy. A full report on the Conference and related findings will be provided to ISR in December. Copies of the report will be available through the author.
ANZAC has started a process of engaging firms and agencies overseas, to identify the scope to link clusters – firstly by sharing experiences and undertaking some benchmarking. The second step will be to identify the scope for linked clusters (i.e. across countries) to facilitate R&D collaboration and investment flows.
Mr. Rodin Genoff, of Playford City Council (also an ANZAC member), is scheduled to deliver a paper on the topic at the OECD World Congress on Clustering in Paris in January 2001.
(extract of main document - indicative only – additions/corrections welcomed - copyright)
Contact: Mr. Trevor Pennifold
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Contact: Ms. Paquita Lamacraft
Parkville (Melbourne University)
Goulburn Valley/Sthn NSW
North East Victoria
1 For a report on the Varese conference, see ‘Pret a Porter’ (R. F. Brown) available from the author or via TCI website.