Clusters as economic development in Kansas

Is the promotion by Kansas government of industry clusters as economic development good for the future of Kansas?

The formula for creating these clusters is always the same: Pick a hot industry, build a technology park next to a research university, provide incentives for businesses to relocate, add some venture capital and then watch the magic happen. But, as I have noted before, the magic never happens. Most of the top-down cluster-development projects in the United States and around the world have died a slow death in relative obscurity. Politicians who held the press conferences to claim credit for advancing science and technology are long gone. Management consultants have cashed in their big checks. Real estate barons have reaped fortunes, and taxpayers are left holding the bag.

The author is Vivek Wadhwa, writing in the Washington Post article Industry clusters: The modern-day snake oil.

Wadwha is criticizing Harvard professor Michael Porter’s cluster theory, which he says has to do with how “geographic concentrations of interconnected companies, specialized suppliers, and service providers gave certain industries a productivity and cost advantage.” Wardwha describes the magical potential: “[Porter’s] legions of followers postulated that by bringing these ingredients together into a ‘cluster,’ regions could artificially ferment innovation. They just needed to build the right infrastructure and bring together chosen industries.”

It’s something that Wichita and Kansas has embraced. We hear — continually — about the importance of the aviation cluster in south-central Kansas and its importance to our state’s economy. Talk of this becomes particularly intense each time the major aviation companies and their suppliers approach local governments for handouts in the form of economic development incentives.

Wichita Mayor Carl Brewer wants to create a cluster of wind energy companies in and around Wichita, and he has traveled as far as Germany in this quest.

Kansas Governor Sam Brownback has embraced the cluster concept. In June, Governor Brownback promoted one such cluster, saying “As a state, we must formulate strategies to achieve a successful economic cluster around the animal health sector.”

Other clusters the state wants to promote include life sciences, tourism, and, as aleady mentioned, aviation. Brownback has held summits on most of these topics. A presentation titled Kansas Competitiveness: State and Cluster Economic Performance, billed as “Prepared for Governor Sam Brownback” in February by Harvard’s Porter analyzes Kansas and its business clusters.

Evidence that backs up Wardwha’s criticism of clusters is found in the recent paper When local interaction does not suffice: Sources of firm innovation in urban Norway (Rune Dahl Fitjar and Andrés Rodríguez-Pose). Summarizing it, Wardwha wrote: “The study found that regional and national clusters are ‘irrelevant for innovation.'”

In particular, the paper states in its introduction: “The results indicate that firm innovation in urban Norway is mainly driven by global pipelines, rather than local interaction. The most innovative — both in terms of basic product innovation and radical product and process innovation — firms are those with a greater diversity of international partners. Local and even national interaction seems to be irrelevant for innovation.”

And from the conclusion: “Recent analyses of clusters and agglomeration have looked for the sources of innovation of firms in the combination of the multiple interactions of firms within the region and in the connections of certain firms in the region with the outside world. The story emerging was one of complementarity. Local interaction took place without much effort through frequent face-to-face interaction in high trust environments, while global pipelines implied a conscious and often costly attempt by individual firms to engage with external actors in order to generate greater innovation and reap economic benefits. … There is a dearth of analyses that have systematically addressed whether the complementarity of these two types of interaction holds across a large number of firms. This has been the main aim of this paper, which has looked at the sources of innovation of 1604 firms across the five main urban agglomerations in Norway. The picture which emerges from the analysis does not conform to that generally stemming from the theoretical literature and from case-studies.”

Is the promotion and pursuit of business and industry clusters a misguided effort by Kansas politicians like Brewer and Brownback and the state’s economic development officials? To the extent that promotion of certain industries means the state is using a top-down, “active investor” approach to economic development — rather than being the caretaker of a competitive platform that encourages as much business experimentation as possible — yes, it is misguided. We run the risk of all the problems described in the opening quotation appearing in this article.


10 thoughts on “Clusters as economic development in Kansas”

  1. The idea of forming clusters of interrelated companies is intuitive and should work fine. Data shows that it doesn’t. It doesn’t work because basically you can’t force ingenuity and innovation. Unfortunately, this idea is VERY easy to sell to most council members, and voters. I’m sure that Wichita’s developers have taken notice and we (the taxpayers) can be counted on to pay for the developers building several turbine plants, etc.

  2. Why does Bob put up with the unnecessary invective from the one note “T. Rex,” cretin?

    I can understand why people can disagree about the efficacy of industry clusters but I can’t understand why someone wants to clutter up this discussion with irrelevant information and personal attacks. Mr. Weeks, you are a better man than I am to put up with this drivel.

    Now to the “cluster” concept. If it really worked, it would have been duplicated innumerable times with the >1k eco-devo groups that exist in all 50 states. Since this has not occurred, and there have been some big buck efforts to duplicate the concept, this is an important issue in this age of economic failure under the Obamanation’s regime.

  3. ictator:

    Why is it no one can have divergent opinions on this blog? Must we all agree with far right-wing BS?

    Isn’t debate and discussion a GOOD thing? Does it have to come to insults?

  4. I’m glad that Bob leaves those comments alone. It’s useful for people to see the hatefulness of the left wing on full display. It’s also useful to realize that their arguments are so shallow that they have nothing to say except for insults.

  5. How is it an insult accurately describe Bob Weeks as an overweight unemployed computer programmer, which is all factual? You may not like it, but is it untrue? Is all of this being paid by the Koch machine?

  6. I second the leaving up of the hateful leftist comments as a useful illustration of how the left cares nothing about anything except hate. They have nothing on the issues. Everyone can see how much T.Rex is like Obama and Pelosi: all hate all the time, avoidance of the issues, jealousy of those whose success they could never achieve.

    This is you, T.Rex. No wonder you hide your identity. The more you post here, the more you reveal how you have lost.

  7. “This is you, T.Rex. No wonder you hide your identity. The more you post here, the more you reveal how you have lost.” — Anonymous

    Bahahahaha

    In other news…shockingly, no one ever answered my question. Isn’t debate and dissent a GOOD thing?!

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