Regional reliance of clusters can be risky says new Conference Board report

A new report on the the contribution of clusters to regional economic growth argues that governments should allow markets to determine cluster development and confine its efforts to supporting and nurturing their growth. It also concludes that the contribution of clusters to the growth of regions, while real, is not well understood and often depends on which stage of the cluster life cycle is being considered.

Sponsored by the Conference Board of Canada and authored by Trevor Munn-Venn and Roger Voyer, the report — Clusters of Opportunity, Clusters of Risk — says clusters can be extremely beneficial for regions, but cautions that they also carry risks, due to their reliance on constant knowledge flow, and increased volatility. Failure to constantly reinvent itself can lead to the cluster’s demise.

“A cluster is like a mine. You can extract as much value out of it as possible until a point is reached where companies are just replicating products — the technology platform is unable to yield new products or processes,” states the report. “

Larger, more diversified regions are able to weather negative forces far better than regions heavily reliant on the activity of a single cluster.

The report focuses on biotechnology and information and communications technology (ICT) clusters, drawing on data provided by Contact Canada and Dun & Bradstreet respectively. In addition, the authors issued a survey that produced 171 responses, conducted a thorough review of relevant literature and conducted 11 case studies from around the world, including Ottawa-Gatineau, Toronto and Vancouver.

For the role of government, the report contends that governments should limit themselves to: framework measures for target markets; support for skilled labour development; investment in knowledge infrastructure; procurement to enable growth; marketing of Canadian clusters abroad; catalyzing networking and research; and, gathering performance data on clusters.

“These initiatives have the potential to make positive contributions to the overall Canadian economy regardless of whether or not clusters are able to live up to their billing,” the report states.

FMI: www.conferenceboard.ca.

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