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Industry Cluster Approach to Workforce and Economic Development

Industry Cluster Approach to Workforce and Economic Development. RCCI Annual Conference October 7, 2003 Lee W. Munnich, Jr. State and Local Policy Program With Liz Templin Extension Educ. - Community Economics University of Minnesota. Why this presentation?.

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Industry Cluster Approach to Workforce and Economic Development

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  1. Industry Cluster Approach to Workforce and Economic Development RCCI Annual Conference October 7, 2003 Lee W. Munnich, Jr. State and Local Policy Program With Liz Templin Extension Educ. - Community Economics University of Minnesota

  2. Why this presentation? • Link between workforce development and economic development • A trained workforce is critical for success • Articulating the regions industry clusters can focus community economic development efforts

  3. Objectives • Definition of industry clusters • Adaptation to rural communities • How industry clusters start (case studies) • Role of higher education

  4. Michael Porter’s“Diamond of Advantage” Chance Government

  5. “The Knowledge Economy” • In today’s economy, innovation is survival, no matter what your product or service line is. • Any innovation requires knowledge about the technologies, processes, markets, etc., that make it work • The economic development challenge:providing a fertile environment for innovation

  6. Rural knowledge clusters defined • Innovative, interrelated groups of firms • Located outside metropolitan areas • Deriving competitive advantages through accumulated, embedded, and imported knowledge among local actors and institutions.

  7. Rural Knowledge Clusters: What Matters? • Competitive advantage – e.g. a rich base of skilled workers, access to proximate market opportunities, local entrepreneurial culture • Historical development and evolution of local knowledge base – rarely appears out of thin air • Institutions – formal and informal; foster the creation, diffusion, and renewal of the local knowledge base

  8. Twin Cities Southeast Minnesota Southwest Minnesota Northwest Minnesota Northeast Minnesota Printing and Publishing Computers and Software Medical Devices Machinery and Metalworking Financial Services Composites Food Processing Printing, Publishing, and Software Industrial Machinery and Computer Manufacturing Computer and Electrical Components Manufacturing Value-Added Agricultural Cooperatives Agricultural Equipment Manufacturing Dairy Processing Recreation and Transportation Equipment Manufacturing Value-Added Agricultural Processing Wood Products Tourism Forest Products Information Technology Health Services Tourism State and Local Policy ProgramIndustry Cluster Studies

  9. Industry Clusters Research Steps 1. Economic data on region’s industries 2. Local leaders determine industries to study 3. Focus groups of industry to identify: • Competitive advantage • History • Institutional support / needs 4. Policy recommendations

  10. Identifying Clusters:Location Quotient • Measures employment concentration in a particular industry in a particular region • Measure of specialization • LQ is calculated as a ratio of the industry’s share of employment in the region to the industry’s share of employment in the nation • LQ > 1 means that concentration of employment in the industry in the region is higher than concentration of employment in same industry in the nation; i.e. the region specializes in that industry

  11. Case Study Evidence of Rural Knowledge Clusters in Minnesota • Recreational transportation equipment (Northwest Minnesota) • Automation and motion control technologies (Alexandria) • Advanced composite materials (Winona) • Precision Agricultural Machinery (Southwest Minnesota)

  12. Case Example 1:Competitive advantage Factors that give local firms a market advantage: • Supply or demand in the marketplace • Related industries • Local rivalry

  13. Northwest Minnesota: Key Facts Population (2000): 88,472* Major Cities: • Crookston: 8,192 • East Grand Forks: 7,501 • Roseau: 2,756 • Thief River Falls: 8,410 Population Density (pop/sq mi): 11 (Twin Cities: 601; MN state: 62) Population Growth (1990-2000): -2% (MN non-metro: 4%;US non-metro: 9%) Job Growth (1990-2000): 16% (MN non-metro: 25%; US non-metro: 18%) *Kittson, Marshall, Norman, Pennington, Polk, Red Lake, Roseau counties (Region 1) Source: Census Bureau; Bureau of Economic Analysis

  14. Northwest Minnesota: Recreational Transportation Equipment Key Industries Other transportation equipment manufacturing (NAICS: 3369/SIC: 3799) • 2000 Employment: 2,197, 20,500% more concentrated than U.S. overall Source: County Business Patterns

  15. Competitive Advantage:Recreational Transportation Equipment Key Employers • Arctic Cat (Thief River Falls) 1,500 employees • Machinewell (Grygla) 110 employees • Polaris Industries (Roseau) 2,100 employees • TEAM Industries (Bagley) 250 employees Source: MN Dept of Trade and Economic Development

  16. Northland Community and Technical College • Customized training for engineers • Certificate programs • Continuous quality improvement training

  17. NW Minnesota: Rural Knowledge Cluster Profile History • Farm equipment mfg base • Need for transportation in snow • Heteen et al develop first modern snowmobile, start Polaris • Spins off, starts Arctic Cat Recreational transportation equipment Competitive Advantages • Demanding local customers • Intense interfirm rivalry • Diffusion to new products and industries Firms and Industries • Snowmobile manufacturing • All-terrain vehicles • Equipment suppliers and machine shops Institutions • Northland Community & Technical College • Minnesota Job Skills Partnership • “Racing culture” – snowmobile racing circuit

  18. Case Example Two:History An historical base of knowledge about an industry or technology that is used to create new products or services

  19. Alexandria: Key Facts Population (2000): 210,059* Major Cities: • Alexandria: 8,820 • Fergus Falls: 13,471 • Moorhead: 32,177 Population Density (pop/sq mi): 26 (Twin Cities: 601; MN state: 62) Population Growth (1990-2000): 6% (MN non-metro: 4%; US non-metro: 9%) Job Growth (1990-2000): 25% (MN non-metro: 25%; US non-metro: 18%) *Becker, Clay, Douglas, Grant, Otter Tail, Pope, Stevens, Traverse, and Wilkin counties (Region 4). Source: Census Bureau; Bureau of Economic Analysis

  20. Alexandria: Automation and Motion Control Technologies Key Industries Packaging Machinery (NAICS: 3339/SIC: 3565) • 2000 Employment: 1,209, 446% more concentrated than U.S. overall Machine Shops and Related (NAICS: 3327/SIC: 3599, 3451, 3452) • 2000 Employment: 844, 210% more concentrated than U.S. overall Source: County Business Patterns

  21. Alexandria: Automation and Motion Control Technologies Key Employers • 3M (Alexandria) 317 employees • Alexandria Extrusion (Alexandria) 274 employees • Brenton Engineering (Alexandria) 127 employees • Douglas Machine (Alexandria) 492 employees • Minnesota Automation (Crosby) 120 employees • Massman Automation (Villard) 100 employees • Schott Automation (Garfield) 35 employees • Thiele Engineering (Fergus Falls) 81 employees Source: MN Dept of Trade and Econ Development

  22. Alexandria Technical College: • Fluid Power Technology major • Center for Automation and Motion Control (CAMC) • Manufacturing Automation Research Laboratory (MARL) • Customized training

  23. Alexandria: Rural Knowledge Cluster Profile History • Ag region, craft-like machine shops and equipment mfg • Proximity to markets for packaging equipment Automation and motion control technologies Competitive Advantages • Industry collective action around shared needs • Shortage of skilled labor in related industries Firms and Industries • Industry packaging and material handling machinery • Other light manufacturing industries Institutions • Alexandria Technical College, Ctr for Automation & Motion Control • MN Mfg Automation Coalition • Tri-State Manufacturer’s Assoc. • Minnesota Technology Inc. • West Central Initiative

  24. Case Example Three:Institutions formal and informal; foster the creation, diffusion, and renewal of the local knowledge base

  25. Winona Winona: Key Facts Population (2000): 112,517* Major Cities: • Winona: 27,069 • Lake City: 5,054 Population Density (pop/sq mi): 44 (Twin Cities: 601; MN state: 62) Population Growth (1990-2000): 5% (MN non-metro: 4%;US non-metro: 9%) Job Growth (1990-2000): 21% (MN non-metro: 25%; US non-metro: 17%) *Blue Earth, Nicollet and Waseca counties Source: Census Bureau; Bureau of Economic Analysis

  26. Winona Winona: Advanced Composite Materials Key Industries Custom compounding of purchased resin (NAICS: 325991/SIC: 3087) •  2000 Employment: 517, 537% more concentrated than U.S. overall All other plastics products manufacturing (NAICS: 326199/SIC: 3089) • 2000 Employment: 241, 30% more concentrated than U.S. overall Source: County Business Patterns

  27. Winona Winona: Advanced Composite Materials Key Employers • RTP Company (Winona) 407 employees • Cytec Engineering (Winona) 175 employees • Ticona Celstran (Goodview) 69 employees • We-no-nah Canoe (Winona) 75 employees • Watlow Polymer Technologies (Winona) 24 employees • AFC Strongwell (Chatfield) 200 employees • Composite Products Inc. (Winona) 50 employees • CodaBow Composites (Winona) 15 employees • Miken Composites (Caledonia) 15 employees • Geotek (Stewartville) 35 employees Source: MN Dept of Trade and Economic Development

  28. Higher Education: Winona State University • The only composites engineering undergraduate program in U.S. • Composite Materials Technology Center (COMTEC) Southeast Technical College • Customized training in process and quality improvement

  29. Winona: Rural Knowledge Cluster Profile Advanced composite materials mfg Competitive Advantages • Diverse local industry base • Skilled worker base around composite engineering • Cooperative relationships History • Miller Brothers – formed Fiberite after WWII • Initial growth in aerospace, military applications • Spin-off/startup activity to new firms Firms and Industries • Composite materials producers • Existing products improved through use of composite materials (i.e. canoes, heated plastics, automotive products, violin bows) Institutions • SAMPE – professional society • Winona St – composite eng • COMTEC – applied R&D/testing • Winona Composites Consortium • Technical college – custom training, technical education

  30. Case Study Four:Industry Cluster at Risk Southwestern Minnesota:Precision Agricultural Equipment

  31. Southwestern Minnesota:Precision Agricultural Equipment • Agricultural sprayer technology • Pitfall -- companies doing the same thing, rather than diverse activities around the same technology • Vulnerability from non-local ownership • Needed: New products using existing knowledge

  32. Auto Industry Supply Chain Automotive Carpet Manufacturing Crafts Furniture (Household) Gaming Hosiery Hosiery Houseboat Manufacturing Oil and Gas Pottery Central Tennessee Northwestern South Carolina Dalton, Georgia Western North Carolina Northeastern, Mississippi Tunica County, Mississippi Catawba Valley, North Carolina Fort Payne, Alabama Somerset, Kentucky Southern Louisiana Seagrove, North Carolina RTS Snapshots of Rural Innovation: Rural Cluster Vignettes Source: Stu Rosenfeld, RTS http://www.rtsinc.org/rc/rc_home.html

  33. Key Findings of Case Studies • History and context are important • Core knowledge base can drive multiple industries and applications. • Difficulty developing comparable quantitative indicators • Non-local ownership risky if production-only • “Institutional” and “entrepreneurial” strategies boost rural knowledge clusters

  34. Implications for Economic Development • Understand your local knowledge base. • Identify specialized knowledge (job classifications) • Note firms in similar industry • Note underlying technology • Consider cluster industry study or Business Retention and Expansion program

  35. 2. Foster linkages between firms and local institutions • Map linkages and stakeholder relationships; note gaps • Emerging workforce training: school-to-work, apprenticeships • Incumbent workforce training: customized job training, continuing education, training partnerships

  36. 3. Develop strategies for promoting innovation around rural knowledge clusters • Research centers • Technical assistance to entrepreneurs • Risk capital

  37. 4. Don’t try to go it alone – promote a regional vision to guide local strategies A. Labor market is regional

  38. For further information: Go to http://www.ruralvitality.org http://www.hhh.umn.edu/centers/slp/

  39. For further information contact:Lee W. Munnich, Jr. Senior Fellow and Director, State and Local Policy Program Humphrey Institute of Public Affairs University of Minnesota Lmunnich@hhh.umn.edu http://www.ruralvitality.org http://www.hhh.umn.edu/centers/slp/ (612) 625-7357

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