Business Cluster for Economic Impact
How do cluster-based strategies fit in the New Economy? This is a hot topic in economic development. In a knowledge-based economy, clusters of businesses form around sources of knowledge where information is developed, shared and exchanged. Recent cluster-based strategies have sought to boost innovation by recognizing the local elements of the New Economy, so that change is leveraged to work for, rather than against, the community.
Business clusters* are:
- Market-driven: Focusing on bringing the supply and demand side of the economy together to work more effectively.
- Inclusive: Reaching out to companies (large and small) as well as suppliers and supporting economic institutions.
- Collaborative: Placing emphasis on collaborative solutions to regional issues.
- Strategic: Helping stakeholders create a strategic vision of their region's next generation economy and providing motivation and commitment to action.
- Value-creating: Improving depth (more suppliers) and breadth (more industries) to increase regional income.
For investors and economic developers, identifying a cluster may be more important than defining a cluster.
One example in St. Louis is a biomedical and biotechnology cluster that formed after years of strategic planning. It is located in an area extending along Forest Park Boulevard from Washington University to St. Louis University. The Center for Emerging Technologies, a business incubator, recently announced an $8 million expansion into a nearby 93-year-old factory building. Although still in its infancy, the envisioned "Technopolis" strategic plan calls for an $80 million investment over the next five years.
Many business clusters, however, are not technology-based. In fact, the new skill set in the New Economy includes speed, quality, flexibility, knowledge and network. Healthy businesses consist of, or are part of, business networks that support growth, expansion and development. The depth, quality and content of relationships help determine how well the business community or region performs.
Communities throughout the Eighth District are building business clusters around their existing strengths in industries including:
- Diversified manufacturing,
- Business and financial services,
- Electrical/electronic components,
- Forest products,
- Information and media,
- Transportation services and
What does this mean for governments, community leaders, lenders and economic developers? All parties need to consider the role of innovation and how it works to better stimulate the economy, redefine traditional roles to facilitate the process, clear regulatory impediments and create a setting that offers incentives for market-based clusters to form and operate.
Endnotes* U.S. Department of Commerce Economic Development Administration
Bridges is a regular review of regional community and economic development issues. Views expressed are not necessarily those of the St. Louis Fed or Federal Reserve System.
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