Doing More Deals: Re-Envisioning the Use of Industrial Clusters to Target Regional Innovation Investments

Abstract

Our interest in writing this article is to create a bridge between the scholarly and academic research on technological innovation and a private sector, for-profit business model that implements the ideas on innovation and entrepreneurship, primarily in metro regional economies.

We begin by noting that the concept of industrial clusters has excited the imaginations of regional planners and economic developers for about 20 years. The idea has been in existence for over a century, with both French and English economists describing early versions of how certain industries and firms liked to locate close to each other.

Planners and economic developers like the idea because it hints at strategies for promoting regional economic growth.We explain that there is a certain type of economic perversity to this economic development strategy in the conventional industrial recruitment strategy.

By using industrial cluster models for "filling in the gaps," a disadvantaged region supposedly becomes economically just like the superior region, which starts out with a better industrial cluster structure. The disadvantaged region erodes the comparative cluster advantage of the superior region.

If all regions look and function alike, then what is the enduring comparative, global competitive advantage between regions? Comparative economic advantage is based upon cost differences and productive diversity, not global sameness.

We describe how the concept can be re-tooled. Regional rates of innovation can be increased when private capital markets direct investment capital into the industrial sectors that have the greatest likelihood of technological cross-over.

Structural Evolutionary Regional Economic Theory (SERET) explains the theoretical basis for predicting what happens when technological genetics between members of an industrial cluster are cross-bred.

Keywords: SERET, private capital markets, industrial value chains, innovation, economic development, technology investments, industrial recruitment

JEL Classification: L16, M13, O31, O32, O33, O34, O38, R15, R58