10 Principles in Economic Development - Industrial Focus
- Have you identified and do you regularly track
the progress of key industry sectors or clusters in your area?
- Have you organized your economic development activities
to understand industry linkages and support industry clusters?
Rather than targeting individual firms or businesses,
economic development agencies should focus on supporting clusters
of industries that are well-suited to an area. A clearer understanding
of supplier-producer relationships can assist government in its
efforts to boost the economic base and productivity levels of
the region.
Michael Porter in his book The Competitive Advantage
of Nations (1990) suggests that to find answers on the competitiveness
of nations, you must focus on specific industries and industry
segments. This understanding of industry clusters can be critical
in making effective public policy decisions in such areas as education
and training, science and technology, and infrastructure investment.
Similarly, such an understanding of industry clusters can help
in shaping and implementing a state or local economic development
strategy. Porter proposes four key determinants of competitiveness,
which he calls the "Diamond of Advantage," based on
cases from around the world.
Michael Porter's Diamond of Advantage
- FACTOR CONDITIONS: a specialized labor pool, specialized
infrastructure and sometimes, selective disadvantages that
drive innovation.
- HOME DEMAND: local customers who push companies to innovate,
especiall if their tastes or needs anticipate global demand.
- RELATED AND SUPPORTING INDUSTRIES: competition among local
suppliers for related industries, creating a high quality,
supportive business infrastructure and spurring innovation
and spin-off industries.
- INDUSTRY STRATEGY /RIVALRY: intense local rivalry among
local industries that is more motivating than foreign competition
and a local “culture” which influences individual
industries’ attitudes toward innovation and competition.
*Michael E. Porter, The Competitive Advantage of
Nations (New York: The Free Press, 1990).
Several states and regions have used or are using
the Porter approach in examining industries, assessing public
policies, and redefining economic development strategies. These
include the states of Massachusetts, California, and Minnesota.
Oregon has organized its economic development strategy
to focus on key industries. Oregon Shines, the state's 1989 strategic
planning document that set the stage for major redesign of economic
development funding and programs, emphasized the importance of
promoting Oregon's key industries. The Oregon legislature adopted
a list of thirteen key industries in 1991 and directed the state
economic development department to work with these industries
to promote the state economy. The Oregon Key Industries program
is not a recruitment program but a commitment to help industry
groups work together to become more competitive. The program brings
together key industry leaders in roundtables to discuss competitive
problems and opportunities; it also promotes flexible networks
of businesses to develop new markets, produce new products, and
increase profits through network brokers and small matching grants.
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