Catalyzing clusters | Feds commit to sector-based economic development with pioneering new funding
The Small Business Administration announced on July 7 its first lead role in support of existing regional innovation clusters. SBA’s Regional Clusters Initiative (see www.sba.gov/clusters) will provide $600,000 in one-year contracts to each of 10-15 cluster systems throughout the U.S. that support small businesses. The program has a general flavor that applies to all sectors as well as an advanced defense technology version. Applications are due on Aug. 16.
As I’ve noted in several previous columns for Mainebiz, SBA’s Administrator Karen Mills is a longtime advocate for the cluster economic development theory, popularized by Harvard Business School’s Michael Porter over the past two decades. While serving as the jobs and innovation czar for Gov. John Baldacci prior to joining Obama’s administration, Mills, of Brunswick, co-authored a 2006 Brookings Institute report advocating a federal role in catalyzing and expanding this sector-based economic approach to growth. While in Maine, she also played an integral role in helping establish a boatbuilding cluster development program that resulted in a $15 million Department of Labor WIRED grant. Mills also was a part of a cohort that led an event in Maine that resulted in development of the Maine Food Producers Alliance, the first such organized effort to catalyze this cluster in the state.
Some believe that Mills’ knowledge and network in cluster development have resulted in the slew of other agency programs focused on regional innovation clusters, or RICs. As noted in my most recent Mills-cluster article (“One Year Later,” Feb. 22), no fewer than four agencies (the Economic Development Administration, Department of Agriculture, Department of Labor and National Science Foundation) have program line items for regional innovation ecosystems/clusters in their fiscal year 2011 budgets. Since that piece was written, five FY 2010 initiatives were announced, ranging from a $129 million multi-agency energy-efficiency RIC program led by the Department of Energy to a $12 million innovation ecosystem initiative led by the EDA (see “All Together Now,” July 12).
While it is difficult to confirm how central Mills has been to this shift, I spoke some months back to a former senior Bush administration official who worked in both the EDA and SBA who indicated that Mills was perhaps the only one in federal government who understood clusters. So, it may be reasonable to assume that Mills is the behind-the-scenes player driving the Obama administration’s evident interest in this innovation and regional development paradigm.
Maintaining momentum
In the midst of a federal spending freeze and a challenging economic environment, multiple federal agencies have announced regional innovation initiatives in the current fiscal year. This suggests a number of things: 1) RICs are indeed a federal priority for regional economic development and innovation — never before have so many federal agencies shown such evident concurrent commitment to a single economic development strategy; 2) If Mills can be credited for the federal government’s shift to RICs, her influence is significant in its breadth (across agencies) and commitment (hundreds of millions of federal dollars in the current fiscal year alone); and 3) the speed with which new programs have emerged (five RIC grant or contract initiatives since February) may indicate a desire by the federal government to commit to programs prior to the September fiscal year-end due to concerns about the mid-term election and what it will mean to the administration’s FY 2011 budget priorities, which include continued and increased multi-agency support for cluster development .
Like any economic development strategy, cluster development requires a long-term commitment. For clusters to succeed, several things will need to happen: 1) the federal government will need to show sustained support, over its present and potential future terms of office, to give clusters the proper policy and funding support; 2) as clusters are self-organizing, with private sector-led groups of players (e.g. companies, equity funders, universities, incubators, etc.), the private sector must carry the ball on cluster development, albeit with formative funding and policy support from the government; and 3) private capital markets (individual and professionally managed venture capital), critical to clusters’ success, must remain robust.
Cluster researchers and the federal government recognize the critical role of high-growth “gazelles” in driving innovation and economic growth; these industries have a long history of funding from private equity markets. Without strong private capital markets, knowledge industry clusters will be significantly hampered in their ability to form and grow.
The federal government seems to be doing its part to catalyze, expand and sustain cluster development. While it’s not going to get easier for them to do so, given political realities of the coming mid-term elections, it’s critical that the private market not miss this opportunity to align with and leverage the government’s broad-based initiative. The government can’t and won’t bring us out of this recession and innovation challenge. We must all see ourselves as cluster catalysts.
Michael Gurau is president of Clear Innovation Partners, a Freeport-based cluster development organization. Reach Michael at mgurau@clearinnovationpartners.com. Read more Venture Builder here.
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