What is an Industry
Cluster?
Industry clusters are a group of
inter-related industries that drive wealth in a geographic region -
primarily through the export of goods and services.
Industries in a cluster share buyers, suppliers,
processes, and technology. Cluster industries utilize the same set of
skills and tap into the same knowledge base and workforce in an area.
Furthermore, industries within a cluster are able to share specialized
services, networks, and research and development.
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What are "Targeted Industry
Clusters?"
In 1992, The Iowa
Department of Economic Development and (IDED) the Wallace Technology
Transfer Foundation commissioned the “Batelle study” to identify
industries in which investments would be likely to yield high
returns. These industries were selected because they:
-
Had high growth potential,
-
Paid higher than average wages, and
-
Were industries with a good match
for the competitive advantages offered by Iowa.
The industries targeted through this
initiative included, among others, value-added agriculture, insurance
and financial services, plastics, fabricated and primary metals,
pharmaceuticals, instruments and measuring devices, and software
development. While the list provided a good starting point for the
state’s marketing and other efforts, it was not intended to exclude
firms in other industries that met the criteria for sound public
investments.
In
1999, Iowa Department of
Economic Development (IDED) commissioned a study by Stanford Research
Institute (SRI) to re-examine targeted industries in light of Iowa’s
actual experience and to update the industry sector analysis. This
study ultimately identified three very broad industry clusters for
future investments. They are:
-
Life sciences (including production
agriculture, value-added processing, pharmaceuticals, and
biotechnology.)
-
Advanced manufacturing (involving
the rapid introduction of new processes including metal
manufacturing and heavy machinery manufacturing,) and
-
Information solutions (including
financial services and information solutions.)
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How is industry cluster analysis useful?
By recognizing the existence of industry
clusters (or the potential for a cluster) in an area, decision-makers are
able to better prepare the workforce, support cluster growth, and increase
wealth in their region.
Some tools that can be used to determine if a cluster
exists are employment and wage trend analysis, location quotient, shift/share analysis, and
emerging industry cluster analysis.
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What is a location quotient?
A location quotient (LQ) measures a
competitiveness by comparing an area's share of a particular activity.
In cluster analysis, a county's or region's share of cluster employment is
compared to other geographic areas. An LQ < 1
indicates the area has less than its share of activity, or minimal
competitiveness in the cluster. An LQ = 1 indicates the area has its
share of the activity, and an LQ > 1 indicates the area is highly
competitive in the cluster. For example:
Let's say ABC county has employment of 100 in the
Biotechnology cluster, and total employment of 500; the state has
employment of 700 in the Biotechnology cluster, with total employment of
15000. The LQ for ABC county is:
100/500 = 4.26
700/15000
This indicates that ABC county is highly competitive
in the Biotechnology cluster when compared the Biotechnology cluster
statewide.
The location quotient may also be used to draw
attention to areas that have the infrastructure and support activities for
a cluster, but the cluster itself is weak. If a location quotient for
support activities is significantly greater than one, but the LQ for the
cluster is less than one, decision makers may consider drawing businesses
intrinsic to the cluster to the area.
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What is shift/share
analysis?
Shift/share analysis is used to determine how much of
an area's employment change is due to national economy, the mix of
industries, and to local competitiveness. A negative value in the
competitiveness component could be caused by local wages that are lower
than state or national average.
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What is emerging industry
analysis?
Emerging cluster analysis
takes a look at the percent of employment and wages changes in an area's
cluster as compared to a larger region, the state, or the nation.
Generally, if the percent change in employment and wages is greater than or
equal to 100%, the cluster is considered to be emerging. If the
percent change is 0 - 99%, the cluster is considered to be stable. A
cluster is considered mature when the percent change is less than zero.
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How can I get more information
on industry clusters in my area?
For more information on
industry clusters, please contact Iowa Workforce Development, Policy and
Information Division, 1000 E. Grand Avenue, Des Moines, IA 50319 (515)
281-8515 or email us at
trends@iowaworkforce.org
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What Industries
are in the Key Clusters?
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