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Jonathan Sallet Headshot
Ed Paisley Headshot

Innovation Clusters Create Competitive Communities

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President Obama's call for a national innovation policy to spur sustainable economic growth and job creation contains an important new idea -- community leadership is a critical component of our nation's economic strength that the federal government must actively cultivate. The President and his team recognize that when dynamic local businesses (large and small) actively engage with nearby universities and research institutions, community colleges and workforce training programs, local financial institutions and venture capital investors, the result is broad-based, innovation-led regional economic growth that will power our country in the 21st century.

Silicon Valley is the obvious star. But so, too, are the life sciences "clusters" in and around Boston and San Diego, Minneapolis and Pittsburgh, the cutting-edge information technology hubs in Boulder Colorado and Phoenix, Albany and Austin, the clean energy regional centers of innovation in New Mexico and Arizona, Pennsylvania and Ohio, and the emerging polymer science clusters in Akron, Ohio and other "rust belt" communities in the Midwest.

The federal government helps seed these and other community-based innovation clusters with about $150 billion a year in direct financial support for basic scientific research, but it then engages poorly or not at all with community leaders to ensure new scientific discoveries become innovative new products and services that create competitive communities and well-paying jobs. That's why it is important for Congress to support President Obama's request for $100 million to support regional innovation clusters and associated business incubators.

As nations around the world race to copy U.S. economic success, it is a startling fact that the United States has never devoted even a single penny to direct national support for regional innovation clusters -- perhaps the key critical component of our future national economic competitiveness. Yet we know that regional clusters work when competitive community strengths are improved through the existence of local, shared advantages that continually spill over as specialists in the same and different high-tech fields look for the next generation of innovation, pushed by competitors, pulled by customers and prodded by suppliers.

What are the kinds of advantages shared by the participants in clusters? They could be a set of workers who boast particular skills, such as building boats in Maine with the latest new materials. Or community colleges that offer training to manufacturing workers in places where advanced manufacturers locate. Or research centers that conduct basic research into biotechnology close to start-up biotechnology companies. Or major industries such as aerospace that spin off new technologies that become new innovations peddled by new companies worldwide.

State governments are the primary funders of programs to help federally funded basic research make its way into job-creating innovation-led companies, yet today 47 out of 50 states face serious budget shortfalls. That's why local leadership needs federal support. The federal government can frame critical national challenges, such as clean energy and advanced manufacturing, and can facilitate the flow of information and expertise to and between regions. Washington can help finance, in a competitive and leveraged fashion, valuable activities that clusters would otherwise be unable to undertake -- and do it with relatively little money. Indeed, the requested $100 million pales alongside that $150 billion spent on R&D annually and the roughly $650 million spent on programs that indirectly (and historically often incoherently) work with regional clusters.

A modest federal investment in a national cluster development program to focus federal spending on what community innovation leaders on the ground know could work better and would multiply the benefits of our existing federal innovation programs. Coordinating these efforts around cluster strengths would help make other federal innovation efforts infinitely more effective. An valuable regional innovation clusters program should support local leadership with a three-part approach:

- Competitive grants that clusters can use to bolster their stressed resources

- Information networks to help clusters gather the data they need to create their own strategies

- Coordination of diverse federal programs to align federal resources more tightly with cluster priorities.

This is good public policy -- and good political leadership that marries the strength of our nation's many competitive community clusters to our famed research prowess and dynamic entrepreneurial culture.

Jonathan Sallet and Ed Paisley are co-authors of the recent paper published by the Center for American Progress titled "The Geography of Innovation: The Federal Government and the Growth of Regional Innovation Clusters."

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