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Inner City Clusters Kim Zeuli New Cluster Approaches
12 November 2014
NEW CLUSTER APPROACHES: INNER
CITY CLUSTERS KIM ZEULI
SENIOR VICE PRESIDENT AND DIRECTOR OF RESEARCH
INITIATIVE FOR A COMPETITIVE INNER CITY (ICIC)
What is an inner city?
ICIC defines an inner city as an economically
distressed urban area that has high poverty and
unemployment rates.
Inner City Areas in New York City
Bronx
Queens
Harlem
Lower East
Side
Brooklyn
Staten
Island
Source: State of the Inner City Economies (SICE) database; ICIC analysis.
There are 328 inner cities
in the U.S., representing
15% of unemployment
21% of poverty and
34% of minority poverty
Note: Clusters with overlapping borders or identical shading have at least 20% overlap (by number of industries) in both directions.
Source: State of the Inner City Economies (SICE) Database, 2011; ICIC analysis.
Inner city advantages for traded clusters
>2 LQ in Inner Cities
>1 LQ in Inner Cities
Furniture Building Fixtures,
Equipment & Services
Fishing & Fishing
Products
Hospitality & Tourism
Agricultural Products
Transportation & Logistics
Plastics
Oil & Gas
Chemical Products
Biopharma- ceuticals
Power
Generation & Transmission
Aerospace Vehicles &
Defense
Lightning & Electrical
Equipment
Financial Services
Publishing & Printing
Entertainment
Information
Tech.
Communi- cations
Equipment
Aerospace Engines
Business Services
Distribution Services
Forest Products
Heavy Construction
Services
Construction Materials
Prefabricated Enclosures
Heavy Machinery
Sporting & Recreation
Goods
Automotive
Production Technology
Motor Driven Products
Metal Manufacturing
Apparel
Leather & Related Products
Jewelry & Precious Metals
Textiles
Footwear
Processed Food
Medical Devices
Analytical Instruments Education &
Knowledge Creation
0.8-1 LQ in Inner Cities
<0.8 LQ in Inner Cities
Local vs. traded clusters
Source: State of the Inner City Economies (SICE) Database, 2003-2012; ICIC analysis; Porter (2010)
Local Clusters Traded Clusters
Definition Serve almost exclusively the local
market. Not directly exposed to
cross-regional competition
Compete to serve national and
international markets
Representative Clusters – Local health services
– Local retail
– Life sciences
– Transportation and logistics
– Maximum job creation
– Jobs that match resident skills
– High wage jobs
– Higher productivity and innovation
potential
Relative Productivity 79.3 144.1
National Annual Wage (2012) $37,000 $66,500
National Wage Growth (2003 – 2012) 3.3% 11.9%
Patents (per 10,000 employees) 0.4 23.0
Share of National Employment (2012) 72% 28%
Share of Inner City Employment (2012) 76% 24%
National Employment Growth (2003-2012) +1.1% -2.4%
Inner City Employment Growth (2003-2012) -0.7% -12.4%
Creating inclusive cluster growth
Source: State of the Inner City Economies (SICE) Database; BLS; ICIC Analysis.
National Educational Requirements
by Cluster Type
45% 41%
32%
30%
23% 29%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Local Clusters Traded Clusters
% o
f W
ork
ers
National Local Cluster Average Wages
High School or Less
Some College
College or Higher
$15
$20
$22
$25
$28
$28
$32
$33
$34
$38
$40
$46
$47
$50
$55
$56
$60
$71
$0 $20 $40 $60 $80
Local Hospitality Establishments
Local Retail Clothing and…
Local Personal Services (Non-…
Local Community and Civic…
Local Education and Training
Local Food and Beverage…
Local Entertainment and Media
Local Household Goods and…
Local Motor Vehicle Products and…
Local Logistical Services
Average Local Cluster Wage
Average Wage, National
Local Health Services
Local Real Estate, Construction,…
Local Commercial Services
Local Industrial Products and…
Local Financial Services
Local Utilities
Average Annual Wage, 2011 ($k)
Local Health Services
Local Hospitality Establishments
Local Commercial Services
Local Real Estate, Construction, and
Development
Local Community and Civic Organizations
Local Food and Beverage Processing and
Distrbiution
Local Retailing of Clothing and General
Merchandise
Local Financial Services
Local Motor Vehicle Products and Services
Local Logistical Services
Local Education and Training
Local Utilities
Local Personal Services (Non-Medical)
Local Entertainment and Media
Local Household Goods and Services
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
-4% -3% -2% -1% 0% 1% 2% 3% 4%
Local cluster performance in the inner city
Source: State of the Inner City Economies (SICE) Database, 2003-2012; ICIC analysis.
100K 250K 500K 1M 2M
Employees
U.S. Employment Growth, 2003-2012
CAGR
Inn
er
Cit
y E
mp
loym
en
t G
row
th, 2
00
3-2
01
2
CA
GR
Inner cities growing slower than US
Inner cities growing faster than US
Business-to-Consumer (B2C)
Business-to-Business (B2B) and
Hybrid (B2B/B2C)
Definition – Serve local consumers
– Serve both local consumers and local businesses
Representative Clusters – Local health services – Local hospitality establishments
– Local commercial services – Local logistical services – Local utilities – Local real estate
– Offers important entry-level jobs – Promotes availability of goods and
services
– Offers middle-wage jobs – Strengthens business environment
Share of National Employment (2012)
38% 26%
Share of Inner City Employment (2012)
42% 27%
National Employment Growth (2003-2012)
+5.5% -2.9%
Inner City Employment Growth (2003-2012)
+4.9% -8.2%
Average Annual Wage (2012)
$34,800 $40,00
Types of local clusters
Source: State of the Inner City Economies (SICE) Database 2003-2012; BLS; ICIC analysis.
New Orleans case study
New Orleans, LA Business Services Distribution and Electronic Commerce Water Transportation Hospitality and Tourism Oil and Gas Production and Transportation
Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School; ICIC
Priority clusters for new economic growth plan 2.11
Cluster Sub-Clusters
Advanced Manufacturing Aerospace Parts Manufacturing; Chemical Manufacturing; Ship and Boat Building; Other Advanced Manufacturing
Transportation, Trade and Logistics Freight; Freight Supplier; Freight Support; Freight Wholesale
Cluster Sub-Clusters
BioInnovation and Health Services Health Manufacturing; Hospitals; Health Services Support; Other Health Services; Health Care Providers
Creative Digital Media Advertising and Marketing; Film, TV, and Radio; Graphic Design; etc.
Sustainable Industries Building/Efficiency; Environmental Administration; Water/Waste
Emerging Clusters:
Foundational Clusters:
• Hospitals provide more jobs in inner cities than any other
sector. Hospitals are top employers in 77/100 largest inner cities
• Two thirds of healthcare jobs are accessible to jobseekers with
an associate’s degree or less.
21%
24%
19%
21%
15%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Healthcare Occupations
Sh
are
of
Em
plo
ym
ent
(20
12
)
High school diploma
or less
Some college,
no degree
Associate’s degree
Bachelor’s Degree
Higher than
Bachelor’s Degree
Generally Less
Accessible
Generally more
Accessible
Job accessibility: criteria for cluster choice
0%
2%
4%
6%
8%
10%
12%
Per
cen
tag
e o
f J
ob
s
Inner Cities
USA
Cluster performance: BioInnovation &
Health Services employment growth New Orleans inner city employment vs. region
(2006-2012)
2003- 2012
Net Job Growth
CAGR Number
Inner City
BioInnovation
& H.S. Cluster
1.4% 705
New Orleans
BioInnovation
& H.S. Cluster
7.5% 8,418
New Orleans MSA
BioInnovation
& H.S. Cluster
1.8% 6,565
100
109 108 108 111
109
100
154
100 100 99
103 105 106
111
90
100
110
120
130
140
150
160
2006 2007 2008 2009 2010 2011 2012
Ind
exed
Em
plo
ym
ent
Gro
wth
, 2
00
6=
10
0
New Orleans IC New Orleans CC New Orleans MSA
BioInnovation & Health Services cluster:
Business profile 2.11
Annual Revenue
Number of BioInnovation
Business Establishments
< $0.5M 533
$.5 - 1M 1,704
$1-2.5M 288
$2.5-5M 91
$5-10M 57
$10-20M 28
$20-50M 14
$50-100M 4
$100-500M 5
$500M - $1B 0
> $1B 0
No Data 129
Total 2,853
38%
21%
12%
5% 3% 2% 1% 0% 0% 0% 0%
18% 19%
60%
5%
12%
0%
10%
20%
30%
40%
50%
60%
70%
Pe
rce
nta
ge o
f To
tal B
usi
ne
sse
s
New Orleans Total BioInnovation
Connecting cluster & small business growth 2.11
• Clusters can stimulate start-
ups and have a significant
impact on the survival and
growth of small businesses.
Small business growth
impacts strength of clusters.
• Positive impact is increased
by aligning small business
development with cluster
growth strategies
• Incubators are a leading
strategy for alignment
“the aerospace
industry is a highly
concentrated industry,
dominated by a small
number of large firms
that are supported by a
large number of small
firms.”
Cluster & small business growth strategies 2.11
• Direct support to small businesses within clusters:
• Visibility
• Networking
• Contract opportunities
• R&D
• Workforce
• Align city’s economic development policies with
cluster-based strategies for small businesses
• Base support on shifting needs of businesses
• Management education
• Supplier networks
• Export promotion
• Access to capital
• Affordable space
(revitalization
opportunities)
New Orleans BioInnovation Center 2.11
• Incubator for health and biosciences start-ups
• State-of-the-art facilities with office and lab space
(34 tenants)
• Direct, subsidized business assistance, educational
events
• New Orleans BioFund – low-interest, flexible term
loans to startups
Impact:
• Fostered the formation of 66 companies
• Creation of more than 220 high-wage jobs
• Clients raised more than $28M in funding
• Launch of 14 new products
Inclusive cluster strategies: key takeaways 2.11
• Identify the right mix of clusters that drive growth in
region and inner city
• Focus on traded clusters where the inner city has
potential competitive advantages
• Support local clusters that offer mid-wage
employment accessible to a wide range of workers
(B2C and B2B)
• Leverage anchor institutions to drive B2B cluster
growth
• Connect and align cluster and small business growth
strategies
• Access to minority and women-owned businesses
• Connections to inner city economy: employment,
revitalization with incubator, start-up location
17 TH TCI GLOBAL CONFERENCE | CREATING SHARED VALUE THROUGH CLUSTERS FOR A SUSTAINABLE
FUTURE
Questions?
@icicorg
www.icic.org
Kim Zeuli
Senior Vice President and
Director of Research, ICIC
